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Keywords

defendantjurisdictionlitigationappealtrademarkdeclaratory judgment
defendantjurisdictionappealtrademarkdeclaratory judgment

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Nike, Inc. v. Already, LLC, 663 F.3d 89, 100 U.S.P.Q.2d 1621

Facts

In July 2009, Nike, Inc. filed a complaint against Already, LLC d/b/a Yums for trademark infringement, alleging that Yums was selling footwear that imitated Nike's Air Force 1 shoe, which Nike has trademarked. In response, Yums filed counterclaims for a declaratory judgment and cancellation of Nike's trademark registration. In March 2010, Nike issued a 'Covenant Not to Sue' to Yums, stating that Yums's actions no longer infringed on Nike's trademark. The District Court dismissed Yums's counterclaims, ruling that the Covenant eliminated any justiciable case or controversy.

Issue

Whether a trademark registrant's delivery of a covenant not to sue and voluntary dismissal of its trademark claims divests a federal court of subject matter jurisdiction over a defendant's counterclaims for a declaratory judgment and cancellation of the trademark's registration.

This appeal requires us to decide whether a trademark registrant's delivery of a covenant not to sue, and voluntary dismissal of its trademark claims, divests a federal court of subject matter jurisdiction over a defendant's counterclaims for a declaratory judgment and cancellation of the trademark's registration.

Rule

A case is properly dismissed for lack of subject matter jurisdiction when the district court lacks the statutory or constitutional power to adjudicate it. A valid covenant not to sue may strip district courts of jurisdiction in trademark cases under both the Declaratory Judgment Act and the Lanham Act. The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests.

A case is properly dismissed for lack of subject matter jurisdiction when the district court lacks the statutory or constitutional power to adjudicate it.

Analysis

The court applied the MedImmune totality of the circumstances test to determine whether the Covenant not to sue eliminated the justiciable case or controversy. The court found that the Covenant was broad enough to cover both past and future sales of Yums's products, thus rendering the threat of litigation remote. Yums's claims of investor concerns did not establish a genuine adverse legal interest, and the court concluded that no actual controversy existed.

Conclusion

The Court of Appeals affirmed the District Court's dismissal of Yums's counterclaims for lack of subject matter jurisdiction, holding that the Covenant not to sue eliminated any justiciable controversy.

We affirm the judgment of the District Court.

Who won?

Nike, Inc. prevailed in this case as the court upheld the dismissal of Yums's counterclaims. The court reasoned that the Covenant Not to Sue effectively removed any justiciable controversy, as it covered both past and future actions, thus eliminating the basis for Yums's claims. The court found that Yums failed to demonstrate a real and substantial controversy that warranted judicial intervention.

Nike, Inc. prevailed in this case as the court upheld the dismissal of Yums's counterclaims. The court reasoned that the Covenant Not to Sue effectively removed any justiciable controversy, as it covered both past and future actions, thus eliminating the basis for Yums's claims.

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