Nike v. MSCHF: First Sale Doctrine, Confusion, and Dilution

by Shekinah Apedo

Can sneakers be customized by buyers and then resold for gain, or is that trademark infringement? This is the core legal question that secondary markets are intrigued to see played out in a court of law. The short-lived Nike v. MSCHF case might've led to great legal discussion on this question and a court decision, however both parties settled before litigation could begin. But, what can we learn from this one-week legal drama?

Here's the rundown: Brooklyn-based design studio, MSCHF, purchased Nike Air Max 97 sneakers, modified them, launched a marketing campaign with entertainer, Lil' Nas X, and resold them as "Satan Shoes". The online drop of the 666 remixed sneakers sold out in minutes and 665 were shipped to buyers. With growing outrage across social media and political figures speaking against the 'demonic' shoes, Nike responded by filing a trademark infringement lawsuit.

Nike argued that MSCHF's Satan Shoes created a "likelihood of injury to Nike's business reputation and goodwill..." and a "likelihood of consumer confusion, mistake, and deception as to the source of origin or relationship of Nike's products and MSCHF's Satan Shoes, and has otherwise competed unfairly by unlawfully trading on and using."

MSCHF argued that the shoes were "not typical sneakers, but rather individually-numbered works of art that were sold to collectors for $1,018 each," and protected under the First Amendment.

During the first week of initial arguments, the Court granted Nike's request for a temporary injunction to halt the production and shipping of the 666th Satan Shoes. (as seen below)

So, what can we learn from this case to enrich NFT creators and buyers with some basic legal knowledge? Let's start with the 3 legal terms at the center of this case: First Sale Doctrine, Likelihood of Confusion, and Trademark Dilution.

First Sale Doctrine is a legal concept that allows buyers to resell purchased items. Used as a defense for trademark infringement, it protects buyers from infringement when trademarked products are resold. If you're going to resell a pair of Nike or Adidas shoes, it would be wise not to place your own logo or trademark on an already IP-protected product. But to modify and resell, perhaps that's a question that will be answered in the ongoing lawsuit filed by Chanel against Shiver + Duke. Currently as it stands, First Sale Doctrine protection ends when the resold item is "materially altered".

Likelihood of Confusion is where two trademarks are so similar and the goods or services are related, that it causes confusion among consumers. As with the Nike v. MSCHF case, a lot of people thought Nike was involved with the Satan Shoes release.

Trademark Dilution protects the owners of well-known marks (i.e. Nike) from having their names and reputation tarnished as to negatively impact their brand. Associations with the Devil and human blood in the shoe soles aren't typically good for business.

The contents of this blog are for informational purposes only and may not be relied on as legal advice.