IP Law Daily Nike fails to obtain judgment on pleadings on counterclaim against NBA star Leonard
Tuesday, May 19, 2020

Nike fails to obtain judgment on pleadings on counterclaim against NBA star Leonard

By Robert B. Barnett Jr., J.D.

The motion for judgment on the pleading as it applied to Leonard’s use of Nike’s "claw" logo was denied because a factual question existed as to whether Nike had at least tacitly permitted the use.

In a copyright dispute between the NBA player Kawhi Leonard and Nike in which the court had previously determined that Nike owned the copyright to the "Claw Design" that they developed together, the Oregon federal district court has now denied Nike’s motion for judgment on the pleadings on its counterclaims for copyright infringement, fraud, and breach of contract. The court granted two of Nike’s motions for judgment on the pleadings, one for a declaratory judgment that Nike owned the copyright and the other for a breach of contract claim involving Leonard’s decision to file the case originally in California in violation of a contractual provision that disputes be resolved in Oregon (Leonard v. Nike, Inc., May 12, 2020, Mosman, M.).

Background. The NBA star Kawhi Leonard and Nike entered into a contract in which Leonard agreed to wear and endorse Nike merchandise. The contract included a provision stating that Nike would own the copyright in any logos that Nike created during the contract. At some point during the contact, Leonard and Nike agreed to develop a Leonard-specific logo for his merchandise. Leonard registered a copyright in a "claw" logo that he had sketched. The logo was based on Leonard’s nickname, The Claw, which he earned for his defensive prowess and his strong hands. As part of the process of developing the Nike logo, Leonard sent his sketch to Nike, who modified it several times until Leonard was satisfied with the final product. The logo was thereafter affixed to Leonard’s merchandise, including the shoes he wore in NBA games.

After the contract was terminated, Leonard sued Nike, alleging that its continued use of the logo violated his copyright. Nike filed several counterclaims, including fraud in obtaining the copyright, breach of its copyright, and breach of the contract. The court sided with Nike on the original copyright infringement claim, and it entered a judgment on the pleadings that dismissed Leonard’s claim with prejudice. The court concluded that the Nike logo was a new piece of intellectual property separate and distinct from the one that Leonard had developed before the contract and that Nike had exclusive rights to it under the contract. At that point, the court took Nike’s motion for judgment on the pleadings on the counterclaims under advisement. It has now ruled on that motion.

Claw Design. To supplement its previous ruling dismissing the Leonard copyright infringement claim with prejudice, the court reiterated that the new claw logo was created "in connection with" the contract. Before the contract, Leonard created what was referred to as the "Leonard Sketch." The Leonard Sketch was sent to Nike during the period of the contract. Nike’s design team modified the sketch and continued modifying it until Leonard accepted the result. As the court said, "Nike collaborated with Mr. Leonard to create the Claw Design which it affixed to new Nike merchandise, which Leonard wore and endorsed, and which Nike sold. Not only was this activity done ‘in connection with’ the Nike Contract, it represents the whole point of the Nike Contract." As a result, Nike owned the Claw Design, and it had the right to register a copyright for it.

Counterclaims. The court next turned to the motion for judgment on the pleadings on the six counterclaims: (1) a declaratory judgment of copyright ownership, (2) a claim for copyright infringement, (3)a claim for fraud on the copyright office, and (4)-(6) three claims for breach of contract of three separate contract provisions.

Declaratory judgment. The declaratory judgment motion was a simple matter to resolve because the court had already determined that Nike was the copyright owner. As a result, the court granted the motion for a judgment on the pleadings as it applied to the declaratory judgment counterclaim.

Copyright infringement. Nike alleged copyright infringement because Leonard (1) used the Claw Design logo on non-Nike merchandise and (2) said that he intended to use it for his own commercial purposes in the future. The motion for judgment on the pleading as it applied to the past use was denied, however, because a factual question existed as to whether Nike had at least tacitly permitted the use. For example, it was alleged to have made statements to Leonard that he owned the logo. In any event, those allegations were sufficient to defeat the motion for a judgment on the pleadings. The motion was also denied as it applied to the intended future use because those statements were made when Leonard believed that he owned the copyright. Now that he knew that he did not, the court said, the likelihood of future harm was significantly reduced.

Fraud. Nike asserted that Leonard obtained his original copyright by fraud on the Copyright Office. The court denied the motion for judgment on the pleadings, concluding that Leonard made statements to the Office that at the time he made them he believed to be true. Leonard also notified the Copyright Office at the time he registered that Nike was also claiming copyrights in the logo, which undermined the fraud allegation.

Breach of contract. The motion for judgment on the pleadings was denied as to two of the three breach of contract claims. Factual questions remained about whether Nike was estopped from claiming breach given that it may have assured Leonard that he was the owner of the logo. The court, however, granted the motion on the third breach claim, which involved breach of the provision requiring that disputes be resolved in Oregon. When Leonard filed this suit originally in the Southern District of California, it should have been obvious to him that the matter arose under the contract, especially considering that it was a breach of contract action. As a result, he violated that contractual provision as a matter of law, and the motion was granted.

The court, therefore, granted judgment on the pleadings as to the first and sixth counterclaims, but it denied the motion as it applied to second through fifth counterclaims.

This case is No. 3:19-cv-01586-MO.

Attorneys: Mitchell C. Stein (Sullivan & Worcester LLP) for Kawhi Leonard. Matthew Ganas (DLA Piper LLP) for Nike Inc.

Companies: Nike Inc.

MainStory: TopStory Copyright GCNNews OregonNews

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