The U.S. Supreme Court issued its opinion yesterday in the closely-watched case, Already, LLC v. Nike, Inc. In a decision that is almost certain to affect patent owners as well, the Court unanimously affirmed the Second Circuit’s opinion and ended the speculation of commentators that trademark holders might no longer have the ability to dismiss an invalidity challenge by entering into a covenant not to sue. The Court concluded that an appropriately framed, broad covenant not to enforce a trademark against a competitor moots the competitor’s action to have the trademark declared invalid. The Court imposed a high standard, however, holding that the party issuing the covenant bears a “formidable burden” to establish it is “absolutely clear” the allegedly wrongful conduct cannot reasonably be expected to reoccur.

BACKGROUND -

Nike designs and manufactures a popular line of shoes known as “Air Force 1s.” In the summer of 2009, Nike filed a lawsuit alleging Already’s “Sugars” and “Soulja Boys” shoe lines infringed and diluted Nike’s Air Force 1 trademark. Already filed a counterclaim asking the court to declare Nike’s trademark invalid.