Saturday, September 23, 2023

StockX hits back at Nike in battle over NFTs and counterfeit sneakers

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Shreya Christina
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In February, Nike sued StockX, a popular online sneaker retailer, for launching a non-fungible token (NFT) series based on Nike’s shoes. Then last month it accused StockX of: knowingly selling counterfeits – something that shouldn’t be possible as StockX claims it authenticates the shoes sold on its site. Now, StockX strikes back† In a lawsuit, the sneaker seller says Nike’s complaint is “nothing more than a failed attempt to support its still baseless claims”.

StockX introduced its Vault NFT series in January. In the company own words, the idea was to allow customers to buy NFTs tied to a physical product, similar to a digital receipt. According to the company, the benefit would be a more efficient trade because a buyer doesn’t have to wait to resell a shoe. Of the nine limited-edition Vault NFT series initially launched, eight were linked to Nike footwear.

When Nike filed a lawsuit, it claimed the NFTs infringed on its trademarks and would be confusing for customers. Than in an amended complaintNike said it had bought four pairs of counterfeit shoes from December to February. Essentially, Nike is wondering how StockX can use NFTs to authenticate sneakers, when it can’t even reliably tell if a sneaker is real or fake.

StockX objects to Nike’s characterization of its authentication process. Unlike other resellers, StockX has made a name for itself by promising that every shoe sold on its site is the real deal. In the filing, the reseller says each sneaker is hand-inspected, along with “AI-enhanced machine learning technology.” It also noted that in the past Nike had praised StockX’s authentication process and its efforts to stop counterfeits.

Basically, the whole issue boils down to Nike and StockX disagreeing about what the Vault NFTs are. StockX says on the file that the Vault NFTs are “definitely not ‘virtual products’ or digital sneakers” because they are tied to a physical good. Because it serves as a digital receipt, StockX says it can’t really be sold as a separate product. The thing is, when you buy the Vault NFT, the shoe itself stays in the StockX inventory until someone chooses to claim the physical good. The NFT can be resold multiple times in the meantime. According to Nike, this makes the Vault NFTs a separate product and not a digital receipt.

However this case gets out of hand, it could have far-reaching implications for how an NFT is actually defined and whether NFTs are considered trademark infringement in the resale market.

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