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UNITEDSTATES
DISTRICT
COURT
SOUTHERN DISTRICT OF
NEW
YORK
No. 09 Civ. 6366 (RJS)
NIKE,
INC.,
Plaintiff,
VERSUS
ALREADY,
LLC,
D/B/A
YUMS,
Defendant.
MEMORANDUM AND ORDER
January
20,2011
RICHARD
J.
SULLIVAN,
District Judge:This action for trademark infringement,false designation
of
ongm, unfaircompetition, and trademark dilution arisesunder the Trademark Act
of
1946 (the"Lanham Act"), New York GeneralBusiness Law Section 360, and New Yorkstate common law. Now before the Court
is
Plaintiff Nike, Inc.'s motion to dismiss itsown complaint with prejudice and to dismissthe counterclaims
of
Defendant Already,LLC, d/b/a Yums, without prejudice. Forthe following reasons, Plaintiffs motion isgranted in its entirety.
L
BACKGROUND
A. FactsPlaintiff, an Oregon corporation, is aleading designer, marketer, and distributor
of
athletic footwear. (Compl.
~~
1,
7.)
In
1982, Plaintiff designed an athletic shoecalled the Air Force L
(Id
~
9.) Since thattime, Plaintiff has produced the shoe in over1,700 different color combinations and hassold it around the world.
(Id)
Today,Plaintiff sells millions
of
pairs
of
Air Force Ishoes per year.
(Id)
Since June 24, 2008, Plaintiff has heldU.S. Trademark Registration No. 3,451,905(the "905 Registration") for an athletic shoe
Case 1:09-cv-06366-RJS Document 52 Filed 01/20/11 Page 1 of 10
 
design, which
it
claims is the Air Force Idesign.
(Id.
~
11.) Specifically, the 905Registration coversthe design
of
stitching on theexterior
of
the shoe, thedesign
of
the material panelsthat form the body
of
theshoe, the design
of
the wavypanel on top
of
the shoe thatencompasses eyelets for theshoe laces, the design
of
thevertical ridge pattern on thesides
of
the sole
of
the shoe,and the relative position
of
these elements to each other.(Comp!.,
Ex.
A.)
Defendant, a Texas corporation, alsosells, among other items, athletic footwear.
(Id.
~~
2,
14.)
In
its Sweet line
of
athleticshoes, Defendant sells two shoes calledSugar and Soulja Boy.
(Id.
~
15.) Plaintiffscomplaint alleges that these shoes infringethe 905 Registration and its common lawtrademark rights (together, the "Nikemark").
(ld.
~~
19-55.)
B.
Procedural HistoryPlaintiff filed the complaint
in
thisaction on July
16,
2009. On November
19,
2009, Defendant filed its answer andcounterclaims seeking a declaratoryjudgment that (1) the mark depicted in the905 Registration is invalid under federal orNew York state law; (2) the design
of
theAir Force I shoe is not a valid trademarkunder federal or New York state law; (3)Defendant "has not infringed any rights thatNike may have" in the mark depicted in the905 Registration; and (4) Defendant "has notinfringed any rights that Nike may have in
2
the configuration"
of
the Air Force
I.
(Def.'s Answer, Doc. No.
17,
~~
ii-v.)Additionally, Defendant seeks cancellation
of
the 905 Registration pursuant to
15
U.S.C.
§
1119 and the award
of
attorney'sfees pursuant to
15
U.S.C.
§
1117.
(Id.
~~
vi-vii.)
In
the middle
of
discovery, Plaintiffdelivered a covenant not to sue, dated March
19,
2010, to Defendant.
(See
Declaration
of
Erik
S.
Maurer ("Maurer DecL")
~
9
&
Ex.
A,
dated April 12, 2010.) The covenantdefines the "Nike Mark"
as
the "federal andcommon law trademark rights in the design
of
Nike's Air Force I low shoe," includingthe 905 Registration.
(Id.
at Ex.
A.)
Thecovenant provides that, because Defendant'sactions "no longer infringe or dilute the NikeMark at a level sufficient to warrant thesubstantial time and expense
of
continuedlitigation," Plaintiff "unconditionally andirrevocably covenants to refrain frommaking any claim(s) or demand(s), or fromcommencing, causing, or permitting to beprosecuted any action
in
law or equity"against Defendant or any related entitieson account
of
any possiblecause
of
action based on orinvolving trademark infringement, unfair competition, ordilution, under state or federallaw in the United Statesrelating to the Nike Markbased on the appearance
of
any
of
[Defendant's] currentand/or previous footwearproduct designs, and anycolorable imitations thereof,regardless
of
whether thatfootwear is produced,distributed, offered for sale,advertised, sold, or otherwise
Case 1:09-cv-06366-RJS Document 52 Filed 01/20/11 Page 2 of 10
 
(Jd.)
used in commerce before orafter the Effective Date
of
thisCovenant.In light
of
this covenant, Plaintiffpetitioned the Court to dismiss its action andDefendant's counterclaims pursuant to Rule41(a)(2)
of
the Federal Rules
of
CivilProcedure. Defendant consented to thedismissal
of
Plaintiffs
causes
of
action withprejudice but objected to the dismissal
of
itscounterclaims. Accordingly, on April 12,2010, Plaintiff filed the instant motionseeking to dismiss its claims with prejudiceand to dismiss Defendant's counterclaimswithout prejudice. Defendant filed itsopposition to Plaintiff s motion on April 26,2010, and Plaintiff filed its reply on May
5,
2010.
II.
DISCUSSION
A. Standard
of
Review
"A
case is properly dismissed for lack
of
subject matter jurisdiction under Rule12(b)(
1)
when the district court lacks thestatutory or constitutional power toadjudicate it."
Makarova
v.
United States,
201
F.3d 110,
113
(2d Cir. 2000). "In thetrial court,
of
course, a party seeking adeclaratory judgment has the burden
of
establishing the existence
of
an actual caseor controversy."
Cardinal
Chern. Co.
v.
Morton In!
'I,
Inc.,
508 U.S. 83,
95
(1993);
see also
ICaS
Vision Sys. Corp., N
V.
v.
Scanner
Tech.'J.
Corp.,
699
F.
Supp. 2d 664,667 (S.D.N.Y. 2010) ("[T]he party 'seekingto invoke the subject matter jurisdiction
of
the district court' . . . bears the burden
of
demonstrating that there
is
subject matterjurisdiction in the case.") (quoting
Scelsa
v.
3
City
Univ.
of
NY,
76 F.3d 37, 40 (2d Cir.1996)). Accordingly, although Defendantargues otherwise, because it is seeking toinvoke the Court's declaratory judgmentjurisdiction, it bears the burden
of
demonstrating that the Court has subjectmatter jurisdiction over its counterclaims.
B.
AnalysisAs an initial matter, the Court need notfocus on the dismissal
of
Plaintiffs
claimsin this action, as Plaintiff has moved fortheir dismissal with prejudice and Defendantconsents to this relief. (Def.'s
Opp'n
at 14.)Accordingly, the Court grants
Plaintiffs
motion with respect to its claims on consent.The parties dispute, however, whetherthe Court may retain jurisdiction overDefendant's counterclaims. The issue iswhether, after the March
19
covenant, anactual controversy exists such that the Courtcan continue to exercise jurisdiction overDefendant's counterclaims seekingdeclaratory relief and cancellation
of
the 905Registration. For the following reasons, theCourt holds that it does not.
1.
Declaratory ReliefPlaintiff maintains that the March
19
covenant divests the Court
of
jurisdictionover Defendant's counterclaims seekingdeclaratory relief, as it strips this action
of
ajusticiable controversy. Although Defendantagrees that the March 19 covenant isenforceable, it argues that the Court retainsjurisdiction over its counterclaims because adispute between the parties remains activeand live. (Def.'s
Opp'n
at 16.)The Declaratory Judgment Act providesthat "[i]n a case
of
actual controversy within
Case 1:09-cv-06366-RJS Document 52 Filed 01/20/11 Page 3 of 10
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