Nike v Lil Nas X – Satan Shoes and the Issue of Brand Dilution from an Australian Lens

Lil Nas X recently caused more than a little controversy after he commenced distributing his personally-designed Satan Shoes, being Nike Air Max 97 runners altered (without approval) to feature a satanic theme (including allegedly adding red ink and human blood to the midsole).

His efforts caught the attention of Nike, Inc., who then sued MSCHF Product Studio, Inc. (appointed by Lil Nas X to distribute the Satan Shoes) under U.S. trade mark, anti-dilution and unfair competition laws.

Trade mark dilution is legally recognised in jurisdictions such as the United States and Europe. Under US law, trade mark dilution occurs when a third party (without authorisation) uses the same or sufficiently similar branding in a manner that:

1. impairs the distinctive quality of the trade mark due to an association forming with the unauthorised use – for example, the trade mark “Barbie”, being well known for dolls, became well known for both dolls and the Barbie song following Aqua’s song “Barbie Girl”[1] (Blurring); or
2. is offensive or unflattering such that it harms the reputation of the trade mark via negative associations – for example, the “Barbie Girl” song causing negative connotations for parents who would ordinarily purchase the Barbie doll for their child (Tarnishing).

Nike alleged that the Satan Shoes tarnished the Nike brand, and produced evidence that consumers were proposing to boycott Nike and/or dispose of all of their Nike products on the basis of Nike’s resulting association with Satanic ideals.

The benefit of pursuing an action for dilution (over traditional trade mark infringement) is that the trade mark owner need only prove that dilution is likely, regardless of presence or absence of

1. actual or likely confusion;
2. competition; or
3. actual economic damage.

Unlike Europe or the United States, the principle of trade mark dilution is not officially recognised in Australia. If this dispute arose under Australian laws, Nike would need to pursue the claim in a different manner.

Protection from Dilution under the Trade Marks Act 1995 (Cth)

There is an argument that trade mark dilution is at least partially covered by section 120(3) of the Trade Marks Act, which deems infringement of a registered trade mark where:

1. the trade mark is well known in Australia;
2. someone uses a substantially identical or deceptively similar trade mark on unrelated goods or services;
3. due to the reputation of the first trade mark, the two marks would be perceived as connected to the registered owner; and
4. for that reason, the interests of the registered owner are likely to be adversely affected.

In a 2000 High Court case involving Nike, the High Court suggested that the equivalent provision under the previous trade marks act operates to prevent dilution.[2] However, the Advisory Council on Intellectual Property thereafter published an issues paper noting that the provisions of section 120 of the Trade Marks Act are far more limited in scope and fall short of the equivalent dilution principles which exist in the United States.[3]

Comparing the provisions of the United States’ Lanham Act and the Australian Trade Marks Act at section 120(3), it appears that the Australian Act may protect instances of blurring, rather than tarnishing, given that section requires the infringing goods or services to be unrelated.

Therefore, were Nike to commence an action against Lil Nas X in Australia, Nike would be unable to rely on the limited protection from dilution contained in section 120(3), given the allegedly infringing goods (Satan Shoes) are the same goods as the goods (shoes) registered for protection by Nike. Nike would therefore need to rely on protection from infringement contained in section 120(1), which protects against traditional infringement of a registered trade mark by a sign which is substantially identical or deceptively similar on the same goods as registered.

There is also infringement protection available under section 121 of the Trade Marks Act for breach of certain restrictions, relevantly including:

1. applying another trade mark to registered goods (ie. the MSCHF mark was applied to the Satan Shoes); or
2. using any matter on the goods which is likely to injure the reputation of the trade mark (ie. the alleged use of a drop of blood or the general satanic theme on the Nike Air Max shoes).

However, this section relies on Nike displaying a notice of prohibition on the shoes or their packaging.

As an aside, there is an argument that the bad faith provision under section 62A of the Trade Marks Act could apply in circumstances of potential dilution, particularly in the case where an Applicant was or intended to free-ride off the reputation of the existing trade mark. However, this is not applicable to the Satan Shoes dispute, as no trade mark registration was sought by Lil Nas X or MSCHF.

Protection under the Australian Consumer Law

In addition to righted protected under the Trade Marks Act, Nike could run an Australian case under section 18 of the Australian Consumer Law, which protects against misleading or deceptive conduct.

However, unlike the U.S. anti-dilution laws, this requires Nike to prove that consumers were or were likely to be misled or deceived by the conduct of the distributor (such as for example being deceived that Nike had authorised distribution of the Satan Shoes).

Further, it is noted that the Australian Consumer Law is aimed at protecting consumers, rather than protecting the reputation and distinctiveness of trade marks and brands.

Conclusion

Despite the scope of protection afforded for registered trade marks, Australia could well benefit from the inclusion of a dilution principle in the Trade Marks Act. This would be of particular value where trade mark owners are concerned how particular activities tarnish the goodwill in their brands without being able to prove any likelihood of deception or confusion in consumers.

Whilst this case raises interesting enforcement issues under Australian trade mark and consumer laws, reports indicate that this case has now been settled in the United States, therefore we will need to wait for another case of this nature to be brought in Australia to see how it plays out in the Australian legal system.

[1] Mattel, Inc  v MCA Records, Inc 296 F 3d 894 (2002). NB: the case was ultimately dismissed under U.S. law for separate considerations distinct to U.S. law.

[2] Campomar Sociedad, Limitada v Nike International Limited [2000] HCA 12

[3] https://www.ipaustralia.gov.au/about-us/public-consultations/archive-ip-reviews/ip-reviews/review-enforcement-trade-marks/issues-paper