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Trademark Owner's Unilateral "Covenant Not to Sue" Precludes Validity Challenge

The Supreme Court unanimously affirmed the dismissal of a challenge to the validity of a trademark in view of the mark owner's unilaterally issued "Covenant Not to Sue." In Already, L.L.C. v. Nike, Inc., Nike accused Already of infringing a trademark on its Air Force 1 sneakers, to which Already responded by alleging Nike's mark was invalid. Nike decided to drop its claims in conjunction with unilaterally issuing a "Covenant Not to Sue," promising not to raise any trademark or unfair competition claims against Already or any affiliated entity based on any of Already's existing footwear designs, or any future Already designs that constituted a "colorable imitation" of Already's current products. Nike relied on its "Covenant Not to Sue" to request that Already’s validity counterclaim also be dismissed because the covenant extinguished any case or controversy; Already desired to maintain its counterclaim of invalidity. The Supreme Court agreed with Nike, affirming the lower court's decision to dismiss Already's counterclaim. The Court ruled that there was no reasonable chance a dispute could ever arise related to the rights at issue between the parties in view of Nike's issued covenant. As a result, the Court concluded that Already lacked standing to challenge the validity of Nike's mark. Practitioners and clients should look to the text of Nike's covenant not to sue for guidance in crafting similar covenants to prevent later attacks against their intellectual property rights.

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Maximizing the protection and value of intellectual property assets is often the cornerstone of a business's success and even survival. In this blog, Nutter's Intellectual Property attorneys provide news updates and practical tips in patent portfolio development, IP litigation, trademarks, copyrights, trade secrets and licensing.

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