In a move years in the making, Nike (NYSE:NKE) is finally putting its foot down to stop the spread of Chuck Taylor knockoffs. On Tuesday, the footwear and athletic apparel behemoth's Converse brand filed 22 separate trademark infringement lawsuits against 31 companies. The list of alleged offenders includes Skechers USA (NYSE:SKX), Wal-Mart Stores, FILA, Ed Hardy, K-Mart, and Ralph Lauren.
At issue, the lawsuits say, is their illegal use of core elements of Converse Chuck Taylor shoes, such as the signature black stripe and rubber toe toppers. In addition, Converse is not only seeking monetary damages through the courts, but has also filed a separate complaint with the International Trade Commission aimed at preventing such counterfeit shoes from even entering the country.
Chuck Taylor knockoffs are nothing new, and Nike acquired Converse -- which itself was founded more than a century ago -- for $305 million way back in 2003. So why did it take so long for Nike to bring this battle to the courts?
One reason is that Nike says it has served roughly 180 cease-and-desist letters for the products in question since 2008, which amounts to nearly six letters per defendant during that period. I suppose nobody can claim they weren't given fair warning before Nike brought out the big guns.
What's more, the stakes are higher now than ever before, as Nike continues to unlock the incredible value behind the Converse brand. Last quarter, Converse brand sales climbed an impressive 16% year over year, to $575 million. But that still only represented a little more than 7% of Nike's total revenue, and only slightly outpaced Nike brand sales growth of 15% during the same period.
By comparison, Skechers managed to increase last quarter's sales a staggering 37%, to roughly $587 million, which means the up-and-coming brand is now technically moving more product on a dollar-sales basis than Converse can claim. That's not to say Skechers' shoe portfolio is completely dependent on the allegedly infringing products; but a quick glance at its website yields dozens of variations, which unmistakably resemble Converse's beloved Chucks. Take, for example, the "classic sneaker style" Skechers uses to describe these variations:
This isn't Nike's first rodeo
At the same time, however, Nike hasn't always been on offense in the courts. Only last year, Under Armour (NYSE:UAA) filed its own trademark infringement suit against Nike, saying the larger company was intentionally trying to create confusion through illegal uses of Under Armour's "I will" catchphrase." Nike countered by saying that, not only had it had used the "noun-verb" combo in its own marketing years before Under Armour coined the phrase, but also insisted "I will" simply hadn't "acquired the distinctiveness or secondary meaning associated with Under Armour" -- and you'd think Nike would know a thing or two about enforcing trademarks as the purveyor of "Just do it."
Curiously, Under Armour and Nike quietly settled that case earlier this year without disclosing additional details -- though it's worth noting Under Armour has seemingly doubled down on the phrase through its latest "I WILL WHAT I WANT" campaign.
This time, however, such a quiet resolution seems virtually impossible given both the massive scope of Nike's new lawsuit, and the fact that the products in question are easily found through the inventories and websites of the companies involved. Even if a "no additional details" settlement were achieved, it won't be hard to confirm if the offending products no longer exist.
Whether that happens remains to be seen. But if it does, one thing is sure: Nike and Converse will finally have the iconic Chuck Taylor style all to themselves.
Steve Symington owns shares of Apple. The Motley Fool recommends Apple and Nike. The Motley Fool owns shares of Apple and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.