Though it surely doesn't have the national significance of last
year's eye-of-the-needle opinion upholding Obamacare, one of the
most famous pieces of writing by U.S. Supreme Court Chief
Justice John Roberts is his dissent in a 2008 case called Sprint Communications v. APCC Services. The dissent is notorious
because Roberts quoted Bob Dylan -- "When you got nothing, you
got nothing to lose" -- in what Adam Liptak of The New York
Times reported to be "almost certainly the first use of a rock
lyric to buttress a legal proposition in a Supreme
Court decision." The subject of Roberts's dissent in Sprint --
Article III standing to sue -- isn't as much fun as his Dylan
citation, but standing has been a concern of the chief justice
since before he was named to the court. So it wasn't a surprise
that Roberts wrote Wednesday's unanimous Supreme Court opinion
in Already v. Nike. And given the chief justice's previous
endorsement of the Bob Dylan theory of Article III standing, the
outcome of the case isn't a shocker either.
The Nike ruling shoots down what Roberts called a
"boundless" rethinking of standing, in which "a market
participant is injured for Article III purposes whenever a
competitor benefits from something allegedly unlawful -- whether
a trademark, the awarding of a contract, a landlord-tenant
arrangement, or so on." Speculative future harm doesn't
constitute enough of an injury to support standing, Roberts
said, refuting the policy argument by Already -- a boutique
sneaker manufacturer -- that small companies should have leeway
to sue as protection against big competitors attempting to bully
them through litigation. That redefinition of standing, Roberts
said, could easily backfire on small businesses. "Lowering the
gates for one party lowers the gates for all," including big
competitors, he wrote.
To get to the standing question, the court first had to
decide whether Nike signed away all of its future rights to sue
Already for infringing its trademark through a covenant not to
sue -- and which side bore the burden of proving the scope of
the covenant. As we've previously reported, the dispute in this
case specifically involved Nike's trademark on its incredibly
popular Air Force sneakers. Nike sued Already, which makes
sneakers under the name of Yums, for infringing its Air Force
mark. But after Already filed a counterclaim challenging the
validity of the mark, Nike offered Already a covenant not to
sue, in which it agreed not to bring claims against Already for
any past or present Yums shoes or future Yums shoes that closely
resembled those already produced. Already signed the covenant
but sought to continue litigating its counterclaim; Nike (and
the 2nd Circuit Court of Appeals) said the covenant effectively
ended federal court jurisdiction over the case.
The Supreme Court held that Nike and other defendants cannot
automatically moot cases against them by ending their supposedly
illegal conduct. "Otherwise," Roberts wrote, "a defendant could
engage in unlawful conduct, stop when sued to have the case
declared moot, then pick up where he left off, repeating this
cycle until he achieves all his unlawful ends." By extension,
the court said, Nike bears the "formidable burden" of showing
that the covenant in this case foreclosed any reasonable
expectation that it could resume its infringement litigation
against Already. (That point was buttressed in a concurrence by
four justices, who emphasized that covenants not to sue don't
automatically let wrongdoers off the hook for counterclaims.)
The court's affirmation of what's known as the "voluntary
cessation doctrine" was a win for Already, which had argued that
counterclaim defendants must prove that they're precluded from
resuming wrongful behavior.
But Roberts's opinion went on to conclude that Nike's
covenant cut off any such prospect, since Already could not
possibly produce a sneaker that would infringe Nike's mark yet
fall outside of the covenant not to sue. "If such a shoe exists,
the parties have not pointed to it, there is no evidence that
Already has dreamt of it, and we cannot conceive of it," Roberts
wrote. "It sits, as far as we can tell, on a shelf between
Dorothy's ruby slippers and Perseus's winged sandals."
That finding meant that Already could only attain standing
in federal court on the theoretical grounds that it is harmed by
uncertainty over the validity of Nike's mark -- an argument
Roberts and the rest of the court roundly rejected.
Interestingly, the court's opinion does not address whether
Already would have standing if it challenged Nike's trademark
through the U.S. Patent and Trademark Office and received an
adverse ruling. We'll have to wait and see whether this ruling
is cited the next time a trademark challenger asks the Federal
Circuit to review a PTO decision upholding a mark.
So, can Already now make its own version of Nike's Air Force
shoes, since the Supreme Court has said there's no way Nike can
sue for infringement of its mark? Roberts addressed the
possibility in a footnote. An exact replica of Nike's shoe, he
said, would presumably include Nike's famous swoosh, which is
trademarked independently and isn't subject to the covenant.
Nike could cite infringement of the swoosh mark even if it's
precluded from suing over the Air Force trademark.
Both Nike counsel Thomas Goldstein of Goldstein & Russell
and Already counsel James Dabney of Fried, Frank, Harris,
Shriver & Jacobson declined comment on the ruling.
(Reporting by Alison Frankel)
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