Supreme Court Ruling Upholds Covenants' Power to Dismiss Invalidity Counterclaims | Law Firm Newswire

Supreme Court Ruling Upholds Covenants’ Power to Dismiss Invalidity Counterclaims

Los Angeles, CA (Law Firm Newswire) April 1, 2014 - The Supreme Court recently ruled in favor of Nike, Inc., in a case concerning whether a covenant not to enforce a trademark can reliably moot a counterclaim of invalidity.

But Simi Valley patent attorney Jim Dawson said the ruling affests more than trademarking. “This case almost certainly has ramifications for similar cases involving patents,” Dawson stated.

Nike makes a line of athletic shoes called “Air Force 1.” In the summer of 2009, Nike filed suit against Already, LLC, claiming that their “Soulja Boy” and “Sugar” shoe lines infringed upon Nike's AIR FORCE 1 trademark. Already responded with a counterclaim seeking to invalidate Nike's trademark.

Later, Nike decided to drop its lawsuit. Already's effect on the sales of Nike's shoes was minimal, Nike concluded, but the threat to its valuable trademark was very real. Nike issued a broad covenant to Already, agreeing not to enforce its trademark with respect to Already's existing products or any future “colorable imitations” of them. Then, Nike moved to dismiss with prejudice both its claims and Already's declaratory judgment counterclaim, arguing that the counterclaim was made moot by the covenant not to sue.

Already elected to pursue its counterclaim, contending that Nike's covenant did not go far enough to ensure its safety from future lawsuits and that Nike's trademark prevented Already from effectively competing.

The district court granted Nike's motion. Because Already presented no evidence that it had plans to develop any products not covered by the covenant, it failed to establish subject-matter jurisdiction necessary for the declaratory judgment it sought. The Second Circuit affirmed.

The Supreme Court unanimously affirmed the ruling, specifically noting the broad scope of the covenant. The court found that absent an extant controversy over a trademark, the federal courts did not retain jurisdiction over the matter (Already, LLC, dba Yums v. Nike, Inc., No. 11-982 (2013)).

The court rejected Already's argument that the federal courts should adjudicate the validity of Nike's trademark due to the “important role [they] play in the administration of federal patent and trademark law.”

“Given that language, it seems very likely this ruling will be applied to patent litigation as well,” Dawson explained. “Therefore, patent owners should retain the ability to dismiss a counterclaim of invalidity on the basis of a covenant not to sue. When drafting such covenants, patent owners should be careful to note the court's attention to the broad nature of Nike's covenant.”

Brooks Acordia IP Law, P.C.
1445 E. Los Angeles Ave. #108
Simi Valley, CA 93065-2827
Phone: (805) 579-2500
Fax: (805) 584-6427

Twitter

Facebook

Google+

  • New Guidance On What Is Patentable by the USPTO
    Since the Alice decision, there has been a lot of confusion about what is patentable – especially for life science and software related patents. At the beginning of 2019, the USPTO has issued new guidelines for determining patetability. These new guidelines set forth that non-patentable subject matter, or “judicial exceptions”, include abstract ideas such as “mathematical concepts, certain methods of organizing human activity, and mental processes.” Additionally, it also includes “laws of nature and natural phenomena.” It further goes on to say ...
  • Grace period and on sale bar related to “secret” sales
    In a Supreme Court decision which was unanimous and authored by Justice Thomas, the Court reiterated the significance of offering a product for sale and how it affects the patent eligibility of the product. In Helsinn Healthcare v. Teva Pharma USA (Supreme Court 2019) the Court was asked to look at the enacted AIA and whether “secret” sales continue to qualify as prior art under the revised Section 102.  The court examined the provision that “an inventor’s sale of an invention to a ...
  • Trademark and Trade-dress Laws
    Christian Louboutin’s signature red-soled heels are universally known as the ultimate signs of luxury in the shoe fashion world. However, despite their fame, the question arises of whether Louboutin can trademark his red soles as exclusively his own.<br />
    Louboutin has attempted to obtain trademarks in several countries, and the verdicts are varied. In Switzerland, for example, Louboutin was denied trademark protection because the court ruled that the red sole was not of distinctive character. However, Louboutin has successfully obtained trademarks ...

See other news sources publishing this article. BETA | Tags: , , , , ,



Get headlines from Law Firm Newswire sent right to your inbox.

* indicates required