Already, LLC v. Nike, Inc.

• Decision Date: 09 January 2013
• Docket Number: No. 11–982.,11–982.
• Parties: ALREADY, LLC, dba Yums, Petitioner v. NIKE, INC.
• Court: U.S. Supreme Court

568 U.S. 85

133 S.Ct. 721

184 L.Ed.2d 553

ALREADY, LLC, dba Yums, Petitioner

v.NIKE, INC.

No. 11–982.

Supreme Court of the United States

Argued Nov. 7, 2012.

Decided Jan. 9, 2013.

James W. Dabney, New York, NY, for Petitioner.

Ginger D. Anders, for the United States as amicus curiae, by special leave of the Court, supporting vacatur and remand.

Thomas C. Goldstein, Washington, DC, for Respondent.

John F. Duffy, Of Counsel, Fried, Frank, Harris, Shriver & Jacobson LLP, Washington, DC, James W. Dabney, Counsel of Record, Stephen S. Rabinowitz, Victoria J.B. Doyle, Randy C. Eisensmith, Fried, Frank, Harris, Shriver & Jacobson LLP, New York, NY, for Petitioner.

Christopher J. Renk, Erik S. Maurer, Audra C. Eidem Heinze, Banner & Witcoff, Ltd., Chicago, IL, Thomas C. Goldstein, Counsel of Record, Kevin K. Russell, Amy Howe, Goldstein & Russell, P.C., Washington, DC, for Respondent.

Chief Justice ROBERTS delivered the opinion of the Court.

The question is whether a covenant not to enforce a trademark against a competitor's existing products and any future "colorable imitations" moots the competitor's action to have the trademark declared invalid.

I

Respondent Nike designs, manufactures, and sells athletic footwear, including a line of shoes known as Air Force 1s. Petitioner Already also designs and markets athletic footwear, including shoe lines known as "Sugars" and "Soulja Boys." Nike, alleging that the Soulja Boys infringed and diluted the Air Force 1 trademark, demanded that Already cease and desist its sale of those shoes. When Already refused, Nike filed suit in federal court alleging that the Soulja Boys as well as the Sugars infringed and diluted its Air Force 1 trademark. Already denied these allegations and filed a counterclaim contending that the Air Force 1 trademark is invalid.

In March 2010, eight months after Nike filed its complaint, and four months after Already counterclaimed, Nike issued a "Covenant Not to Sue." Its preamble stated that "Already's actions ... no longer infringe or dilute the NIKE Mark at a level sufficient to warrant the substantial time and expense of continued litigation." App. 96a. The covenant promised that Nike would not raise against Already or any affiliated entity any trademark or unfair competition claim based on any of Already's existing footwear designs, or any future Already designs that constituted a "colorable imitation" of Already's current products. Id., at 96a–97a.

After issuing this covenant, Nike moved to dismiss its claims with prejudice, and to dismiss Already's invalidity counterclaim without prejudice on the ground that the covenant had extinguished the case or controversy. Already opposed dismissal of its counterclaim, arguing that Nike had not established that its voluntary cessation had mooted the case. In support, Already presented an affidavit from its president, stating that Already had plans to introduce new versions of its shoe lines into the market; affidavits from three potential investors, asserting that they would not consider investing in Already until Nike's trademark was invalidated; and an affidavit from one of Already's executives, stating that Nike had intimidated retailers into refusing to carry Already's shoes.

The District Court dismissed Already's counterclaim, stating that because Already sought "to invoke the Court's declaratory judgment jurisdiction, it bears the burden of demonstrating that the Court has subject matter jurisdiction over its counterclaim[ ]." Civ. No. 09–6366 (SDNY, Jan. 20, 2011), App. to Pet. for Cert. 25a. The Court read the covenant "broad[ly]," concluding that "any of [Already's] future products that arguably infringed the Nike Mark would be ‘colorable imitations' " of Already's current footwear and therefore protected by the covenant. Id., at 29a, n. 2. Finding no evidence that Already sought to develop any shoes not covered by the covenant, the Court held there was no longer "a substantial controversy ... of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Id., at 34a (quoting MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) (internal quotation marks omitted)).

The Second Circuit affirmed. It held that in determining whether a covenant not to sue "eliminates a justiciable case or controversy," courts should look to the totality of the circumstances, including "(1) the language of the covenant, (2) whether the covenant covers future, as well as past, activity and products, and (3) evidence of intention ... on the part of the party asserting jurisdiction" to engage in conduct not covered by the covenant. 663 F.3d 89, 96 (2011) (footnote omitted). Noting that the covenant covers "both past sales and future sales of both existing products and colorable imitations," the Second Circuit found it hard to conceive of a shoe that would infringe the Air Force 1 trademark yet not fall within the covenant. Id., at 97. Given that Already "ha[d] not asserted any intention to market any such shoe," the court concluded that Already could not show any continuing injury, and that therefore no justiciable controversy remained. Ibid. We granted certiorari. 567 U.S. ––––, 133 S.Ct. 24, 183 L.Ed.2d 674 (2012).

II

Article III of the Constitution grants the Judicial Branch authority to adjudicate "Cases" and "Controversies." In our system of government, courts have "no business" deciding legal disputes or expounding on law in the absence of such a case or controversy. DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 341, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006). That limitation requires those who invoke the power of a federal court to demonstrate standing—a "personal injury fairly traceable to the defendant's allegedly unlawful conduct and likely to be redressed by the requested relief." Allen v. Wright, 468 U.S. 737, 751, 104 S.Ct. 3315, 82 L.Ed.2d 556 (1984). We have repeatedly held that an "actual controversy " must exist not only "at the time the complaint is filed," but through "all stages" of the litigation. Alvarez v. Smith, 558 U.S. 87, 92, 130 S.Ct. 576, 175 L.Ed.2d 447 (2009) (internal quotation marks omitted); Arizonans for Official English v. Arizona, 520 U.S. 43, 67, 117 S.Ct. 1055, 137 L.Ed.2d 170 (1997) ("To qualify as a case fit for federal-court adjudication, ‘an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed’ " (quoting Preiser v. Newkirk, 422 U.S. 395, 401, 95 S.Ct. 2330, 45 L.Ed.2d 272 (1975) )).

A case becomes moot—and therefore no longer a "Case" or "Controversy" for purposes of Article III—"when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome."

Murphy v. Hunt, 455 U.S. 478, 481, 102 S.Ct. 1181, 71 L.Ed.2d 353 (1982) (per curiam ) (some internal quotation marks omitted). No matter how vehemently the parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is moot if the dispute "is no longer embedded in any actual controversy about the plaintiffs' particular legal rights." Alvarez, supra, at 93, 130 S.Ct. 576.

We have recognized, however, that a defendant cannot automatically moot a case simply by ending its unlawful conduct once sued. City of Mesquite v. Aladdin's Castle, Inc., 455 U.S. 283, 289, 102 S.Ct. 1070, 71 L.Ed.2d 152 (1982). Otherwise, a defendant could engage in unlawful conduct, stop when sued to have the case declared moot, then pick up where he left off, repeating this cycle until he achieves all his unlawful ends. Given this concern, our cases have explained that "a defendant claiming that its voluntary compliance moots a case 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, 120 S.Ct. 693, 145 L.Ed.2d 610 (2000).

III

At the outset of this litigation, both parties had standing to pursue their competing claims in court. Nike had standing to sue because Already's activity was allegedly infringing its rights under trademark law. Already had standing to file its counterclaim because Nike was allegedly pressing an invalid trademark to halt Already's legitimate business activity. See MedImmune, supra, at 126–137, 127 S.Ct. 764 (a genuine threat of enforcement of intellectual property rights that inhibits commercial activity may support standing). But then Nike dismissed its claims with prejudice and issued its covenant, calling into question the existence of any continuing case or controversy.

Under our precedents, it was Nike's burden to show that it "could not reasonably be expected" to resume its enforcement efforts against Already. Friends of the Earth,supra, at 190, 120 S.Ct. 693. Nike makes a halfhearted effort to avoid this test. Relying on Deakins v. Monaghan, 484 U.S. 193, 108 S.Ct. 523, 98 L.Ed.2d 529 (1988), it argues that "when a defendant makes a judicially enforceable commitment to avoid the conduct that forms the basis for an Article III controversy, there is no reason to apply a special rule premised on the defendant's unfettered ability to ‘return to [its] old ways.’ " Brief for Respondent 42.

Nike's reliance on Deakins is misplaced. In Deakins, the Court did not disavow the voluntary cessation doctrine; the Court employed precisely the analysis required by that test. It found the case was moot because the challenged action—pursuing a claim in court—could not be resumed in "this or any subsequent action" and because it was entirely "speculative" that any similar claim would arise in the future. 484 U.S., at 201, n. 4, 108 S.Ct. 523 (internal quotation marks omitted). It distinguished that situation from one in which a defendant is "free to return to his old ways." Ibid. (internal quotation marks omitted). That is the question the voluntary cessation doctrine poses: Could the allegedly wrongful...