Nike v Already LLC – Unilateral Covenant Not to Sue As A Way Out

A defendant's counterclaims can act as a bear trap for plaintiff, keeping it in a case that it wishes to unilaterally drop. Plaintiff sues defendant alleging trademark infringement of a registration described as a 'design' or 'configuration' mark. Defendant files answers and counterclaims seeking declaratory judgement cancelling registration. During discovery, plaintiff delivers uni-lateral covenant not to sue, stating that because defendant's actions 'no longer infringe or dilute at a level sufficient to warrant' continued litigation, plaintiff 'unconditionally and irrevocably' covenants not to sue defendant on claims arising from defendant's current and/or previous footwear product designs or 'colorable imitations' thereof. Plaintiff then moved to dismiss its action and the counterclaims. Defendants consented to dismissal of plaintiff's claims but opposed dismissal of its counterclaims, seeking cancellation of the registration. It argued the registration remained a sword over its head, and that it could still run afoul of that registration in the future. However, the Court noted that the covenant applied to future sales of defendant's shoes and colorable imitations thereof. There was no evidence that defendant was working on 'new or updated' products, and it was hard to envision such products that could infringe the registered mark and not be covered by the covenant. Decision Nike Soulja DJ Counterclaims

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