StockX has released a public response to Nike’s NFT lawsuit against the resale platform. While claiming the lawsuit is “baseless”, StockX insists its NFTs are “definitely not ‘virtual products’ or digital sneakers” [emphasis theirs]. The company points to fair use and nominative first-sale doctrines in trademark law to argue that the sale of NFTs based on Nike sneakers is legal.
StockX’s first foray into the metaverse came in mid-January when it launched a series of sneaker NFTs composed almost entirely of Nike designs. Subsequent releases have provided tokens for other sneakers and streetwear collectibles, and each NFT is tied to a physical product kept in StockX’s “vault”. NFT holders can redeem their tokens and give up ownership of their tokens in exchange for the associated physical product – although when and how users would be able to do this was not initially clear, just one of the many issues surrounding StockX’s entry into the NFT -market.
Nike filed a lawsuit against StockX within two weeks of its launch, accusing the defendant of trademark infringement and trademark dilution. Lawyers for the sportswear giant say StockX engages in “blatant freeriding, almost exclusively, on the back of Nike’s famous trademarks and associated goodwill” and is likely to confuse customers who believe Nike supports the initiative.
StockX isn’t backing down — Nike has already taken legal action against a number of independent shoe designers that trade in custom sneakers or rely heavily on existing designs, and has turned its attention to StockX’s transactions in the metaverse. Nike has plans of its own to release sneaker NFTs after it acquired digital sneaker brand RTFKT Studios, plans that its lawyers say are jeopardized by StockX’s actions.
The most recent defendants in lawsuits filed by Nike, with the exception of John Gieger, have reached an out-of-court settlement before a judge could rule — likely because of a significant imbalance in resources compared to the multi-billion dollar company. However, StockX should be well equipped to carry out legal proceedings in defense. The latest financing round values the company at $3.8 billion, making it the most valuable player in the sneaker resale market, next to eBay.
StockX says its NFTs are just a way to “track and save ownership of physical products” [its] customers time and money, while reducing the environmental impact of re-shipment.” It further argues that what it does is no different than any platform that uses images to accurately represent the products offered for sale.
The difference, however, is that StockX’s NFTs cost significantly more than buying the accompanying sneaker. A pair of the coveted Nike SB x Ben & Jerry’s Dunk Low “Chunky Dunky” can be bought on StockX for around $1,500 depending on size. The associated NFT has sold for a whopping $5,000, suggesting that buyers value the tokens differently than just the representation of a physical good.
NFTs are inherently gritty regardless of what someone who invested in them might tell you, but we may need to look to the courts to see if StockX’s activities in the metavers rise to the level of illegitimacy.