Source: http://www.ipsofactoj.com/DecidedCases/international/2013/part03/int2013(03)-009.htm
Timestamp: 2017-09-26 07:34:16
Document Index: 117493694

Matched Legal Cases: ['art 3', '§32', '§1114', '§18', '§1117', '§1127']

Already LLC v NIKE Inc [USSC]
IpsofactoJ.com: International Cases [2013] Part 3 Case 9 [USSC]
(trading as YUMS)
In March 2010, eight months after Nike filed its complaint, and four months after Already counterclaimed, Nike issued a “Covenant Not to Sue.” Its preamble stated that “Already’s actions .... no longer infringe or dilute the NIKE Mark at a level sufficient to warrant the substantial time and expense of continued litigation.” App. 96a. The covenant promised that Nike would not raise against Already or any affiliated entity any trademark or unfair competition claim based on any of Already’s existing footwear designs, or any future Already designs that constituted a “colorable imitation” of Already’s current products. Id., at 96a–97a.
The District Court dismissed Already’s counterclaim, stating that because Already sought “to invoke the Court’s declaratory judgment jurisdiction, it bears the burden of demonstrating that the Court has subject matter jurisdiction over its counterclaim[ ].” Civ. No. 09–6366 (SDNY, Jan. 20, 2011), App. to Pet. for Cert. 25a. The Court read the covenant “broad[ly],” concluding that “any of [Already’s] future products that arguably infringed the Nike Mark would be ‘colorable imitations’” of Already’s current footwear and therefore protected by the covenant. Id., at 29a, n. 2. Finding no evidence that Already sought to develop any shoes not covered by the covenant, the Court held there was no longer “a substantial controversy .... of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id., at 34a (quoting MedImmune, Inc. v Genentech, Inc., 549 U. S. 118, 127 (2007) (internal quotation marks omitted)).
The Second Circuit affirmed. It held that in determining whether a covenant not to sue “eliminates a justiciable case or controversy,” courts should look to the totality of the circumstances, including “(1) the language of the covenant, (2) whether the covenant covers future, as well as past, activity and products, and (3) evidence of intention .... on the part of the party asserting jurisdiction” to engage in conduct not covered by the covenant. 663 F. 3d 89, 96 (2011) (footnote omitted). Noting that the covenant covers “both past sales and future sales of both existing products and colorable imitations,” the Second Circuit found it hard to conceive of a shoe that would infringe the Air Force 1 trademark yet not fall within the covenant. Id., at 97. Given that Already “ha[d] not asserted any intention to market any such shoe,” the court concluded that Already could not show any continuing injury, and that therefore no justiciable controversy remained. Ibid. We granted certiorari. 567 U. S. ___ (2012).
Article III of the Constitution grants the Judicial Branch authority to adjudicate “Cases” and “Controversies.” In our system of government, courts have “no business” deciding legal disputes or expounding on law in the absence of such a case or controversy. DaimlerChrysler Corp. v Cuno, 547 U. S. 332, 341 (2006) . That limitation requires those who invoke the power of a federal court to demonstrate standing – a “personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to be redressed by the requested relief.” Allen v Wright, 468 U. S. 737, 751 (1984). We have repeatedly held that an “actual controversy” must exist not only “at the time the complaint is filed,” but through “all stages” of the litigation. Alvarez v Smith, 558 U. S. 87, 92 (2009) (internal quotation marks omitted); Arizonans for Official English v Arizona, 520 U. S. 43, 67 (1997) (“To qualify as a case fit for federal-court adjudication, ‘an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed’” (quoting Preiser v Newkirk, 422 U. S. 395, 401 (1975))).
A case becomes moot – and therefore no longer a “Case” or “Controversy” for purposes of Article III – “when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Murphy v Hunt, 455 U. S. 478, 481 (1982) (per curiam) (some internal quotation marks omitted). No matter how vehemently the parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is moot if the dispute “is no longer embedded in any actual controversy about the plaintiffs’ particular legal rights.” Alvarez, supra, at 93.
We have recognized, however, that a defendant cannot automatically moot a case simply by ending its unlawful conduct once sued. City of Mesquite v Aladdin’s Castle, Inc., 455 U. S. 283, 289 (1982) . Otherwise, 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. Given this concern, our cases have explained that “a defendant claiming that its voluntary compliance moots a case bears the formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Friends of the Earth, Inc. v Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 190 (2000) .
Under our precedents, it was Nike’s burden to show that it “could not reasonably be expected” to resume its enforcement efforts against Already. Friends of the Earth, supra, at 190. Nike makes a halfhearted effort to avoid this test. Relying on Deakins v Monaghan, 484 U. S. 193 (1988), it argues that “when a defendant makes a judicially enforceable commitment to avoid the conduct that forms the basis for an Article III controversy, there is no reason to apply a special rule premised on the defendant’s unfettered ability to ‘return to [its] old ways.’” Brief for Respondent 42.
Nike’s reliance on Deakins is misplaced. In Deakins, the Court did not disavow the voluntary cessation doctrine; the Court employed precisely the analysis required by that test. It found the case was moot because the challenged action – pursuing a claim in court – could not be resumed in “this or any subsequent action” and because it was entirely “speculative” that any similar claim would arise in the future. 484 U. S., at 201, n. 4 (internal quotation marks omitted). It distinguished that situation from one in which a defendant is “free to return to his old ways.” Ibid. (internal quotation marks omitted). That is the question the voluntary cessation doctrine poses: Could the allegedly wrongful behavior reasonably be expected to recur? Nike cannot avoid its “formidable burden” by assuming the answer to that question. Friends of the Earth, supra, at 190.
Having determined that the voluntary cessation doctrine applies, we begin our analysis with the terms of the covenant (App. 96a–97a):
[Nike] unconditionally and irrevocably covenants to refrain from making any claim(s) or demand(s) .... against Already or any of its .... related business entities .... [including] distributors .... and employees of such entities and all customers .... on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law .... relating to the NIKE Mark based on the appearance of any of Already’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced .... or otherwise used in commerce before or after the Effective Date of this Covenant.
In addition, Nike originally argued that the Sugars and Soulja Boys infringed its trademark; in other words, Nike believed those shoes were “colorable imitations” of the Air Force 1s. See Trademark Act of 1946 (Lanham Act), §32, 60Stat. 437, as amended, 15 U. S. C. §1114. Nike’s covenant now allows Already to produce all of its existing footwear designs – including the Sugar and Soulja Boy – and any “colorable imitation” of those designs. We agree with the Court of Appeals that “it is hard to imagine a scenario that would potentially infringe [Nike’s trademark] and yet not fall under the Covenant.”[1] 663 F. 3d, at 97. Nike, having taken the position in court that there is no prospect of such a shoe, would be hard pressed to assert the contrary down the road. See New Hampshire v Maine, 532 U. S. 742, 749 (2001) (“ ‘[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him’” (quoting Davis v Wakelee, 156 U. S. 680, 689 (1895))). 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. It sits, as far as we can tell, on a shelf between Dorothy’s ruby slippers and Perseus’s winged sandals.
The authorities on which Already relies are not on point. In Cardinal Chemical Co. v Morton Int’l, Inc., we affirmed the unremarkable proposition that a court’s “decision to rely on one of two possible alternative grounds (noninfringement rather than invalidity) did not strip it of power to decide the second question, particularly when its decree was subject to review by this Court.” 508 U. S. 83, 98 (1993) . In essence, when a court has jurisdiction to review a case, and decides the issue on two independent grounds, the first half of its opinion does not moot the second half, or vice versa. Here the issue is whether the District Court had jurisdiction to consider the claim in the first place.
This case is also unlike Altvater v Freeman, 319 U. S. 359 (1943). There, patent holders brought suit against licensees for specific performance of a license. The licensees counterclaimed, seeking a declaratory judgment that the patents were invalid. The Court of Appeals, after finding that the license was no longer in force and the devices at issue did not infringe, dismissed the licensees’ counterclaim as moot. We reversed, finding the controversy still live because the licensees continued to “manufactur[e] and sell[ ] additional articles claimed to fall under the patents,” and the patent holders continued to “demand[ ] .... royalties” for those products. Id., at 364–365. Here of course the whole point is that Already is free to sell its shoes without any fear of a trademark claim.
Already argues, however, that there are alternative theories of Article III injuries that save the case from mootness.
First, it argues that so long as Nike remains free to assert its trademark, investors will be apprehensive about investing in Already.
Second, it argues that given Nike’s decision to sue in the first place, Nike’s trademarks will now hang over Already’s operations like a Damoclean sword.
Finally, and relatedly, Already argues that, as one of Nike’s competitors, it inherently has standing to challenge Nike’s intellectual property.
The problem for Already is that none of these injuries suffices to support Article III standing. Although the voluntary cessation standard requires the defendant to show that the challenged behavior cannot reasonably be expected to recur, we have never held that the doctrine – by imposing this burden on the defendant – allows the plaintiff to rely on theories of Article III injury that would fail to establish standing in the first place.
We begin with Already’s argument that Nike’s trademark registration “gives false color to state and federal trademark claims which expose [Already’s] business to substantial and unpredictable risks,” deterring investors. Brief for Petitioner 31. To demonstrate this, Already presented affidavits from potential investors stating that Nike’s lawsuit dissuaded them from investing in Already or prompted them to withdraw prior investments, and that they would “consider” investing in Already only if Nike’s trademark were struck down. App. to Pet. for Cert. 33a. Already argues that like the plaintiffs in Village of Euclid v Ambler Realty Co., 272 U. S. 365 (1926) – who had standing to challenge an ordinance because it reduced their property value – Already should have standing to challenge the trademark because its mere existence hampers its ability to attract capital.
But once it is “absolutely clear” that challenged conduct cannot “reasonably be expected to recur,” Friends of the Earth, 528 U. S., at 190, the fact that some individuals may base decisions on “conjectural or hypothetical” speculation does not give rise to the sort of “concrete” and “actual” injury necessary to establish Article III standing, Lujan v Defenders of Wildlife, 504 U. S. 555, 560 (1992) (internal quotation marks omitted). In Euclid, we reasoned that, assuming the merits of plaintiff’s claim, “the ordinance, in effect, constitutes a present invasion of [plaintiff’s] property rights.” 272 U. S., at 386. Here there is no such present invasion; in fact there is a covenant promising no invasion. In addition, unlike the plaintiffs in Euclid, Already does not claim that Nike’s Air Force 1 infringes any of its property rights.
Already has also pointed to an affidavit from a vice president stating that Nike has “suggested” to Already’s retailers that they refrain from carrying Already’s shoes, lest “Nike .... cancel its account or take other actions against the retailer, e.g., delay shipment of the retailer’s Nike order or ‘lose’ the retailer’s Nike order.” App. 177a. Even if a plaintiff may bring an invalidity claim based on a reasonable expectation that a trademark holder will take action against the plaintiff’s retailers, the covenant here extends protection to Already’s distributors and customers. And even if Nike were engaging in harassment or unfair trade practices, Already has not explained how invalidating Nike’s trademark would do anything to stop it.
Already also complains that it can no longer “just blithely go about its shoe business as if there were no risk of being sued again.” Reply Brief 14. As counsel told us at oral argument: “once bitten, twice shy.” Tr. of Oral Arg. 8. But we have never held that a plaintiff has standing to pursue declaratory relief merely on the basis of being “once bitten.” Quite the opposite. See, e.g., Los Angeles v Lyons, 461 U. S. 95, 109 (1983) (holding there is no justiciable controversy where plaintiff had once been subjected to a chokehold). Given our conclusion that Nike has met its burden of demonstrating there is no reasonable risk that Already will be sued again, there is no reason for Already to be so shy. It is the only one of Nike’s competitors with a judicially enforceable covenant protecting it from litigation relating to the Air Force 1 trademark. Insofar as the injury is a threat of Air Force 1 trademark litigation, Already is Nike’s least injured competitor.
Under this approach, Nike need not even have threatened to sue first. Already, even with no plans to make anything resembling the Air Force 1, could sue to invalidate the trademark simply because Already and Nike both compete in the athletic footwear market. Taken to its logical conclusion, the theory seems to be that 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. We have never accepted such a boundless theory of standing. The cases Already cites for this remarkable proposition stand for no such thing. In each of those cases, standing was based on an injury more particularized and more concrete than the mere assertion that something unlawful benefited the plaintiff’s competitor. Northeastern Fla. Chapter, Associated Gen. Contractors of America v Jacksonville, 508 U. S. 656 (1993); Super Tire Engineering Co. v McCorkle, 416 U. S. 115 (1974) .
First of all, granting covenants not to sue may be a risky long-term strategy for a trademark holder. See, e.g., 3 J. McCarthy, Trademarks & Unfair Competition §18:48, p. 18–112 (4th ed. 2012) (“[U]ncontrolled and ‘naked’ licensing can result in such a loss of significance of a trademark that a federal registration should be cancelled”); Sun Banks of Fla., Inc. v Sun Fed. Sav. & Loan Assn., 651 F. 2d 311, 316 (CA5 1981) (finding that “extensive third-party use of the [mark was] impressive evidence that there would be no likelihood of confusion”). In addition, the Lanham Act provides some check on abusive litigation practices by providing for an award of attorney’s fees in “exceptional cases.” 15 U. S. C. §1117(a); cf., e.g., Gwaltney of Smithfield, Ltd. v Chesapeake Bay Foundation, Inc., 484 U. S. 49, 67, n. 6 (1987) (explaining that an award of litigation costs can protect “from the suddenly repentant defendant”).
Accepting Already’s theory may benefit the small competitor in this case. But lowering the gates for one party lowers the gates for all. As a result, larger companies with more resources will have standing to challenge the intellectual property portfolios of their more humble rivals – not because they are threatened by any particular patent or trademark, but simply because they are competitors in the same market. This would further encourage parties to employ litigation as a weapon against their competitors rather than as a last resort for settling disputes.
Already’s only legally cognizable injury – the fact that Nike took steps to enforce its trademark – is now gone and, given the breadth of the covenant, cannot reasonably be expected to recur. There being no other basis on which to find a live controversy, the case is clearly moot.
As for business activities, it is plain that Already has said all it has to say. The District Court held a hearing on whether the case was mooted by the covenant. There, and at every stage of the proceedings thereafter, Already steadfastly refused to suggest that it has any plans to create any arguably infringing shoe that does not unambiguously fall within the scope of the covenant – this despite every incentive, opportunity, and invitation to do so. As noted, the District Court expressly found “no indication” that Already had any such plans, App. to Pet. for Cert. 31a, and Already never challenged this finding. It did not challenge that finding on appeal to the Second Circuit, even though its significance was clear. The Court of Appeals expressly found that Already “has not asserted any intention to market any such shoe.” 663 F. 3d, at 97. Already declined to challenge these conclusions before us, despite questions from the bench addressing that particular issue. Tr. of Oral Arg. 7–8.
Under such circumstances, a remand would serve no purpose. Cf., e.g., Global-Tech Appliances, Inc. v SEB S.A., 563 U. S. ___, ___ (2011) (slip op., at 13–16) (announcing new standard and directly applying standard to affirm the jury verdict); Thornburg v Gingles, 478 U. S. 30 (1986) (announcing and applying new standard). The uncontested findings made by the District Court, and confirmed by the Second Circuit, make it “absolutely clear” this case is moot.
(with whom Justice Thomas, Justice Alito, and Justice Sotomayor join, concurring)
As the Court now holds and as the precedents instruct, when respondent Nike invoked the covenant not to sue to show the case is moot, it had the burden to establish that proposition. The burden was not on Already to show that a justiciable controversy remains. Under the voluntary cessation doctrine, Nike bears the “formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Friends of the Earth, Inc. v Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 190 (2000) . In the circumstances here, then, Nike must demonstrate that the covenant not to sue is of sufficient breadth and force that Already can have no reasonable anticipation of a future trademark infringement claim from Nike.
There are relatively few cases that have discussed the meaning and effect of covenants not to sue in the context of ongoing litigation. See, e.g., Revolution Eyewear, Inc. v Aspex Eyewear, Inc., 556 F. 3d 1294 (CA Fed. 2009); Caraco Pharmaceutical Labs., Ltd. v Forest Labs., Inc., 527 F. 3d 1278 (CA Fed. 2008). Courts should proceed with caution before ruling that they can be used to terminate litigation. An insistence on the proper allocation of the formidable burden on the party asserting mootness is one way to ensure that covenants are not automatic mechanisms for trademark holders to use courts to intimidate competitors without, at the same time, assuming the risk that their trademark will be found invalid and unenforceable.
While there still may be some doubts that Nike’s showing below would suffice in other circumstances, here Already’s litigation stance does seem to have made further proceedings on the mootness issue unnecessary. In addition, as the Court notes, in any future trademark proceeding Nike will be bound by the lower courts’ broad reading of this particular covenant, thus barring suit against Already for any shoe that is not an exact copy or counterfeit version of the Air Force 1 shoe. See ante, at 7, and n. (citing New Hampshire v Maine, 532 U. S. 742, 749 (2001)).
[1] Nike has “acknowledged that if [Already] were to manufacture an exact copy of the Air Force 1 shoe .... Nike could claim that the Covenant permits an infringement suit on the ground that a counterfeit differs from a colorable imitation under the Lanham Act.” 663 F. 3d, at 97, n. 5. Already, however, has never asserted any intent to make counterfeit Air Force 1s. Ibid. Moreover, because a counterfeit would presumably include Nike’s swoosh, an independently registered trademark not at issue here, invalidating the Air Force 1 trademark maynot be sufficient to allow Already to proceed to make counterfeits. See 15 U. S. C. §1127 (defining a counterfeit as a “spurious mark which is identical with, or substantially indistinguishable from, a registered mark”).