As a Toronto-based law firm and rampant supporter of the Toronto Raptors basketball team, we have to dedicate this week’s newsletter to our MVP, Kawhi Leonard (especially in view of the latest win as NBA champs). In the midst of the finals against the Golden State Warriors, Leonard launched a lawsuit against Nike in California with respect to intellectual property ownership rights over Leonard’s personal trademark, the Klaw logo. Notwithstanding that this is a dispute between two behemoths, there are always lessons to be learned for our clients, no matter their level of prominence in the marketplace.
Facts of the Case
In 2011, as a College basketball player, Leonard conceived of a logo to be used in association with his personal brand. In October 2011, Leonard signed an endorsement deal with Nike. During the term of the agreement, Nike and Leonard went back and forth in the creation of the logo. Leonard’s statement of facts, as laid out in the Complaint, states that for the most part Leonard rejected Nike’s suggested improvements to the logo and exhibited control over the use of the logo.
Beginning in March 2016, Leonard filed a series of US trademark applications for the logo and the word mark.
In May 2017, Nike filed for and was granted copyright protection of the logo in the US, without Leonard’s consent or knowledge.
In 2018, the contract between Leonard and Nike terminated. Leonard subsequently issued a demand letter to Nike asserting his rights to the intellectual property rights associated with the Klaw logo. Nike issued their response, asserting its rights. No resolution was reached, resulting in Leonard launching a claim against Nike.
Leonard’s Position
Leonard’s position is that the construct of the logo is personal to him. The Klaw logo is an outline of his oversized hand and contains his initials and his jersey team number. He asserts that, at all times, he exhibited control over the logo and licensed Nike the rights to use the logo. Leonard continued to use the logo outside of his relationship with Nike, as part of charitable initiatives and basketball bootcamps. In instances where there was unauthorized third party use of Leonard’s logo (outside of Nike and/or Leonard), Nike did not take any action to enforce against the counterfeiters, despite Leonard’s requests.
Nike’s Position
At the time of writing this newsletter, Nike had not yet filed its Statement of Defence against Leonard’s complaint. We have not reviewed Nike’s response to Leonard’s demand letter (as is often the case, without prejudce pre-litigation correspondence are not made public). In addition, we have not reviewed the agreement between Leonard and Nike. (This too is likely governed by confidentiality provisions). In all likelihood, ownership of Leonard’s background intellectual property and the future intellectual property that would be created through the Nike and Leonard collaboration will have been addressed in the agreement between the parties. Until we see this agreement, we cannot definitively say what Nike’s position is. However, it would be extremely surprising if the contract was drafted in a way that did not account for this problem.
Lessons Learned
With any collaboration between two brands in a brand ambassador role, be it a celebrity or a company, it is important to note that each party is bringing its own brand to the table. The relationship between the parties should always be governed by a written agreement. Ownership of intellectual property is a critical consideration. And this should be comprehensively considered. For example, what pre-existing intellectual property is each party bringing to the table? Do they retain separate and distinct ownership rights? If yes, it is important to ensure that proper licensing provisions are included in the agreement so that the requisite control provisions are upheld. During the course of the co-branding relationship, it is likely that new intellectual property will be created, especially as new campaigns are launched. Who owns that intellectual property? Who can use the new intellectual property once the relationship terminates? At what point is the collaboration and/or input by the other party sufficient to claim ownership rights as a co-author. How are the moral rights to be treated?
Final Thoughts
Bear in mind that at the time of writing this newsletter, Leonard is a championship winning MVP basketball player. But the relationship between Leonard and Nike was initiated in 2011 when Leonard, although a super star college athlete, was a young adult with unrealized potential. A large part of Nike’s marketing strategy and notoriety stems from its ability to collaborate with athletes. It locks in the athletes at early stages of their career, before their notoriety is established and when their rates are cheaper. So, will Nike’s conduct in this case create a freezing effect for other athletes to sign with Nike? Perhaps, yes.