Professional Jeweler Archive: Just Don't Do It

July 2000

Managing: Legal Issues

Just Don't Do It

Nike swooshes in to take legal aim at jewelers infringing on its licensed trademarks

In the most visible of many recent actions taken to protect corporate logos, sportswear giant Nike launched a nationwide campaign to stop jewelers from selling items that infringe on its licensed trademarks. Understanding what Nike is doing, how it’s taking action and the causes behind it will help you avoid costly trademark disputes.

As branding continues to rise in importance, this issue is going to be of greater importance to retailers. Major corporations such as Nike and high-profile designers such as David Yurman are not only establishing legal copyright, trademark and trade dress rights in pieces or entire collections of jewelry, they are aggressively policing and enforcing these rights. Corporations that spend millions of dollars creating marketable and highly profitable logos, emblems, designs and looks are waging war against the companies that produce unlicensed, unauthorized and, therefore, illegal copies of them. The term often used for the sale of unauthorized products is piracy. It’s a problem in the music, video and software industries and is becoming a persistent issue in the watch and jewelry industries.

What Nike Is Doing

According to Vada Manager, Nike’s director of global issues management, Nike became aware of the unauthorized sale of pendants, rings, charms, bracelets and earrings bearing one of Nike’s trademarks – the “swoosh,” the Michael Jordan Jump Man or the Nike name itself. Consumers contacted Nike to complain about the poor quality of a piece of jewelry only to be told it wasn’t made or authorized by Nike. Trademark owners such as Nike fear their marks’ values will be denigrated if consumers associate it with poorly made products.

The Investigation

Last year, Nike representatives called 2,500 jewelry stores, manufacturers and pawn shops in Florida to determine whether they sold Nike jewelry. Based on the answers, Nike investigators visited 400 businesses and determined more than 200 were selling or would order on request unauthorized jewelry.

Nike attorneys are trying to settle with these businesses before filing formal lawsuits. The terms the settlements demand suggest how seriously Nike takes piracy. Nike’s settlement offer requires the jeweler to pay financial damages, most of which are $1,000 to $10,000, based on how much infringing merchandise a dealer had in stock and sold already, says Manager. The jeweler also must turn over all infringing goods, agree in writing not to buy or sell any more unauthorized jewelry and answer a questionnaire about the purchase and sale of the goods.

The questionnaire helps Nike find the source of the illegal items. This point is important to remember: In most trademark or copyright infringement disputes, the retailer probably isn’t the primary target unless it’s a large business. The manufacturer or distributor is the quarry, but the trademark’s owner often has no other way to get to the manufacturer except through a retailer.

It’s important to keep records of where you bought inventory and to work with suppliers with integrity. An established supplier is less likely to sell you infringing goods and is more likely to be able to make good if it does.

Nike’s settlement demands may sound draconian, but if the company were to prevail in a lawsuit, it would be entitled to all that plus damages. Such lawsuits can take a year or more to come to trial and involve a great deal of pretrial preparation. Legal costs can climb to thousands of dollars for both sides. And if you lose, the court can order you to pay all the legal fees.

The Solution

If you’re buying trademarked jewelry or jewelry incorporating the name or logo of a company or organization, contact that company or organization first. Tell it what you are buying and from whom.

In Nike’s case, the only jewelry the company authorizes are sport watches, usually sold in sporting goods stores. Virtually any jewelry you come across bearing a Nike trademark is suspect.

Issues often arise concerning the validity or enforceability of trademarks and copyrights. Sometimes these are difficult issues and can be resolved only by lawyers or the courts. But you should be able to spot a potential problem.

A red flag should go up if you think customers will likely buy an item because it’s associated with a corporation, organization or designer. If so, find out whether that corporation, organization or designer has a legal interest in the association you assume customers make. There’s a good chance someone has spent a lot to create that association and has gone to the trouble to protect his or her investment with a trademark or copyright.

Manager says any retailer who has a question about items bearing one of Nike’s trademarks may call the Nike legal department at (503) 671-NIKE (6453). For an in-depth look at copyright and trademark law, see Professional Jeweler, “Designer Victory,” January 2000, p. 129, and “Trademarking the Millennium,” January 1999, p. 92.

– by William H. Donahue Jr.

William H. Donahue Jr. is an attorney practicing in New Jersey.

Next Month: Insurance for intellectual property disputes.

Copyright © 2001 by Bond Communications