On March 31, StockX published a revision of its previous statement, from Feb. 8, on Nike’s lawsuit – filed on Feb. 3 – over the collectibles-trading company’s so-called Vault NFTs. Both statements are available online.
StockX began as a marketplace for second-hand collectible items, notably sneakers, with an authentication service on top. However, in recent months, it has expanded into a kind of brokerage. Rather than ship purchased collectibles out to purchasers, it has begun retaining possession – hence the vault – and conferring ownership in the form of NFTs on the Ethereum blockchain.
StockX is arguing, therefore, that the value of a Vault NFT lies not in any digital or physical sneaker but rather in the storage of a collectible item, the discount on its trading fees and the savings in time. So its service would be akin to that of a broker in precious metals. The gold, or what have you, lies in a vault and never moves, and what changes hands with every trade is a certificate of ownership, nowadays immaterial. What the broker sells, then, is, in fact, convenience. The twist with an NFT is that the certificate exists as a numerical key associated with a new entry on the blockchain ledger.
As StockX puts it: “Because each Vault NFT is tied to a physical good already stored in the StockX vault, a buyer no longer has to wait several days before they can resell, and they do not have to pay fees associated with multiple legs of shipping and physical authentication. Just as our platform does with physical goods, NFTs provide safe and secure access for our customers to buy and sell in the digital secondary market without costs, delays and risks that can be associated with physically shipping goods upon each trade.”
Among Nike’s many complaints are that StockX’s transactions deprive it of control over its own branded products. “Nike has no say in how many Vault NFTs bearing its trademarks are released, where the Vault NFTs are released and traded, when the Vault NFTs are released, how the Vault NFTs are released, traded, or redeemed, and at what price the Vault NFTs are sold.” The sportswear giant objects also to what it believes is unauthorized use of its logo and the effect that such use may have on the minds of the buying public.
StockX’s original response says that Nike’s suit rests on a “mischaracterization” of Vault NFTs, which “are not digital or virtual sneakers.” “We do not state or imply that our Vault NFTs are associated with, sponsored by or officially connected to any third party brand,” the statement reads. “In fact, we clearly and expressly state the opposite. We are confident that our customers understand the difference between our Vault NFTs and the third-party products to which they correspond.”
The new statement specifies that Vault NFTs are meant to “track ownership of frequently traded physical products” and reiterates that they are “absolutely not ‘virtual products’ or digital sneakers.” It also adds an ecological argument: that the trade-in NFTs reduce “the environmental impact of repeated shipping.”
More importantly, it says that its use of images is “nominative fair use,” in reference to the “fair use” doctrine in U.S. trademark law. “It is no different,” the statement reads, “than major e-commerce retailers and marketplaces who use images and descriptions of products to sell physical sneakers and other goods.”
The question is, does StockX’s practice differ from that of a precious-metals broker? Gold is describable to the customer’s satisfaction entirely in words because one mass of the stuff is equivalent to any other mass of the same weight and grade. This is not the case with sneakers, as any pair will be different from any other – in condition, production run and even ownership. Two pairs of otherwise equivalent Air Jordans will differ in value if only one pair has been worn, has a manufacturing defect, was once the property of Michael Jordan himself, and so forth. Also, a retailer or e-tailer displaying images of a brand’s products is under contract with the brand and pays for the products it sells.
