Nike, Inc. v. Stockx LLC

Background

The parties submitted letters about several discovery disputes. After a conference, the court requested additional briefing on StockX’s requests for information and documents concerning Nike’s revenue from NFTs, digital sneakers, and physical sneakers.

StockX argued that the discovery was relevant to Nike’s theory that StockX had been unjustly enriched. StockX relied on Nike’s initial disclosures, which said Nike was pursuing disgorgement of StockX’s profits based on unjust enrichment. StockX also argued, relying on cited Second Circuit and Southern District of New York decisions, that Nike needed evidence showing that StockX’s sales diverted sales from Nike to obtain an unjust-enrichment remedy.

Court’s Analysis

Nike represented that it was seeking no monetary relief related to StockX’s NFTs and only sought injunctive relief for those claims. The court agreed that Nike’s NFT-related revenue was therefore not relevant to a claim or defense and sustained Nike’s objections to Request for Production Nos. 54–56 and Notice Topic 15. The opinion also notes that, at an earlier conference, the court denied discovery concerning Nike’s “Digital Sneakers,” including virtual sneakers usable in video games.

For Nike’s false-advertising and counterfeiting claims, Nike argued that it sought statutory rather than actual damages for the sale of counterfeit Nike shoes. Nike also argued that it did not need to prove that StockX’s conduct diverted revenue from Nike to receive damages for false advertising. The court agreed with Nike.

The court explained that the cited Second Circuit decision did not establish the broad rule StockX proposed. It noted that damages may be available in a false-designation-of-origin case even when the parties’ products do not directly compete. The court concluded that Nike could obtain unjust-enrichment profits by showing that StockX’s sales were ill-gotten; proof that StockX’s sales directly diverted Nike’s sales was not required. The court also rejected StockX’s argument that Nike’s sales data could help the factfinder decide damages, because Nike did not compete in the secondary market where StockX operated. Stable Nike sales therefore would not show whether StockX was unjustly enriched by selling counterfeit shoes.

Ruling

The court sustained Nike’s objections to Notice Topic 16 and, accordingly, sustained Nike’s objections to the identified revenue-related discovery. StockX was precluded from seeking that discovery. The order was issued by Sarah Netburn, United States Magistrate Judge.