As Ye Sow, So Shall Ye Reap
When I started my company, a former high school friend and tennis teammate who’s a lawyer offered to create a contract for my services. I thanked him and declined. I informed him that I have a philosophy that the company with the most resources will win in a legal battle and I will not go down that road. I’ll use simple language engagement letters which state what I’ll do for my clients. Since that time, I’ve only had one instance where a client didn’t want to pay and I was able to resolve the issue by writing a letter to the President of the company. Had I failed, I would have written it off and moved on.
So it was with great interest that I read an article this week about a small local company, Sweat It Out, which sued Nike over trademark infringement. Sweat it Out had developed and trademarked Cool Compression technology which they had been selling for decades. They built a customer base that included college and professional sports teams. The reason for the suit is they believed Nike stole the technology and apparently refused to negotiate with Cool Compression's owners to resolve the matter. Sweat it Out won a jury trial in 2021.
Later, the district judge in the case ordered Nike to pay Sweat It Out’s lawyers $4.6M, plus an inflation adjustment which could bring the total to nearly $7M. Nike appealed.
As part of the appeal the judge ordered a special master, a retired Pennsylvania Supreme Court justice, to evaluate the judge's order and Nike’s appeal and make a recommendation. The special master recommended awarding Sweat It Out attorneys significant fees to be paid by Nike for several reasons.
1: “Nike knew” it was violating the much smaller company’s trademark rights “but just did not care.”
2) “Nike would not even speak with the CEO, much less negotiate, in order to find a reasonable compromise to avoid the expense of a trial.”
3) Nike tried to discourage the owner from pursuing the case by burying the company in expensive litigation that ran his legal bills into the millions. Evidence showed that Nike “threatened to kill the owner's business with litigation.”
4) Nike exhibited “reckless indifference” to trademark protected Sweat It Out technology which it was proven that Nike had unfairly copied.
She went on to say that “Nike’s incivility, bad behavior, blatant willful infringement, and recklessly indifferent conduct” once it was warned of its infringement, “are rare qualities” that justify more than typical penalties.
While it’s quite common that big companies, especially in the tech sector these days, sue each other over the use or misuse of their IP (intellectual property), I find Nike’s behavior reprehensible.
Clearly in this case, Nike intentionally used the power of its size and brand to attempt to bully a small competitor, with a willingness to bury the company under the weight of legal fees.
My partner Shakti Dudley and I have created IP and a brand we call Enlightening Leaders. One of the principals is that Enlightening Leaders live by the Universal Laws. Clearly, Nike leaders did not do so in this case.
Did Nike?
Do What was in the highest and best good for all concerned. No.
Cause no harm. No.
Do Unto others, as you would have them do unto you. No.
However, what Nike leaders didn’t understand is that were are other Universal Laws at work on Nike. What Ye Sow, So Shall Ye Reap. They were unnecessarily inflicting pain and suffering on a small business owner, his company and his employees.
Each of us has an opportunity to take a stand for what we believe. I applaud Sweat It Out’s CEO for standing up for himself and his company and not being intimidated by Nike’s size and economic might. He didn’t allow himself or his company to be bullied. That's what competition looks like. Maybe the leaders of Nike can learn something about leadership from him.
The ultimate irony here is that Nike expects our government to help prevent bad actors in other countries like China from stealing its IP or knocking off its products and brand.
True competitors love the competition, it makes them better and stronger. Yes it's difficult to stay on top when you are the big dog in an industry, but stealing from and then attempting to kill off small fringe competitors isn’t a great strategy for competing.
As Ye Sow, So Shall Ye Reap.
Like an unfailing boomerang, this Universal Law went to work on Nike. They are now experiencing difficulties. Revenue dropped 10% in the most recent quarter and their profit fell 28% from a year ago. Nike has oversold Air Force 1, Air Jordan 1 and Dunk, diluting their brands in the process. It’s been reported that Nike’s culture has deteriorated in the last several years due to restructurings and strategic missteps which collectively have taken a toll on employee morale. None of this should be a surprise, that’s how Universal Laws work.
As a result, Nike recently announced they are bringing back a former Nike executive to be CEO. Clearly he has a big turnaround task ahead of him. Nike employees, stakeholders and its shareholders should hope that he is more of an Enlightened Leader than his predecessor. If not, then Nike's woes are just beginning.