Supreme Court Holds Covenant Not to Sue Can Moot Challenge to Trademark: Court Places Burden on Trademark Owner to Establish that Covenant Not to Sue Eliminates Any Case or Controversy

Sullivan & Cromwell LLP - January 10, 2013

In Already, LLC v. Nike, Inc., the Supreme Court affirmed a decision of the Second Circuit Court of Appeals, holding that a covenant not to sue provided by the mark owner in a trademark infringement action can render moot a counterclaim challenging the validity of the mark. In a unanimous opinion written by Chief Justice Roberts, the Court placed the burden on the mark owner to show that the covenant not to sue will eliminate any case or controversy between the parties by establishing that, as a result of the covenant, the mark owner “could not reasonably be expected to resume its enforcement activities against the accused infringer.”

The Already decision provides further support for a strategy sometimes employed by intellectual property owners to seek enforcement of their IP rights knowing that they later can avoid litigation expenses and the risks associated with challenges to the validity of their trademarks or patents if they are willing to cease any claims against the target of the enforcement action.