By Joseph Vernon
Almost one year to the day after Kawhi Leonard’s iconic jumper sunk the Philadelphia 76ers and propelled the Toronto Raptors to an improbable championship, Leonard was on the receiving end of a similarly devastating blow in his off-court battle with his former sponsor. A federal district court in Oregon issued an opinion on Monday that ensured victory for Nike in a hotly contested dispute over the ownership of a stylized claw logo Leonard claimed as his own. The ruling left Nike in possession of the game ball with the outcome no longer in doubt. The only remaining question is whether the apparel company will mercifully dribble out the clock, or press on to finish with an emphatic dunk.
Leonard sued Nike last June in the midst of that championship run, a run that saw his popularity soar and the claw logo figure prominently in pre-game television features and Leonard’s post-season merchandising plans. Leonard claimed to have designed a claw logo concept in college and refined it by December 2011, around the same time he signed an endorsement contract with Nike. Leonard maintained that the logo was his property, citing in support his unfettered use of the logo on non-Nike apparel. Leonard claimed to have merely allowed Nike to use the logo on its own apparel during the term of their endorsement contract.
That endorsement contract expired in 2018 and Leonard signed a lucrative deal to become the new face of New Balance. No doubt wishing to capitalize on his meteoric rise, Leonard’s suit sought a judicial declaration that he was free to use the logo as he wished, including with his new sponsor. He also accused Nike of committing a fraud on the U.S. Copyright Office when Nike registered the logo as its own in 2017, purportedly without Leonard’s knowledge.
Leonard’s complaint left several questions unanswered. He conceded that he shared and discussed his refined logo concept with Nike while under contract and that the parties eventually agreed on a final rendering that incorporated his refined concept. But while he claimed to have created and owned a claw logo, it was unclear if he was referring to the final rendering. His complaint was also silent on whether his endorsement contract with Nike addressed jointly developed intellectual property. Nike’s copyright application suggested that the final rendering was a “work for hire,” a legal concept that gives an employer ownership in a work prepared by an employee. But it was unclear to whom that “employee” reference applied.
Nike answered those questions with the assuredness of a Mutombo finger wag when it responded to Leonard’s complaint and filed a counterclaim of its own. Nike accused Leonard of trying “to re-write history,” claiming that Leonard may have provided a “rough draft” of a logo, but that the final rendering was created by a team of Nike designers and owned by Nike. Nike attached both the draft and the final rendering to its counterclaim.
Nike cited in support a provision in its endorsement contract in which Leonard agreed that Nike would “exclusively own” all logos created by Nike or Leonard “in connection with” the contract, and another provision in which Leonard agreed not to use any created logos without Nike’s consent. Nike also referenced a 2014 article in which Leonard purportedly acknowledged:
I drew up the rough draft, sent it over, and they (Jordan Brand) made it perfect…I give the Jordan Brand team all credit because I’m no artist at all…They refined it and made it look better than I thought it would ever be and I’m extremely happy with the final version.
Thus, Nike argued that it owned the final rendering and that Leonard’s use of the logo on non-Nike apparel constituted a breach of his endorsement contract and willful copyright infringement. Nike’s counterclaim sought a declaration that it was the owner of the logo and damages for Leonard’s alleged copyright infringement and breaches of the endorsement contract. Nike also accused Leonard of committing a fraud on the Copyright Office when he registered the logo in his name. Citing a forum selection provision in the endorsement contract, Nike also sought to transfer the case out of a federal court in California to the District of Oregon. The California court granted that motion and the battle shifted north.
Soon after, Nike filed a motion for judgment on the pleadings seeking an early dismissal of Leonard’s claims and judgment on its counterclaims. Nike argued that under the endorsement contract, and given that the final rendering was created during the contract’s term, there could be no dispute that Nike owned the claw logo. Even if there was a dispute under the terms of the contract, Nike argued that basic copyright principles confirmed its ownership given Leonard’s admission that Nike prepared the final rendering and the clear differences between the rough draft and final rendering. Nike asserted that it was entitled to judgment on its contract and copyright claims, and that the only thing left to decide was the amount of damages it had incurred.
In response Leonard argued that Nike’s motion was not a true attack on the pleadings, which at this stage had to be accepted as true and construed in Leonard’s favor. Leonard argued that the motion instead relied impermissibly on contested facts, and since there was a dispute over who authored the claw logo and when, the Court could not determine—without factual development—if the logo truly “arose in connection with” the endorsement contract. Nike argued similarly that any comparison of the rough draft and final rendering had to be made by the fact finder—a jury—and not the judge as a matter of law.
The briefing closed around the same time the league and country began to grapple with the effects of Covid-19. While the action ceased on the basketball courts, it merely shifted to the telephone in the litigation. The Court held a telephonic hearing on April 22 and, after hearing from both sides, Judge Michael Mosman largely sided with Nike. He ruled on the call that he was granting Nike’s motion with respect to the ownership of the claw logo, and dismissing Leonard’s claims with prejudice. This left only Nike’s counterclaims on the table, and Judge Mosman indicated that he would issue the balance of his ruling in a written opinion. He delivered that opinion on Monday.
Not surprisingly given the prior ruling, the Court granted Nike’s motion with respect to its first counterclaim, declaring Nike the owner of the claw design. He explained that Leonard’s own pleadings—even accepted as true—demonstrated that Leonard sent the rough draft of the logo to Nike during the term of the endorsement contract. He further explained that the final rendering was not created until 2014—also during the term of the contract—and only “after an iterative design process involved Leonard and the Nike design team.” He noted Leonard’s concession that the final rendering was proposed by Nike, and that Leonard “accepted” that proposal.
Judge Mosman confirmed that the final rendering was the logo in dispute and explained that if it was created “in connection with” the endorsement contract, Nike owned it. He ruled that there could be no dispute that it was, and that Nike did:
Not only was this activity done “in connection with” the Nike Contract, it represents the whole point of the Nike Contract.
Therefore, for the reasons stated at oral argument and herein, Nike owns the Claw Design and the right to register a copyright for it.
The Court did agree with Leonard that it would be premature to grant judgment on the remaining counterclaims. Regarding the claim for willful copyright infringement, Judge Mosman noted Leonard’s allegation that he previously used the logo on non-Nike goods “without dispute or challenge from Nike.” He ruled that there at least remained an issue of fact “about whether this past use was permitted or tacitly encouraged by Nike.” And this fact issue was relevant to Leonard’s defense that Nike waived its ability to assert its copyright claims and his defense that Nike should otherwise be estopped from asserting those claims. This same fact issue precluded the Court from entering judgment on the breach of contract claims, since there was at least a dispute about whether Leonard was permitted to use the logo and whether he failed to cooperate with Nike in its efforts to protect its intellectual property.
The Court ruled similarly on Nike’s claim that Leonard defrauded the Copyright Office, noting that whether Leonard “knowingly lied” in his application depended on what he believed and what he told the Copyright Office. Noting Leonard’s claim that he did disclose that Nike also claimed copyrights in the logo, Judge Mosman agreed with Leonard that this fact issue precluded him from entering judgment for Nike at this stage in the proceedings.
So, at least as it relates to Leonard’s defense of some of Nike’s claims—and the damages to which Nike may be entitled—Leonard did live to fight another day. But with the ownership issue decided, the range of outcomes is not positive for Leonard. With little to no upside and potentially significant downside, Leonard may be motivated to settle the case quickly and call it a day. But with little incentive to settle, Nike may well decide to play this out, and in doing so send a strong message to potential copyright infringers and those who might consider flouting their contractual obligations.
The Court has asked the parties to meet and prepare a joint status report by June 8 outlining how they expect this case to proceed. And while teams and fans may be clamoring for on-court action to be in full swing by June, Leonard’s camp likely hopes that this off-court battle will be in the rear-view mirror by then.
About the author: Joseph Vernon is a commercial litigator and sports lawyer at Miller Canfield, a global law firm headquartered in Detroit. He represents and advises athletes, coaches and front-office personnel in contract negotiations and related disputes. He is also an accomplished writer in the field, and is often asked to comment on new and emerging issues.
