Firm faces off with banks over Nike counterfeit money chase

A $1.8bn trademark infringement lawsuit brought by Nike against sellers of counterfeit products has generated a dispute with international banks over the proceeds from sale of the goods.

Nike won the $1.8bn default judgement in a New York federal court in 2017, after the hundreds of individual defendants named in the lawsuit – which dates back to 2013, failed to appear.

That is a common occurrence in trademark infringement and counterfeit suits when they involve sellers based in China selling products online, who are often only known by the URL they are using to sell the fakes, or a username/email on an e-commerce platform.

In this case the defendants were accused of massive counterfeiting of Nike and Converse shoes and other trademarked items, but were almost impossible to identify individuals to go after to secure the awarded money.

Recognising the challenge, Nike sold the rights to collect the damages to Next Investments LLC, which took on the task in an attempt to render it more than a symbolic victory.

Follow the money

Next has targeted six Chinese banks – Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, China Merchants Bank, and Industrial and Commercial Bank of China – saying they maintained New York-based accounts associated with the defendants.

It wants them to pay out $150m in damages for violating a court-ordered asset freeze of around $69m, transferring money made from the counterfeit sales so it was out of US legal jurisdiction.

The bid was blocked at the first attempt earlier this year, on the grounds that Next had been unable to establish that any of the asset restraints were enforceable against the banks’ Chinese branches because they were effectively separate entities.

It has now moved to the Second Circuit appeals court, setting up a crucial test of what can be done to restrain US branches of foreign banks that hold illicit revenue, according to a Bloomberg Law report.

“A reversal could present a new tool for brand owners to block movement of illicit funds out of U.S. jurisdiction by outlining when and how courts can impose and enforce asset freezes on those branches,” says Bloomberg. The case is currently due to be heard in New York on December 7.

The case is Nike, Inc. et al. v. Wu, 1:13-cv-08012.