Troutman Sanders LLP: Supreme Court One Step Closer to Question of Whether a Defendant in a Trademark Case can Still Challenge the Mark's Validity after the Plaintiff Agrees to a Covenant Not to Sue

By Megan Rahman

The Supreme Court has asked Nike to respond to a cert petition which addresses whether a federal district court is divested of jurisdiction once a defendant in a trademark case promises not to assert its mark against the plaintiff's then-existing commercial activities.  On appeal from the Second Circuit [enhanced version available to lexis.com subscribers], the case arises from Nike's lawsuit against YUMS LLC in 2009 for trademark infringement, unfair competition, and dilution under both federal and New York state law. Nike alleged that the design of YUMS' sneakers infringed on the design of Nike's Air Force 1 shoe. YUMS counterclaimed seeking to cancel Nike's registration pursuant to 15 U.S.C. § 1119. Prior to any decision on the merits, Nike gave YUMS a covenant-not-to-sue, which stated that YUMS' actions no longer infringed or diluted Nike's trademark. While Nike dismissed its case, YUMS wanted to maintain its counterclaim, arguing that Nike's mark continued to improperly chill its innovative marketing efforts. The district court dismissed YUMS' case, however, finding that the covenant not to sue left no ongoing case or controversy to allow it to continue to assert its jurisdiction. The Second Circuit affirmed, holding that 15 U.S.C. § 1119 does not provide federal courts with an independent basis for jurisdiction absent an actual case or controversy between the parties.

YUMS' petition argues that the Second Circuit's ruling allows litigants to avoid unexpected resistance by delivering a covenant not to sue and evading any test of the validity of the asserted registration. In early March, Nike had waived it right to file a response to the petition.  Nike has until May 4 to respond to the petition.  

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