Nike, Adidas Sneaker Hole Case Takes Third Trip To Federal Circuit

Sports shoe giants Nike Inc. and Adidas S.A. will fight Monday for the third time in the federal circuit in a case involving a shoe-making process with major implications for the industry and patent law.

The decade-old saga questions whether Nike has the method of creating knit sneakers without drilling holes for the laces. In this final chapter, Nike wants the United States Court of Appeals for the Federal Circuit to clarify who has the “burden of persuasion” to show that a patent should not have issued when the Trial Board and patent appeal raises its own challenge.

The way the issue is decided could mean more modes of attack against patentees in the US Patent and Trademark Office’s “inter partes review” proceedings.

Money is at stake for cobblers. If Nike successfully defends the patent, it could force Adidas and others to obtain licenses to use the resource-efficient method to manufacture knitted sneakers, said Susan Scafidiprofessor of fashion law at Fordham University.

“This would be a landmark case for the footwear industry and for anyone looking at the inter partes process review process,” Scafidi said. “It’s not trivial in terms of the actual process of creating knitted sneakers, and it’s also not trivial in terms of the inter partes review process and the freedom that the patent office really has.”

sneaker holes

Nike often tries to portray Adidas as a follower in innovation because Nike owns more patents. Adidas challenged U.S. Patent No. 7,347,011the technology used by Nike to make its 2012 FlyKnit sneakers. Adidas released a similar product, its Primeknit shoe, the same year.

Nike first appealed to the Federal Circuit in 2014 after the patent court refused to allow it to amend some of the patent claims on the grounds that the amendments were invalid as obvious based on prior inventions. Two years later, the Court of Appeal partially reversed this decision, finding errors in the council’s analysis.

On remand, neither Nike nor Adidas presented any new evidence or arguments. In 2018, the PTAB issued a new decision on its own initiative finding that a patent claim was obvious, relying on a knitting manual that neither party had on file. Nike appealed to the Federal Circuit again, saying it should have had the opportunity to challenge the new challenge raised by the board.

In 2020, the Federal Circuit claimed the PTAB could raise its own challenges during IPRs, but dismissed the case saying Nike should have been given the opportunity to respond.

Now on the federal circuit for the third time, Nike argue that counsel again erred in saying that neither party bears the burden of persuasion. Adidas, as petitioner, should bear the burden, says Nike.

Adidas states in its response Short that because the board took on the challenge themselves, it doesn’t make sense for Adidas to make that argument.

“It’s a general question of how far the patent office has in an inter partes examination to be essentially the third party and not just the arbiter,” Scafidi said. “That’s the key here.”

Patent Owner’s Headache

Clarity from the federal circuit is needed for practitioners to understand who bears the burden in these situations, said Anna G. Phillipspatent attorney at Sterne, Kessler, Goldstein & Fox PLLC.

The patent office can raise IPR challenges when the challenger withdraws from the proceedings, but there are open questions about the role of counsel when both parties are still involved.

“It’s a question of law that the Federal Circuit could shed some light on whether or not it upholds the board’s decision or takes another approach to the board’s decision,” Phillips said. “Anyway, the Federal Circuit will decide, they will provide guidance.”

For patent holders, an assertion could create more headaches during IPR proceedings, the lawyers said. This would mean that the patent office would start its analysis all over again and patentees would have to anticipate challenges on two fronts.

“It makes things a bit more unpredictable for patentees in the sense that you make a motion for an amendment, the petitioner opposes it, and then the petitioner is expected to prove the claim unpatentable,” said Laura W. Smalleya patent attorney at Harris Beach PLLC, “but then you have a situation where counsel can come up with their own arguments, and the burden of persuasion is arguably lower.”

It’s not unusual for Nike and Adidas to fight, but the potential money involved makes this case unique, Scafidi said, although she noted that it “can seem crazy to spend 10 years arguing over about the holes for the laces”.

“They’ve faced each other before, but not like this,” Scafidi said. “Nike is trying to not only save money on its own shoelace holes, but raise money on everyone else.”

The case is Nike, Inc. v. Adidas AG, fed. Cir., n° 21-01903, pleading of 08/01/22.

Darryl A. Chapin