# Already v. Nike: When a Covenant Not to Sue Moots a Trademark Challenge

> A unanimous Supreme Court held that Nike's broad, irrevocable covenant not to sue mooted a competitor's counterclaim attacking the validity of Nike's Air Force 1 trademark.

Topic: Trademarks  |  Author: Lidiia Levitska  |  Source: Intellectual Property Law (outsideipcounsel.com)
Canonical: https://outsideipcounsel.com/blog/already-v-nike-covenant-not-to-sue-mootness/


*Already, LLC v. Nike, Inc.*, 568 U.S. 85 (2013), is the Supreme Court's leading modern statement on when a trademark holder can extinguish a validity challenge by unilaterally promising not to sue. Nike had sued Already — the maker of the "Sugar" and "Soulja Boy" sneakers sold under its Yums brand — claiming those shoes infringed Nike's registered trade dress in the Air Force 1. Already counterclaimed to cancel the Air Force 1 registration as invalid. Nike then delivered a broad "Covenant Not to Sue" and moved to dismiss the entire case, including the counterclaim, as moot. Writing for a unanimous Court, Chief Justice Roberts held that the covenant's sweeping breadth satisfied the demanding voluntary-cessation standard and left no live case or controversy for Already's counterclaim to occupy.

## At a glance

- **Case:** *Already, LLC, DBA Yums v. Nike, Inc.*, 568 U.S. 85 (2013), Docket No. 11-982
- **Court:** Supreme Court of the United States, on certiorari to the Second Circuit
- **Decided:** January 9, 2013 (argued November 7, 2012); unanimous
- **Opinion:** Chief Justice Roberts, for the Court; Justice Kennedy concurring (joined by Justices Thomas, Alito, and Sotomayor)
- **Subject matter:** Article III mootness, voluntary cessation, and a covenant not to sue extinguishing a trademark-cancellation counterclaim
- **Holding:** A trademark holder's unconditional and irrevocable covenant not to sue, broad enough to cover the accused party's current and future colorable imitations, moots that party's counterclaim challenging the mark's validity

## The dispute and the covenant

Nike holds a federal registration for the design of its Air Force 1 shoe — the stitching, eyelet panels, and other features that make up the sneaker's trade dress. In 2009 Nike sued Already, alleging that Already's Sugar and Soulja Boy lines infringed and diluted that mark. Already denied infringement and counterclaimed, seeking a declaration that Nike's Air Force 1 trademark was invalid and an order canceling the registration. The counterclaim raised the prospect that the very mark Nike was asserting could be wiped off the register.

Roughly eight months into the litigation, Nike changed course. It issued a "Covenant Not to Sue" declaring that Already's designs "no longer infringe or dilute" the Nike mark at a level warranting continued litigation, and promising that Nike would not raise any trademark or unfair-competition claim against Already — or any affiliated distributor, retailer, or customer — based on Already's existing footwear designs "or any future Already designs that constituted a 'colorable imitation'" of those products. Having disarmed itself, Nike moved to dismiss its own claims with prejudice and to dismiss Already's counterclaim as moot. The district court dismissed the counterclaim for lack of subject-matter jurisdiction, and the Second Circuit affirmed.

## Voluntary cessation and the "formidable burden"

The doctrinal engine of the case is the voluntary-cessation rule. Ordinarily a defendant cannot moot a case simply by ceasing the challenged conduct, because it could resume the moment the case is dismissed. To guard against that manipulation, the party asserting mootness "bears the formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur." The Court applied that standard to Nike's covenant rather than to a bare promise to walk away.

Measured against that burden, the covenant sufficed. Chief Justice Roberts emphasized its breadth: the covenant was "unconditional and irrevocable"; it prohibited Nike not merely from filing suit but from "making any claim or any demand"; and it reached not only Already's existing and prior designs but "any colorable imitations" of them. It extended beyond Already itself to its distributors and customers. Given that scope, the Court could not conceive of a shoe Already could make that would both fall outside the covenant and yet still infringe the Air Force 1 mark. If Already could not be sued, it faced no threat from the challenged registration, and there was accordingly no continuing case or controversy for its counterclaim to redress.

The Court then rejected Already's attempt to manufacture a live dispute. Already argued that the covenant still chilled its ability to raise capital, that investors remained wary, and that competitors like Already have a special, ongoing interest in ridding the market of invalid trademarks. Roberts found each theory speculative or legally insufficient. Concerns about investors and market perception, absent any concrete threat of enforcement, did not amount to the kind of injury Article III requires. And the Court declined to adopt Already's "sweeping" position that any competitor always retains standing to challenge a trademark — a rule that would allow a plaintiff who never had, or has surrendered, any live claim to litigate a mark's validity in the abstract.

## Kennedy's caution about strategic covenants

Justice Kennedy, joined by three colleagues, concurred to sound a warning about how the decision should be read. He was troubled by the tactical potential of covenants not to sue: a trademark holder might file an aggressive suit, force a competitor to reveal its product plans, and then — having extracted that information and imposed litigation costs — issue a covenant to escape any test of its own mark's validity. Kennedy stressed that courts should not readily infer mootness merely because a covenant has been filed. The burden remains on the party asserting mootness, and it is a heavy one; a defendant seeking dismissal must show that the covenant genuinely and completely eliminates any reasonable prospect of an infringement suit. "An insistence on the proper allocation of the formidable burden," he wrote, is the mechanism that prevents covenants from becoming an instrument of gamesmanship.

## Open questions

*Already* resolved that a sufficiently broad covenant can moot a validity counterclaim, but it left the harder line-drawing to future cases. How broad must a covenant be? Nike's reached every colorable imitation of Already's current line; a narrower covenant — one carving out particular future designs, or limited to specific customers — might not carry the formidable burden, and lower courts have since parsed covenant language closely. The decision also left open how much a defendant's litigation-imposed disclosures or sunk costs should factor into the equitable calculus that Justice Kennedy flagged. And because the ruling rests on Article III mootness rather than trademark policy, it does not disturb the availability of cancellation proceedings before the USPTO's Trademark Trial and Appeal Board, where a competitor with standing may still attack a registration outside the shadow of a covenant.

## Implications

- **A covenant can be a shield, but only a broad one.** To moot a validity challenge, a covenant not to sue must be unconditional, irrevocable, and expansive enough to cover the accused party's present and future colorable imitations; hedged or conditional promises will not carry the formidable burden.
- **The burden stays with the mark holder.** The party asserting mootness must show it is "absolutely clear" no infringement suit could reasonably recur — a defendant cannot moot a case by a grudging or partial retreat.
- **No free-floating right to challenge a mark.** A competitor's general interest in clearing invalid trademarks does not, by itself, create Article III standing once the threat of suit is removed.
- **Weigh the litigation costs before you sue.** Kennedy's concurrence signals that courts will scrutinize covenants deployed mid-litigation to escape a counterclaim, especially where the plaintiff has already extracted the defendant's business information.

## Frequently asked questions

**What did Already v. Nike decide?** The Supreme Court held that Nike's unconditional and irrevocable covenant not to sue Already over its shoe designs mooted Already's counterclaim seeking to cancel Nike's Air Force 1 trademark, because there was no longer a live case or controversy under Article III.

**What is the voluntary-cessation doctrine?** A defendant's decision to stop challenged conduct does not automatically moot a case; the party asserting mootness bears the "formidable burden" of showing it is "absolutely clear" the conduct cannot reasonably be expected to recur. The Court held Nike's covenant met that burden.

**Can any competitor challenge a trademark's validity?** No. The Court rejected Already's argument that a competitor always retains standing to attack a mark. Once Nike promised not to sue over any current or future colorable imitation, Already had no concrete, ongoing injury to support a live controversy.

## Authorities and sources

- *Already, LLC v. Nike, Inc.*, 568 U.S. 85 (2013), Docket No. 11-982 (decided January 9, 2013). [Justia](https://supreme.justia.com/cases/federal/us/568/85/); [Cornell Legal Information Institute](https://www.law.cornell.edu/supremecourt/text/11-982).
- Oral argument and case summary via [Oyez](https://www.oyez.org/cases/2012/11-982).
- Unanimous vote, Roberts authorship, Kennedy concurrence (joined by Thomas, Alito, and Sotomayor), and the covenant's breadth corroborated by [Wikipedia: Already, LLC v. Nike, Inc.](https://en.wikipedia.org/wiki/Already,_LLC_v._Nike,_Inc.) and [FindLaw full-text opinion](https://caselaw.findlaw.com/court/us-supreme-court/11-982.html).