Fake sneakers and NFT: Nike alleges Michigan market sold counterfeit shoes

Nike escalated its legal battle with StockX earlier this month when it alleged the Michigan-based online marketplace was selling counterfeit sneakers.

This follows a lawsuit in February that claims StockX is illegally using the Nike trademark by selling digital versions of the brand’s sneakers. In an amended lawsuit filed in the US District Court in Southern New York by New York law firm DLA Piper, Nike attacked the crown jewel of StockX’s business: authenticity.

StockX, a $3.8 billion online sneaker and streetwear resale marketplace, acts as a middleman between buyers and sellers. When a customer buys a pair of sneakers, for example, the seller sends the shoes to StockX to authenticate the brand, often big names like Nike, Adidas, Reebok or New Balance.

Related: Nike sues Michigan market for virtual sneakers sold as NFT

Despite StockX’s bragging an accuracy rate of 99.96% on its websiteNike claims counterfeit sneakers are coming out of the retailer’s doors.

“Since December 2021 and throughout the filing of this action, Nike has obtained from StockX four pairs of allegedly ‘authenticated’ Nike-branded shoes which Nike claims are in fact counterfeit,” attorneys for DLA Piper wrote in the trial.

The 72-page complaint says the counterfeit sneakers, purchased over a two-month period, bore a “verified authentic” label and came with a paper receipt stating the shoes were “100% authentic.”

StockX responded to this claim by saying it had invested millions in fighting the “proliferation of counterfeit products” in its marketplace.

“Nike’s latest case is not only baseless, but also puzzling given that their own brand protection team trusted our authentication program, and that hundreds of Nike employees – including executives current superiors – use StockX to buy and sell products,” said the Detroit. company based said in an online statement.

This legal battle began in February shortly after StockX launched its non-fungible token Vault NFT service.

NFTs, which look like a digital image, act as proof of ownership of a physical product. They make it easier for customers to trade sneakers and store rare goods in StockX’s vault, the company says.

Nike claims the virtual products were “created, marketed, offered for sale and sold” without its consent. In the updated court filing, attorneys also allege that a counterfeit pair of Air Jordan 1 Retro High OG was being sold as NFT.

“StockX represents the same shoe on one of eight Nike-branded NFTs for sale on StockX’s platform, which is also currently StockX’s top-selling NFT by total volume sold,” the lawsuit states.

A StockX sales history shows that the Air Jordan 1 Retro High OG NFT first sold for $501 in February. After 100 sales, it is now listed at $295.

Related: A Michigan-based online marketplace is selling sneaker NFTs. What does that mean?

StockX sold more than 550 Nike-branded NFTs, according to the lawsuit, and minted another 2,000. Other NFT Vault products currently on sale include valuable Pokeman cards, action figures, and sneakers from brands like Adidas and New Balance.

“Nike’s challenge has no merit and clearly demonstrates their lack of understanding of the modern market,” StockX said.

Reselling sneakers is big business.

Simple supply and demand dictate the secondary market: Limited-edition sneakers from major brands often sell out quickly, increase in value, and are resold for a higher price.

Currently valued at $2 billion in North America per Cowen analysisthe resale industry has the potential to reach $30 billion by 2030, a big chunk of the $85 billion global sneaker market.

Sneaker brands make no direct profit from this secondary market, as companies like StockX and its sellers rake in billions. But Cowen says he’s creating a “powerful halo” for the primary market by increasing the hype and average selling price around limited-edition shoes.

Nike asked the court to “promptly and permanently” restrain StockX from selling NFTs with its trademarks, infringing Nike products, and making “false and/or misleading statements” about the authenticity of its products.

StockX says it plans to “vigorously defend our position” and continues to dispute Nike’s claims.

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