Nike’s ‘Satan shoes’ victory: would demonic branding have fared better in the UK?

In March, Nike brought trademark infringement proceedings at the US District Court for the Eastern District of New York against MSCHF Product Studio, in response to the art collective’s launch of its so-called “Satan shoe”.

The shoe—a genuine Nike Air Max 97 shoe featuring Nike’s trademarks (such as its swoosh logo)—was modified by MSCHF without Nike’s approval to give it a satanic theme.

The collective added red ink and—sensationally—a drop of human blood, to the “air bladder” in the sole; a pentagram to the laces and inside the shoe, as well as an inverted red cross . In addition, “LUKE 10:18” was embroidered on the shoe—a reference to the biblical passage which recounts: “I saw Satan fall like lightning from heaven”.

MSCHF offered only 666 products at a price of $1,018 each, referencing the numbers associated with the devil and the bible passage.

The court ordered a temporary restraining order against MSCHF, shortly after which the case settled. This article discusses relevant considerations had the dispute arisen in the UK.

Trademark exhaustion in the UK

Nike would likely argue that there was “double identity” infringement due to MSCHF’s use of its trademarks without consent for goods identical to those for which the marks were registered.

However, under the principle of exhaustion, a trademark owner has no recourse against goods put on the market in the European Economic Area (EEA) or the UK under its trademark by, or with the consent of, the trademark owner.

When the UK was part of the EU, the purpose of exhaustion was to reconcile the fundamental interests of protecting trademark rights and the free movement of goods within the EEA. Post-Brexit, the UK has, for now, retained the same exhaustion regime.

Trademark exhaustion is qualified in the UK “where there exist legitimate reasons for the proprietor to oppose further dealings in the goods (in particular, where the condition of the goods has been changed or impaired after they have been put on the market)”. Nike would likely rely on this exception to oppose the sale of the “Satan shoe”.

Alterations to goods

Much of the case law around trademark exhaustion in the UK has concerned repackaging of pharmaceuticals, and there has been little judicial consideration of how the exception applies where the goods themselves have been altered.

Nike could point to MSCHF’s modifications as having “changed or impaired” the condition of its goods. On the wording of the provision above, change/impairment can be said to be an express example of a “legitimate reason”.

However, in Viking v Kosan (2011) the Court of Justice of the European Union (CJEU) held that, “alteration or impairment of the condition of goods bearing a mark is given […] as an example of what may constitute legitimate reasons”.

While arguably broad in scope, the provision refers to the “condition” of goods. MSCHF has declared the “Satan shoe” to be “art created for people to observe, speculate on, purchase, and own” intended as a comment on “the absurdity of the collaboration culture”. MSCHF may contend that, rather than the condition, the fundamental nature of Nike’s product has changed.

In Hoffmann-La Roche v Centrafarm (1978), the CJEU confirmed that a principle underlying the approach to exhaustion is the guarantee of origin provided by a trademark, which requires that the consumer “can be certain that a trademarked product which is sold to him has not been subject at a previous stage of marketing to interference by a third person, without the authorisation of the proprietor of the trademark, such as to affect the original condition of the product”.

The ruling added that the trademark owner may prevent “any use of the trademark which is likely to impair the guarantee of origin so understood”.

MSCHF may argue that, where the consumer is informed as to the source of the modifications, the guarantee of origin would not be impaired. Instead, it would pertain only to the goods in their original form. Several cases support this position.

Past cases

Aufarbeitung von Fahrzeugkomponenten (2006) concerned third party reconditioning of brake components branded with the trademark of the original manufacturer and, after reconditioning, its own trademark. The German Federal Supreme Court found for the re-seller, holding that the relevant public understood from the added trademark that the components were those of the original manufacturer and had been reconditioned by the third party.

In Tuning (2015), the German Federal Supreme Court considered the re-tuning of Porsche motor engines by a third party. In its marketing, the third party used the description, “Porsche ... with TECHART conversion”. The court held that consumers would understand that the Porsche trademark did not denote the origin of the vehicle in its altered state, only its original state.

In these two decisions, the court left open the question of exhaustion and focused its analysis on whether the re-sellers’ uses of the manufacturers’ marks were descriptive. However, they support the contention that, irrespective of the question of exhaustion, product modifications may benefit from the descriptive use defence where consumers are aware that a third party was responsible for the modifications.

These decisions contrast with a third German case, AVM Computersysteme Vertriebs (2020), in which a third party changed the firmware of wireless local area network routers prior to re-sale. The Munich District Court found that the trademark owner had a legitimate reason to oppose re-sale. It appears from the decision that consumers were unaware that modifications had been undertaken by a third party.

In a UK case, Sony v Tesco (1999), Tesco bought Sony PlayStations in France for re-sale in the UK. Tesco modified the plug and included a radio frequency modulator unit. In Bristol-Myers Squibb v Paranova (1996) (BMS), the CJEU had held that, where the re-seller adds an extra article to the packaging, the origin of that article must be indicated “to dispel any impression that the trademark owner is responsible for it” so the UK court required Tesco to amend its packaging notice to indicate that the articles added were not made or approved by Sony.

In Sony v Saray Electronics (1983), the UK Court of Appeal ordered another re-seller of Sony equipment, who had modified it, to explain to consumers that it “was manufactured by Sony for use outside the UK but has been modified by Saray’s for use in the UK”.

Consequently, regarding the sale of the “Satan shoe” in the UK, it may be material whether consumers are aware that Nike was not involved in the alterations.

In its US complaint, Nike relied on social media comments where consumers attributed the final product to Nike. However, MSCHF’s statement that “we are not affiliated with Nike, as we have consistently iterated to the press” suggests MSCHF sought to avoid confusion.

MSCHF could point to the unusual stylisation of the shoes, their higher price and exclusivity, and packaging that appears to carry MSCHF’s trademark but not Nike’s, as indicative of third-party involvement in the product.

Ultimately, the issue of consumer confusion would require proper consideration at trial. As in Tesco, BMS and Saray, the court may require MSCHF to supply information on the product clarifying Nike’s lack of involvement.

Damage to reputation

A further basis for opposing sale of the “Satan shoe” in the UK may be that it damages the reputation of Nike’s trademarks—the CJEU having confirmed damage to reputation as a “legitimate reason” in L’Oréal v Bellure (2009).

In its US complaint, Nike relied on the prestige of its brand. Nike could argue that the satanic theme has damaged that reputation, citing consumers who believe that Nike is endorsing satanism. However, this may be a minority view and the high price of the product, its exclusivity and creativity of the alterations and slick marketing are also relevant factors and are not usually considered damaging to reputation.

Conclusion

Nike would likely have a basis under UK law for opposing the sale of the “Satan shoe” particularly if consumers attributed the modified features to Nike and/or the satanic theme was found to damage Nike’s trademarks.

That said, a similar dispute in the UK would provide greater clarity as to the application of exhaustion to re-sold altered goods.

For several reasons, this is an uncertain area of law. Previous cases have focused on repackaging of pharmaceuticals and the CJEU acknowledged in Loendersloot v Ballantine (1997) that its guidance took account of “the particular nature of pharmaceutical products”.

Few cases involve alterations to goods themselves. There is even wider uncertainty over the entire exhaustion regime in the UK. At present, the pre-Brexit exhaustion regime continues to apply, but the UK Supreme Court, Court of Appeal and the legislature are free to depart from it.

The UK Intellectual Property Office is expected to conduct a consultation on exhaustion in 2021, after which the future UK regime may be clearer.

Alex Borthwick is of counsel at Powell Gilbert’s London office. He can be contacted at alex.borthwick@powellgilbert.com

Image: Shutterstock / Pavel Chagochkin