Nike attempted to run a small business into the ground—first by ripping off its designs, and then by burying it in litigation, according to a Pennsylvania judge. Now, it could be forced to pay millions.
A court-ordered review of a case brought and won by Norristown, Penn.-based Lontex Corp. against Nike for trademark infringement in 2021 has been completed, and retired Pennsylvania Supreme Court Justice Judge Jane Cutler Greenspan reported that the athleticwear titan knew it was violating the much smaller brand’s trademark rights “but just did not care,” the Philadelphia Inquirer reported.
Lontex, which alleged that Nike infringed upon its trademarks for its signature Sweat It Out garments with Cool Compression technology, won a federal jury verdict proving its case three years ago. The Penn. sportswear company, which trademarked a technology for cooling compression garments in 2008, argued that Nike began using “Cool Compression” verbiage without its knowledge or consent to describe its very similar Nike Pro base layer products in 2015.
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Lontex’s lawyers sent Nike a cease-and-desist letter, though certain products continued to be marketed using the phrase “Cool Compression” by Nike and its wholesale retail partners. This constituted a willful disregard of Lontex’s right to the trademark, the jury ruled.
Lontex founder Efraim Nathan said that Nike duped his designs and copied his claims, and that did irreparable damage to his business, which had previously worked with coaches, trainers and players in the major leagues and college.
Nike was ordered it to pay Lontex $791,000 in compensatory and punitive damages—a number far lower than the estimated $100 million that Nike took in selling its “Cool Compression” line. In an unusual departure from protocol for a civil trademark case, it was also ordered to pay Lontex’s attorney fees, which totaled about $4.6 million, including an inflation adjustment that brought the number closer to $7 million.
But the Oregon athletic apparel and footwear firm appealed the decision. Back in court earlier this summer, the Third Circuit Court in Pennsylvania determined the trademark infringement proceedings were conducted fairly and upheld the original judgment. But in its July ruling, the Third Circuit also called for a review regarding the payout of attorney’s fees, and Greenspan was appointed as the “special master” to conduct that report and determine whether the payout order was fair.
In the text viewed by the Philadelphia Inquirer, Greenspan pointed to an exhibit that showed Nike threatened to “kill Lontex’s business” through a protracted legal battle. Instead of paying out damages outright, it instead opted to bury Nathan in millions of dollars in legal bills over the ensuing years after the judgment, Greenspan found.
“Nike’s incivility, bad behavior, blatant willful infringement and reckless indifferent conduct upon notice of the infringement are rare qualities that distinguish this case from the typical case and, in sum, created an unusual discrepancy in the merits,” she wrote.
Greenspan assessed that the “exceptional” nature of Nike’s conduct indeed merits the award of Lontex’s attorney’s fees.
“In the world of sports apparel, with the same customer base, Lontex’s trademark was an edge that Nike did not see fit to respect,” she added.
The case is slated to return to federal court this month, with both Lontex and Nike expected to submit their responses to the report by mid-October.
