Out of reach: covenant not to sue moots subject matter jurisdiction


Robert Kenney and Katherine Peden

A sufficiently broad covenant not to sue given to an accused infringer may resolve the entirety of a case between the parties, as Robert Kenney and Katherine Peden report.

In July 2009, Nike sued Already LLC, doing business as Yums, in the US District Court for the Southern District of New York for trademark infringement, false designation of origin, unfair competition and trademark dilution based on its federally registered Nike trademark covering the design of Nike’s Air Force 1 athletic shoe. Yums filed a counterclaim for declaratory judgment seeking to cancel Nike’s registration on the grounds that it was not a trademark under 15 USC §1127 or under New York law.

Subsequently, Nike delivered a ‘covenant not to sue’ to Yums, stating that Nike would refrain from pursuing action against Yums relating to the Nike mark “based on the appearance of any of Yums’ current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced, distributed, offered for sale, advertised, sold or otherwise used in commerce before or after the effective date of this covenant”.

After a hearing before the district court to determine whether the covenant divested the court of subject matter jurisdiction, Nike moved to voluntarily dismiss its infringement claims under Rule 41(a)(2) of the Federal Rules of Civil Procedure as well as to dismiss Yums’ counterclaim under Rule 12(b)(1.)

Covenant not to sue, Nike, Already LLC, MedImmune