Already, LLC v. Nike, Inc. - 11-982 (2013)
SUPREME COURT OF THE UNITED STATES
ALREADY, LLC, dba YUMS, PETITIONER v. NIKE, INC.
on writ of certiorari to the united states court of appeals for the second circuit
[January 9, 2013]
Justice Kennedy, with whom Justice Thomas, Justice Alito, and Justice Sotomayor join, concurring.
As the Court now holds and as the precedents instruct, when respondent Nike invoked the covenant not to sue to show the case is moot, it had the burden to establish that proposition. The burden was not on Already to show that a justiciable controversy remains. Under the voluntary cessation doctrine, Nike bears the “formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 190 (2000) . In the circumstances here, then, Nike must demonstrate that the covenant not to sue is of sufficient breadth and force that Already can have no reasonable anticipation of a future trademark infringement claim from Nike.
Both the District Court and the Court of Appeals issued their rulings on the erroneous premise that it was for Already to make the relevant showing. When a court has imposed the burden to establish a certain proposition on the wrong party, remand from a reviewing court is often appropriate to determine whether the outcome would have been different had the proper rule been applied. Here, however, the Court concludes the case must be deemed moot in all events, based on the terms and scope of the covenant and on Already’s seeming insistence that no matter how it might be worded, a covenant drawn by the trademark holder cannot moot the case. Brief for Petitioner 33–34; Tr. of Oral Arg. 10–13. For reasons the Court states, this goes too far. Already appears also to dis-claim any need to determine whether there is a real like-lihood it will produce a new product that, first, is not a colorable imitation of its existing product line, and, sec-ond, might be thought to infringe Nike’s trademark.
This brief, separate concurrence is written to underscore that covenants like the one Nike filed here ought not to be taken as an automatic means for the party who first charged a competitor with trademark infringement suddenly to abandon the suit without incurring the risk of an ensuing adverse adjudication. Courts should be well aware that charges of trademark infringement can be disruptive to the good business relations between the manufacturer alleged to have been an infringer and its dis-tributors, retailers, and investors. The mere pendency of litigation can mean that other actors in the marketplace may be reluctant to have future dealings with the alleged infringer. Nike appears to have been well aware of that dynamic in this case. In referring to Already it stated at one point: “[O]ver the past eight months, Nike has cleared out the worst offending infringers. Now Already remains as one of the last few companies that was identified on that top ten list of infringers.” App. 114a.
Any demonstrated reluctance by investors, distributors, and retailers to maintain good relations with the alleged infringer might, in an appropriate case, be an indication that the market itself anticipates that a new line of products could be outside the covenant not to sue yet still within a zone of alleged infringement. And, as noted at the outset, it is the trademark holder who has the burden to show that this is not the case. It is not the burden of the alleged infringer to prove that the covenant not to sue is inadequate to protect its current and future products from a trademark enforcement action.
In later cases careful consideration must be given to the consequences of using a covenant not to sue as the basis for a motion to dismiss as moot. If the holder of an alleged trademark can commence suit against a competitor; in midcourse file a covenant not to sue; and then require the competitor and its business network to engage in costly, satellite proceedings to demonstrate that future production or sales might still be compromised, it would seem that the trademark holder’s burden to show the case is moot may fall well short of being formidable. The very suit the trademark holder initiated and later seeks to de-clare moot may still cause disruption and costs to the competition. The formidable burden to show the case is moot ought to require the trademark holder, at the outset, to make a substantial showing that the business of the competitor and its supply network will not be disrupted or weakened by satellite litigation over mootness or by any threat latent in the terms of the covenant itself. It would be most unfair to allow the party who commences the suit to use its delivery of a covenant not to sue as an op-portunity to force a competitor to expose its future business plans or to otherwise disadvantage the competitor and its business network, all in aid of deeming moot a suit the trademark holder itself chose to initiate.
There are relatively few cases that have discussed the meaning and effect of covenants not to sue in the context of ongoing litigation. See, e.g., Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F. 3d 1294 (CA Fed. 2009); Car-aco Pharmaceutical Labs., Ltd. v. Forest Labs., Inc., 527 F. 3d 1278 (CA Fed. 2008). Courts should proceed with caution before ruling that they can be used to terminate litigation. An insistence on the proper allocation of the formidable burden on the party asserting mootness is one way to ensure that covenants are not automatic mechanisms for trademark holders to use courts to intimi- date competitors without, at the same time, assuming the risk that their trademark will be found invalid and unenforceable.
While there still may be some doubts that Nike’s showing below would suffice in other circumstances, here Already’s litigation stance does seem to have made further proceedings on the mootness issue unnecessary. In addition, as the Court notes, in any future trademark proceeding Nike will be bound by the lower courts’ broad reading of this particular covenant, thus barring suit against Already for any shoe that is not an exact copy or counterfeit version of the Air Force 1 shoe. See ante, at 7, and n. (citing New Hampshire v. Maine, 532 U. S. 742, 749 (2001) ).
With these observations, I join the opinion and judgment of the Court.