WASHINGTON — The Supreme Court Wednesday handed down a unanimous decision in favor of Nike Inc. in a trademark dispute over a footwear design with Already LLC, a Dallas-based apparel and footwear company doing business under the brand name Yums.

This story first appeared in the January 10, 2013 issue of WWD. Subscribe Today.

The justices ruled that an action filed by Already seeking to declare Nike’s trademark on a footwear design invalid was moot because Nike had already signed a covenant not to enforce its trademark against the company’s footwear style.

The Supreme Court case, which was brought by Already, grew out of a trademark infringement lawsuit that Nike filed against Already in 2009. In that case Nike alleged that two of Already’s athletic shoes violated Nike’s Air Force 1 trademark.

Denying those allegations, Already filed a counterclaim against Nike and challenged the validity of Nike’s Air Force 1 trademark.

However, while the suit was pending, Nike reversed course and issued a “covenant not to sue,” promising not to raise any infringement or unfair competition claims against Already’s existing footwear designs or any future designs that constituted a “colorable imitation” of current products, according to the court.

Nike moved to dismiss its claims, as well as Already’s counterclaim, but Already opposed the dismissal of its counterclaim. Already provided affidavits from three potential investors who asserted they would not invest in any new versions of its footwear lines until Nike’s trademark was invalidated. An executive also gave an affidavit that Nike had intimidated retailers into refusing to carry the company’s shoes, the court said.

The District Court dismissed Already’s counterclaim to invalidate Nike’s trademark, concluding that was no longer a controversy because Nike had signed the covenant not to sue, and the Second Circuit Court of Appeals affirmed the lower court’s ruling.

In the majority opinion, Chief Justice John Roberts said the case, like others, had become “moot” because “the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest.”

Roberts said that Nike had met the burden of proving that it would not resume its enforcement activity. “The covenant is unconditional and irrevocable,” Roberts wrote. “It prohibits Nike from filing suit or making any claim or demand; protects both Already and Already’s distributors and customers, and covers not just current or previous designs, but also colorable imitations.”

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