In trademark cases, does the plaintiff always dictate the existence of a case or controversy?  The Supreme Court has granted certiorari in a case in order to answer that question.  On June 25, 2012, the United States Supreme Court agreed to hear an appeal in Already, LLC dba Yums v. Nike, Inc., No. 11-982, in order to decide “whether 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.”

In 2009, Nike sued YUMS over a YUMS brand shoe design that allegedly bore more than a passing resemblance to Nike’s federal trademark registration number 3,451,905.  It asserted claims for trademark infringement, unfair competition, and dilution under federal and state law.  In response, YUMS asserted a counterclaim for declaratory judgment, seeking to cancel Nike’s registration.

Nike then threw a curveball.  Before any decision on the merits was made, Nike provided to YUMS a covenant-not-to-sue on its registration.  Motivated in part by Nike’s desire to avoid the onerous time and expense of litigation, the covenant documented Nike’s promise to refrain from making any claims or demands, and from commencing any action (either directly or indirectly) against YUMS or its successors and customers, based upon Nike’s registration number 3,451,905.  Although the covenant was limited to YUMS’ current shoes and “colorable limitations” of current lines, it effectively eviscerated Nike’s claim in the suit.

Instead of dismissing its own claim in response, YUMS attempted to continue its declaratory judgment claim.  The district court dismissed the case, however, holding that there was no subject matter jurisdiction.  YUMS could not demonstrate that it had taken any “meaningful steps” toward developing any potentially-infringing products outside the scope of the covenant, and therefore there was no ongoing case or controversy for the court to decide.  The Second Circuit affirmed, and YUMS appealed to the Supreme Court.

Now, it is up to the Supreme Court to decide whether there was an ongoing case or controversy between Nike and YUMS.  Beyond the immediate result between the parties, the Supreme Court’s decision may limit years of existing precedent which tends to grant jurisdiction when a party seeks to invalidate intellectual property rights.  Will the other shoe drop?  Stay tuned… Docket here. Petition documents, via Patently-O, here.