In a prior blog, we reported that the Supreme Court had granted certiorari in Already, LLC dba Yums v. Nike, Inc., No. 11-982, to an appeal from the Second Circuit’s decision affirming the Southern District of New York’s holding that a covenant not to sue entered in a trademark dispute ended the case and controversy between the parties.

The issue before the Supreme Court is “[w]hether a federal district court is divested of Article III jurisdiction over a party’s challenge to the validity of a federally registered trademark if the registrant promises not to assert its mark against the party’s then-existing commercial activities.”

On August 16, 2013, petitioner Yums filed its opening brief with the Court. Yums argues for reversal on the basis that Nike’s covenant not to sue Yums did not divest the district court of jurisdiction over Yums’ challenge to the validity of Nike’s asserted trademark registration. In short, Yums asserts that, although it may not be sued based on the registration, the continued validity of that registration is harmful to it. The registration creates the appearance that Nike may exclude others from using a similar shoe configuration which, Yums posits, disadvantages it “both procedurally and substantively, in [its] efforts to attract investment and compete with [Nike] in the marketplace.”

Yums further argues that Nike failed to carry its “heavy burden” of showing mootness, and notes that the lower court’s decision is inconsistent with “the strong federal policy favoring the full and free use of ideas in the public domain,” citing to Lear, Inc. v. Adkins, 395 U.S. 653, 674 (1969) (the seminal case invalidating “licensee estoppel,” that is, the notion that a patent licensee is estopped from challenging the validity of the underlying patent); as well as prior Supreme Court precedent rejecting restrictions on a litigants’ ability to challenge in federal court “the validity of claimed rights to exclude use of design and utilitarian conceptions.”

Gibbons will continue to monitor developments in this case, and its impact on federal court jurisdiction.

Catherine M. Clayton is a Director in the Gibbons Intellectual Property Department. Owen J. McKeon, a Director in the Gibbons Intellectual Property Department, and Ralph A. Dengler, Counsel to the Gibbons Intellectual Property Department, co-authored this post.