ALREADY LLC v. NIKE

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

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No. 11–982

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ALREADY, LLC, dba YUMS, PETITIONER v. NIKE, INC.

on writ of certiorari to the united states court of appeals for the second circuit

[January 9, 2013]

Chief Justice Roberts delivered the opinion of the Court.

The question is whether a covenant not to enforce a trademark against a competitor’s existing products and any future “colorable imitations” moots the competitor’s action to have the trademark declared invalid.

I

Respondent Nike designs, manufactures, and sells athletic footwear, including a line of shoes known as Air Force 1s. Petitioner Already also designs and markets athletic footwear, including shoe lines known as “Sugars” and “Soulja Boys.” Nike, alleging that the Soulja Boys infringed and diluted the Air Force 1 trademark, demanded that Already cease and desist its sale of those shoes. When Already refused, Nike filed suit in federal court alleging that the Soulja Boys as well as the Sugars infringed and diluted its Air Force 1 trademark. Already denied these allegations and filed a counterclaim contending that the Air Force 1 trademark is invalid.

In March 2010, eight months after Nike filed its complaint, and four months after Already counterclaimed, Nike issued a “Covenant Not to Sue.” Its preamble stated that “Already’s actions . . . no longer infringe or dilute the NIKE Mark at a level sufficient to warrant the substantial time and expense of continued litigation.” App. 96a. The covenant promised that Nike would not raise against Already or any affiliated entity any trademark or unfair competition claim based on any of Already’s existing footwear designs, or any future Already designs that constituted a “colorable imitation” of Already’s current products. Id., at 96a–97a.

After issuing this covenant, Nike moved to dismiss its claims with prejudice, and to dismiss Already’s invalidity counterclaim without prejudice on the ground that the covenant had extinguished the case or controversy. Already opposed dismissal of its counterclaim, arguing that Nike had not established that its voluntary cessation had mooted the case. In support, Already presented an affidavit from its president, stating that Already had plans to introduce new versions of its shoe lines into the market; affidavits from three potential investors, asserting that they would not consider investing in Already until Nike’s trademark was invalidated; and an affidavit from one of Already’s executives, stating that Nike had intimidated retailers into refusing to carry Already’s shoes.

The District Court dismissed Already’s counterclaim, stating that because Already sought “to invoke the Court’s declaratory judgment jurisdiction, it bears the burden of demonstrating that the Court has subject matter jurisdiction over its counterclaim[ ].” Civ. No. 09–6366 (SDNY, Jan. 20, 2011), App. to Pet. for Cert. 25a. The Court read the covenant “broad[ly],” concluding that “any of [Already’s] future products that arguably infringed the Nike Mark would be ‘colorable imitations’ ” of Already’s current footwear and therefore protected by the covenant. Id., at 29a, n. 2. Finding no evidence that Already sought to develop any shoes not covered by the covenant, the Court held there was no longer “a substantial controversy . . . of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id., at 34a (quoting MedImmune, Inc. v. Genentech, Inc., 549 U. S. 118, 127 (2007) (internal quotation marks omitted)).

The Second Circuit affirmed. It held that in determining whether a covenant not to sue “eliminates a justiciable case or controversy,” courts should look to the totality of the circumstances, including “(1) the language of the covenant, (2) whether the covenant covers future, as well as past, activity and products, and (3) evidence of intention . . . on the part of the party asserting jurisdiction” to engage in conduct not covered by the covenant. 663 F. 3d 89, 96 (2011) (footnote omitted). Noting that the covenant covers “both past sales and future sales of both existing products and colorable imitations,” the Second Circuit found it hard to conceive of a shoe that would infringe the Air Force 1 trademark yet not fall within the covenant. Id., at 97. Given that Already “ha[d] not asserted any intention to market any such shoe,” the court concluded that Already could not show any continuing injury, and that therefore no justiciable controversy remained. Ibid. We granted certiorari. 567 U. S. ___ (2012).

II

Article III of the Constitution grants the Judicial Branch authority to adjudicate “Cases” and “Controversies.” In our system of government, courts have “no business” deciding legal disputes or expounding on law in the absence of such a case or controversy. DaimlerChrysler Corp. v. Cuno, 547 U. S. 332, 341 (2006) . That limitation requires those who invoke the power of a federal court to demonstrate standing—a “personal injury fairly traceable to the defendant’s allegedly unlawful conduct and likely to be redressed by the requested relief.” Allen v. Wright, 468 U. S. 737, 751 (1984) . We have repeatedly held that an “actual controversy” must exist not only “at the time the complaint is filed,” but through “all stages” of the litigation. Alvarez v. Smith, 558 U. S. 87, 92 (2009) (internal quotation marks omitted); Arizonans for Official English v. Arizona, 520 U. S. 43, 67 (1997) (“To qualify as a case fit for federal-court adjudication, ‘an actual controversy must be extant at all stages of review, not merely at the time the complaint is filed’ ” (quoting Preiser v. Newkirk, 422 U. S. 395, 401 (1975) )).

A case becomes moot—and therefore no longer a “Case” or “Controversy” for purposes of Article III—“when the issues presented are no longer ‘live’ or the parties lack a legally cognizable interest in the outcome.” Murphy v. Hunt, 455 U. S. 478, 481 (1982) (per curiam) (some internal quotation marks omitted). No matter how vehemently the parties continue to dispute the lawfulness of the conduct that precipitated the lawsuit, the case is moot if the dispute “is no longer embedded in any actual controversy about the plaintiffs’ particular legal rights.” Alvarez, supra, at 93.

We have recognized, however, that a defendant cannot automatically moot a case simply by ending its unlawful conduct once sued. City of Mesquite v. Aladdin’s Castle, Inc., 455 U. S. 283, 289 (1982) . Otherwise, a defendant could engage in unlawful conduct, stop when sued to have the case declared moot, then pick up where he left off, repeating this cycle until he achieves all his unlawful ends. Given this concern, our cases have explained that “a defendant claiming that its voluntary compliance moots a case bears the formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 190 (2000) .

III

At the outset of this litigation, both parties had standing to pursue their competing claims in court. Nike had standing to sue because Already’s activity was allegedly infringing its rights under trademark law. Already had standing to file its counterclaim because Nike was allegedly pressing an invalid trademark to halt Already’s legitimate business activity. See MedImmune, supra, at 126–137 (a genuine threat of enforcement of intellectual property rights that inhibits commercial activity may support standing). But then Nike dismissed its claims with prejudice and issued its covenant, calling into question the existence of any continuing case or controversy.

Under our precedents, it was Nike’s burden to show that it “could not reasonably be expected” to resume its enforcement efforts against Already. Friends of the Earth, supra, at 190. Nike makes a halfhearted effort to avoid this test. Relying on Deakins v. Monaghan, 484 U. S. 193 (1988) , it argues that “when a defendant makes a judicially enforceable commitment to avoid the conduct that forms the basis for an Article III controversy, there is no reason to apply a special rule premised on the defendant’s unfettered ability to ‘return to [its] old ways.’ ” Brief for Respondent 42.

Nike’s reliance on Deakins is misplaced. In Deakins, the Court did not disavow the voluntary cessation doctrine; the Court employed precisely the analysis required by that test. It found the case was moot because the challenged action—pursuing a claim in court—could not be resumed in “this or any subsequent action” and because it was entirely “speculative” that any similar claim would arise in the future. 484 U. S., at 201, n. 4 (internal quotation marks omitted). It distinguished that situation from one in which a defendant is “free to return to his old ways.” Ibid. (internal quotation marks omitted). That is the question the voluntary cessation doctrine poses: Could the allegedly wrongful behavior reasonably be expected to recur? Nike cannot avoid its “formidable burden” by assuming the answer to that question. Friends of the Earth, supra, at 190.

IV A

Having determined that the voluntary cessation doctrine applies, we begin our analysis with the terms of the covenant:

“[Nike] unconditionally and irrevocably covenants to refrain from making any claim(s) or demand(s) . . . against Already or any of its . . . related business entities . . . [including] distributors . . . and employees of such entities and all customers . . . on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law . . . relating to the NIKE Mark based on the appearance of any of Already’s current and/or previous footwear product designs, and any colorable imitations thereof, regardless of whether that footwear is produced . . . or otherwise used in commerce before or after the Effective Date of this Covenant.” App. 96a–97a (emphasis added).

The breadth of this covenant suffices to meet the burden imposed by the voluntary cessation test. The covenant is unconditional and irrevocable. Beyond simply prohibiting Nike from filing suit, it prohibits Nike from making any claim or any demand. It reaches beyond Already to protect Already’s distributors and customers. And it covers not just current or previous designs, but any colorable imitations.

In addition, Nike originally argued that the Sugars and Soulja Boys infringed its trademark; in other words, Nike believed those shoes were “colorable imitations” of the Air Force 1s. See Trademark Act of 1946 (Lanham Act), §32, 60Stat. 437, as amended, 15 U. S. C. §1114. Nike’s covenant now allows Already to produce all of its existing footwear designs—including the Sugar and Soulja Boy—and any “colorable imitation” of those designs. We agree with the Court of Appeals that “it is hard to imagine a scenario that would potentially infringe [Nike’s trademark] and yet not fall under the Covenant.”* 663 F. 3d, at 97. Nike, having taken the position in court that there is no prospect of such a shoe, would be hard pressed to assert the contrary down the road. See New Hampshire v. Maine, 532 U. S. 742, 749 (2001) (“ ‘[W]here a party assumes a certain position in a legal proceeding, and succeeds in maintaining that position, he may not thereafter, simply because his interests have changed, assume a contrary position, especially if it be to the prejudice of the party who has acquiesced in the position formerly taken by him’ ” (quoting Davis v. Wakelee, 156 U. S. 680, 689 (1895) )). If such a shoe exists, the parties have not pointed to it, there is no evidence that Already has dreamt of it, and we cannot conceive of it. It sits, as far as we can tell, on a shelf between Dorothy’s ruby slippers and Perseus’s winged sandals.

Given Nike’s demonstration that the covenant encompasses all of its allegedly unlawful conduct, it was incumbent on Already to indicate that it engages in or has sufficiently concrete plans to engage in activities not covered by the covenant. After all, information about Already’s business activities and plans is uniquely within its possession. The case is moot if the court, considering the covenant’s language and the plaintiff’s anticipated future activities, is satisfied that it is “absolutely clear” that the allegedly unlawful activity cannot reasonably be expected to recur.

But when given the opportunity before the District Court, Already did not assert any intent to design or market a shoe that would expose it to any prospect of infringement liability. See App. to Pet. for Cert. 31a (finding that there was “no indication” of any such intent); 663 F. 3d, at 97, n. 5 (noting the “absence of record evidence that [Already] intends to make any arguably infringing shoe that is not unambiguously covered by the Covenant”). The only affidavit it submitted to the District Court on that question was from its president, saying little more than that Already currently has plans to introduce new shoe lines and make modifications to existing shoe lines. It never stated that these shoes would arguably infringe Nike’s trademark yet fall outside the scope of the covenant. Nor did it do so on appeal to the Second Circuit. And again, it failed to do so here, even when counsel for Already was asked at oral argument whether his client had any intention to design or market a shoe that would even arguably fall outside the covenant. Tr. of Oral Arg. 6–8. Given the covenant’s broad language, and given that Already has asserted no concrete plans to engage in conduct not covered by the covenant, we can conclude the case is moot because the challenged conduct cannot reasonably be expected to recur.

The authorities on which Already relies are not on point. In Cardinal Chemical Co. v. Morton Int’l, Inc., we affirmed the unremarkable proposition that a court’s “decision to rely on one of two possible alternative grounds (noninfringement rather than invalidity) did not strip it of power to decide the second question, particularly when its decree was subject to review by this Court.” 508 U. S. 83, 98 (1993) . In essence, when a court has jurisdiction to review a case, and decides the issue on two independent grounds, the first half of its opinion does not moot the second half, or vice versa. Here the issue is whether the District Court had jurisdiction to consider the claim in the first place.

This case is also unlike Altvater v. Freeman, 319 U. S. 359 (1943) . There, patent holders brought suit against licensees for specific performance of a license. The licensees counterclaimed, seeking a declaratory judgment that the patents were invalid. The Court of Appeals, after finding that the license was no longer in force and the devices at issue did not infringe, dismissed the licensees’ counterclaim as moot. We reversed, finding the controversy still live because the licensees continued to “manufactur[e] and sell[ ] additional articles claimed to fall under the patents,” and the patent holders continued to “demand[ ] . . . royalties” for those products. Id., at 364–365. Here of course the whole point is that Already is free to sell its shoes without any fear of a trademark claim.

B

Already argues, however, that there are alternative theories of Article III injuries that save the case from mootness. First, it argues that so long as Nike remains free to assert its trademark, investors will be apprehensive about investing in Already. Second, it argues that given Nike’s decision to sue in the first place, Nike’s trademarks will now hang over Already’s operations like a Damoclean sword. Finally, and relatedly, Already argues that, as one of Nike’s competitors, it inherently has standing to challenge Nike’s intellectual property.

The problem for Already is that none of these injuries suffices to support Article III standing. Although the voluntary cessation standard requires the defendant to show that the challenged behavior cannot reasonably be expected to recur, we have never held that the doctrine—by imposing this burden on the defendant—allows the plaintiff to rely on theories of Article III injury that would fail to establish standing in the first place.

We begin with Already’s argument that Nike’s trademark registration “gives false color to state and federal trademark claims which expose [Already’s] business to substantial and unpredictable risks,” deterring investors. Brief for Petitioner 31. To demonstrate this, Already presented affidavits from potential investors stating that Nike’s lawsuit dissuaded them from investing in Already or prompted them to withdraw prior investments, and that they would “consider” investing in Already only if Nike’s trademark were struck down. App. to Pet. for Cert. 33a. Already argues that like the plaintiffs in Village of Euclid v. Ambler Realty Co., 272 U. S. 365 (1926) — who had standing to challenge an ordinance because it reduced their property value—Already should have standing to challenge the trademark because its mere existence hampers its ability to attract capital.

But once it is “absolutely clear” that challenged conduct cannot “reasonably be expected to recur,” Friends of the Earth, 528 U. S., at 190, the fact that some individuals may base decisions on “conjectural or hypothetical” speculation does not give rise to the sort of “concrete” and “actual” injury necessary to establish Article III standing, Lujan v. Defenders of Wildlife, 504 U. S. 555, 560 (1992) (internal quotation marks omitted). In Euclid, we reasoned that, assuming the merits of plaintiff’s claim, “the ordinance, in effect, constitutes a present invasion of [plaintiff’s] property rights.” 272 U. S., at 386. Here there is no such present invasion; in fact there is a covenant promising no invasion. In addition, unlike the plaintiffs in Euclid, Already does not claim that Nike’s Air Force 1 infringes any of its property rights.

Already has also pointed to an affidavit from a vice president stating that Nike has “suggested” to Already’s retailers that they refrain from carrying Already’s shoes, lest “Nike . . . cancel its account or take other actions against the retailer, e.g., delay shipment of the retailer’s Nike order or ‘lose’ the retailer’s Nike order.” App. 177a. Even if a plaintiff may bring an invalidity claim based on a reasonable expectation that a trademark holder will take action against the plaintiff’s retailers, the covenant here extends protection to Already’s distributors and customers. And even if Nike were engaging in harassment or unfair trade practices, Already has not explained how invalidating Nike’s trademark would do anything to stop it.

Already also complains that it can no longer “just blithely go about its shoe business as if there were no risk of being sued again.” Reply Brief 14. As counsel told us at oral argument: “once bitten, twice shy.” Tr. of Oral Arg. 8. But we have never held that a plaintiff has standing to pursue declaratory relief merely on the basis of being “once bitten.” Quite the opposite. See, e.g., Los Angeles v. Lyons, 461 U. S. 95, 109 (1983) (holding there is no justiciable controversy where plaintiff had once been subjected to a chokehold). Given our conclusion that Nike has met its burden of demonstrating there is no reasonable risk that Already will be sued again, there is no reason for Already to be so shy. It is the only one of Nike’s competitors with a judicially enforceable covenant protecting it from litigation relating to the Air Force 1 trademark. Insofar as the injury is a threat of Air Force 1 trademark litigation, Already is Nike’s least injured competitor.

Already falls back on a sweeping argument: In the context of registered trademarks, “[n]o covenant, no matter how broad, can eradicate the effects” of a registered but invalid trademark. Brief for Petitioner 33–34. According to Already, allowing Nike to unilaterally moot the case “subverts” the important role federal courts play in the administration of federal patent and trademark law. Id., at 40. It allows companies like Nike to register and brandish invalid trademarks to intimidate smaller competitors, avoiding judicial review by issuing covenants in the rare case where the little guy fights back. Already and its amici thus contend that Already, “[a]s a company engaged in the business of designing and marketing athletic shoes,” has standing to challenge Nike’s trademark. See id., at 21; see also Brief for Intellectual Property Professors as Amici Curiae 3 (suggesting that standing extends to all “participants in that field”); Brief for Public Patent Foundation as Amici Curiae 12 (“[T]he public has standing to challenge the validity of any issued patent or registered trademark in court”).

Under this approach, Nike need not even have threatened to sue first. Already, even with no plans to make anything resembling the Air Force 1, could sue to invalidate the trademark simply because Already and Nike both compete in the athletic footwear market. Taken to its logical conclusion, the theory seems to be that a market participant is injured for Article III purposes whenever a competitor benefits from something allegedly unlawful—whether a trademark, the awarding of a contract, a landlord-tenant arrangement, or so on. We have never accepted such a boundless theory of standing. The cases Already cites for this remarkable proposition stand for no such thing. In each of those cases, standing was based on an injury more particularized and more concrete than the mere assertion that something unlawful benefited the plaintiff’s competitor. Northeastern Fla. Chapter, Associated Gen. Contractors of America v. Jacksonville, 508 U. S. 656 (1993) ; Super Tire Engineering Co. v. McCorkle, 416 U. S. 115 (1974) .

Already’s arguments boil down to a basic policy objection that dismissing this case allows Nike to bully small innovators lawfully operating in the public domain. This concern cannot compel us to adopt Already’s broad theory of standing.

First of all, granting covenants not to sue may be a risky long-term strategy for a trademark holder. See, e.g., 3 J. McCarthy, Trademarks & Unfair Competition §18:48, p. 18–112 (4th ed. 2012) (“[U]ncontrolled and ‘naked’ licensing can result in such a loss of significance of a trademark that a federal registration should be cancelled”); Sun Banks of Fla., Inc. v. Sun Fed. Sav. & Loan Assn., 651 F. 2d 311, 316 (CA5 1981) (finding that “extensive third-party use of the [mark was] impressive evidence that there would be no likelihood of confusion”). In addition, the Lanham Act provides some check on abusive litigation practices by providing for an award of attorney’s fees in “exceptional cases.” 15 U. S. C. §1117(a); cf., e.g., Gwaltney of Smithfield, Ltd. v. Chesapeake Bay Foundation, Inc., 484 U. S. 49, 67, n. 6 (1987) (explaining that an award of litigation costs can protect “from the suddenly repentant defendant”).

Accepting Already’s theory may benefit the small competitor in this case. But lowering the gates for one party lowers the gates for all. As a result, larger companies with more resources will have standing to challenge the intellectual property portfolios of their more humble rivals—not because they are threatened by any particular patent or trademark, but simply because they are competitors in the same market. This would further encourage parties to employ litigation as a weapon against their competitors rather than as a last resort for settling disputes.

Already’s only legally cognizable injury—the fact that Nike took steps to enforce its trademark—is now gone and, given the breadth of the covenant, cannot reasonably be expected to recur. There being no other basis on which to find a live controversy, the case is clearly moot.

V

The Solicitor General asks us to “remand the case for further proceedings in which the parties can develop the record on both the scope of the covenant and petitioner’s business activities, and the courts below can apply the proper standard to the record.” Brief for United States as Amicus Curiae 28.

Such a remand would serve no purpose. The scope of the covenant is clear. Already’s argument is not that the covenant could be drafted more broadly, but instead that no covenant would ever do. See Tr. of Oral Arg. 12–13.

As for business activities, it is plain that Already has said all it has to say. The District Court held a hearing on whether the case was mooted by the covenant. There, and at every stage of the proceedings thereafter, Already steadfastly refused to suggest that it has any plans to create any arguably infringing shoe that does not unambiguously fall within the scope of the covenant—this despite every incentive, opportunity, and invitation to do so. As noted, the District Court expressly found “no indication” that Already had any such plans, App. to Pet. for Cert. 31a, and Already never challenged this finding. It did not challenge that finding on appeal to the Second Circuit, even though its significance was clear. The Court of Appeals expressly found that Already “has not asserted any intention to market any such shoe.” 663 F. 3d, at 97. Already declined to challenge these conclusions before us, despite questions from the bench addressing that particular issue. Tr. of Oral Arg. 7–8.

The courts below did not expressly invoke the voluntary cessation standard, as articulated in our cases. But the analysis in their opinions addressed the same questions we have addressed today under that standard. In determining the case was moot, they relied, as we have, on the breadth of the covenant and the absence of any indication that Already would produce an infringing shoe. The District Court explained that “[w]hether a covenant not to sue will divest the trial court of jurisdiction depends on what is covered by the covenant.” App. to Pet. for Cert. 29a (internal quotation marks omitted). It read the covenant “broadly,” id., at 34a, and found “no indication that any of [Already’s] forthcoming models would extend beyond this broad language,” id., at 31a. It even concluded that from Already’s perspective, there was “little difference” between invalidating the trademark and the scope of protection already afforded by the covenant. Id., at 34a.

Likewise, the Court of Appeals asked “whether the covenant covers future, as well as past, activity and products,” and inquired into “evidence of intention or lack of intention, on the part of the party asserting jurisdiction, to engage in new activity or to develop new potentially infringing products that arguably are not covered by the covenant.” 663 F. 3d, at 96. It concluded that “[t]he breadth of the Covenant renders the threat of litigation remote or nonexistent” because it could not envision a shoe that would be within Nike’s trademark yet not protected by the covenant, noting that Already “has not asserted any intention to market any such shoe.” Id., at 97.

Under such circumstances, a remand would serve no purpose. Cf., e.g., Global-Tech Appliances, Inc. v. SEB S. A., 563 U. S. ___, ___ (2011) (slip op., at 13–16) (announcing new standard and directly applying standard to affirm the jury verdict); Thornburg v. Gingles, 478 U. S. 30 (1986) (announcing and applying new standard). The uncontested findings made by the District Court, and confirmed by the Second Circuit, make it “absolutely clear” this case is moot.

The judgment of the Court of Appeals is affirmed.

It is so ordered.

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1 * Nike has “acknowledged that if [Already] were to manufacture an exact copy of the Air Force 1 shoe . . . Nike could claim that the Cov-enant permits an infringement suit on the ground that a counterfeit differs from a colorable imitation under the Lanham Act.” 663 F. 3d, at 97, n. 5. Already, however, has never asserted any intent to make counterfeit Air Force 1s. Ibid. Moreover, because a counterfeit would presumably include Nike’s swoosh, an independently registered trademark not at issue here, invalidating the Air Force 1 trademark maynot be sufficient to allow Already to proceed to make counterfeits. See 15 U. S. C. §1127 (defining a counterfeit as a “spurious mark which is identical with, or substantially indistinguishable from, a registered mark”).

SUPREME COURT OF THE UNITED STATES

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No. 11–982

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ALREADY, LLC, dba YUMS, PETITIONER v. NIKE, INC.

on writ of certiorari to the united states court of appeals for the second circuit

[January 9, 2013]

Justice Kennedy, with whom Justice Thomas, Justice Alito, and Justice Sotomayor join, concurring.

As the Court now holds and as the precedents instruct, when respondent Nike invoked the covenant not to sue to show the case is moot, it had the burden to establish that proposition. The burden was not on Already to show that a justiciable controversy remains. Under the voluntary cessation doctrine, Nike bears the “formidable burden of showing that it is absolutely clear the allegedly wrongful behavior could not reasonably be expected to recur.” Friends of the Earth, Inc. v. Laidlaw Environmental Services (TOC), Inc., 528 U. S. 167, 190 (2000) . In the circumstances here, then, Nike must demonstrate that the covenant not to sue is of sufficient breadth and force that Already can have no reasonable anticipation of a future trademark infringement claim from Nike.

Both the District Court and the Court of Appeals issued their rulings on the erroneous premise that it was for Already to make the relevant showing. When a court has imposed the burden to establish a certain proposition on the wrong party, remand from a reviewing court is often appropriate to determine whether the outcome would have been different had the proper rule been applied. Here, however, the Court concludes the case must be deemed moot in all events, based on the terms and scope of the covenant and on Already’s seeming insistence that no matter how it might be worded, a covenant drawn by the trademark holder cannot moot the case. Brief for Petitioner 33–34; Tr. of Oral Arg. 10–13. For reasons the Court states, this goes too far. Already appears also to dis-claim any need to determine whether there is a real like-lihood it will produce a new product that, first, is not a colorable imitation of its existing product line, and, sec-ond, might be thought to infringe Nike’s trademark.

This brief, separate concurrence is written to underscore that covenants like the one Nike filed here ought not to be taken as an automatic means for the party who first charged a competitor with trademark infringement suddenly to abandon the suit without incurring the risk of an ensuing adverse adjudication. Courts should be well aware that charges of trademark infringement can be disruptive to the good business relations between the manufacturer alleged to have been an infringer and its dis-tributors, retailers, and investors. The mere pendency of litigation can mean that other actors in the marketplace may be reluctant to have future dealings with the alleged infringer. Nike appears to have been well aware of that dynamic in this case. In referring to Already it stated at one point: “[O]ver the past eight months, Nike has cleared out the worst offending infringers. Now Already remains as one of the last few companies that was identified on that top ten list of infringers.” App. 114a.

Any demonstrated reluctance by investors, distributors, and retailers to maintain good relations with the alleged infringer might, in an appropriate case, be an indication that the market itself anticipates that a new line of products could be outside the covenant not to sue yet still within a zone of alleged infringement. And, as noted at the outset, it is the trademark holder who has the burden to show that this is not the case. It is not the burden of the alleged infringer to prove that the covenant not to sue is inadequate to protect its current and future products from a trademark enforcement action.

In later cases careful consideration must be given to the consequences of using a covenant not to sue as the basis for a motion to dismiss as moot. If the holder of an alleged trademark can commence suit against a competitor; in midcourse file a covenant not to sue; and then require the competitor and its business network to engage in costly, satellite proceedings to demonstrate that future production or sales might still be compromised, it would seem that the trademark holder’s burden to show the case is moot may fall well short of being formidable. The very suit the trademark holder initiated and later seeks to de-clare moot may still cause disruption and costs to the competition. The formidable burden to show the case is moot ought to require the trademark holder, at the outset, to make a substantial showing that the business of the competitor and its supply network will not be disrupted or weakened by satellite litigation over mootness or by any threat latent in the terms of the covenant itself. It would be most unfair to allow the party who commences the suit to use its delivery of a covenant not to sue as an op-portunity to force a competitor to expose its future business plans or to otherwise disadvantage the competitor and its business network, all in aid of deeming moot a suit the trademark holder itself chose to initiate.

There are relatively few cases that have discussed the meaning and effect of covenants not to sue in the context of ongoing litigation. See, e.g., Revolution Eyewear, Inc. v. Aspex Eyewear, Inc., 556 F. 3d 1294 (CA Fed. 2009); Car-aco Pharmaceutical Labs., Ltd. v. Forest Labs., Inc., 527 F. 3d 1278 (CA Fed. 2008). Courts should proceed with caution before ruling that they can be used to terminate litigation. An insistence on the proper allocation of the formidable burden on the party asserting mootness is one way to ensure that covenants are not automatic mechanisms for trademark holders to use courts to intimidate competitors without, at the same time, assuming the risk that their trademark will be found invalid and unenforceable.

While there still may be some doubts that Nike’s showing below would suffice in other circumstances, here Already’s litigation stance does seem to have made further proceedings on the mootness issue unnecessary. In addition, as the Court notes, in any future trademark proceeding Nike will be bound by the lower courts’ broad reading of this particular covenant, thus barring suit against Already for any shoe that is not an exact copy or counterfeit version of the Air Force 1 shoe. See ante, at 7, and n. (citing New Hampshire v. Maine, 532 U. S. 742, 749 (2001) ).

With these observations, I join the opinion and judgment of the Court.

Print this transcript Transcript: 

ORAL ARGUMENT OF JAMES W. DABNEY ON BEHALF OF THE PETITIONER

Chief Justice John G. Roberts: We'll hear argument first today in Case 11-982, Already, LLC, d/b/a YUMS v. Nike.

Mr. Dabney.

James W. Dabney: Mr. Chief Justice, and may it please the Court:

The Article III question in this case turns on resolution of two issues: First, whether loss of freedom to operate on the part of a direct competitor qualifies as Article III injury in fact; and second, what party bears the burden of proof of facts that are contended by it to render a claim moot.

The counterclaim in this case seeks to extinguish a source of cost, risk, and official restraint on what footwear products the petitioner can and cannot legally sell.

These are classic forms of injury in fact.

On the burden of proof point, the proponent of a factual contention always bears the burden of proving this, and this is especially true, and the question arises in the context of a claim that a voluntary act has allegedly ousted a Federal court of jurisdiction.

Mootness doctrine protects a party seeking relief from the kind of evasive maneuvering that's happened in this case.

Justice Anthony Kennedy: If -- if I were to write an -- an opinion indicating that there's a chill here because distributors and retailers will see that there's been this suit against the -- your client and they will be reluctant to distribute, would there -- would I just make that up, or is there something I can read to find out -- find that out, or--

James W. Dabney: Injury in fact is a question of fact, and injury in fact is based on evidence.

Justice Anthony Kennedy: --Well, the evidence here was that they did need investors, and investors were reluctant.

James W. Dabney: That's correct.

Justice Anthony Kennedy: It wasn't specific evidence, but then I -- anything besides that?

James W. Dabney: There are three forms of injury in this case.

The first is that the petitioner's cost of operation is increased because the disputed claim was not expunged.

When the petitioner designs and sells new products, it has to go through an incredibly costly process to determine whether or not its next line of shoes might give rise to a plausible claim--

Justice Anthony Kennedy: Okay.

Is that -- is that in the record?

James W. Dabney: --It certainly is.

The petitioner says through its president, on page 173 of the Joint Appendix, that he's engaged in new development of new shoe lines, which by definition are outside the scope of the covenant document.

Justice Anthony Kennedy: When you said it's incredibly costly to do this and so forth, is that in the record?

James W. Dabney: That specific statement is not in the record.

Justice Anthony Kennedy: I mean, it makes sense, but I -- I'm a little reluctant to take judicial notice of the shoe business.

I mean--

James W. Dabney: Your Honor, I'm glad you brought that up, because under the mootness doctrine, the burden of proof on that and every other fact relevant to mootness fell on the respondent.

Under this Court's precedents, the respondent in this case, in order to oust the district court of jurisdiction, had to show two things to a high degree of probability: The first thing the respondent had to show is that it was absolutely clear that the petitioner could not reasonably be expected to bring--

Justice Stephen G. Breyer: You're right, that's the standard.

And so you said that -- I mean, I feel perhaps more calmly about this than I might feel is warranted, but the -- the question is, is there anything here that you -- so you said by definition, we're going to produce some new shoes, which new shoes are not -- do not have the appearance of any current and/or previous footwear product designs and any colorable imitations thereof.

So I would like you to refer me to the record where your president of your client or somebody else says we are intending to produce some new shoes that fall outside that definition, and of course, I will look at that.

Because your opponent says we can find no reasonable likelihood that they are going to produce anything or they have any present intent of showing, of producing something that falls outside that definition.

But now, you just said, oh, no, we're definitely going to.

So just refer me to those pages in the record that shows that, because, of course, you win if that's true.

James W. Dabney: --Page 173A of the record of the Joint Appendix states that the petitioner is intending -- is regularly engaged in the design of new footwear.

Justice Stephen G. Breyer: Yes, but that isn't the point.

The point is, is the new footwear that you're designing footwear that is not -- does not have the appearance of any current or previous footwear product designs or any colorable imitation thereof?

And so to say you are in the business of producing new footwear, at least to me, suggests nothing, because the question is what the footwear looks like, not that you're producing new footwear.

James W. Dabney: Your Honor, in the real world, a business competitor--

Justice Stephen G. Breyer: No, I'm not interested in the real world.

I am interested in the record.

James W. Dabney: --The record does not show that the petitioner lacks any concrete interest in entering the line of commerce that--

Justice Stephen G. Breyer: And does it show anything at all in respect that would support the claim that you are going to produce new footwear that doesn't either resemble nor is a colorable imitation of anything that you have previously produced or is the subject of the case?

James W. Dabney: --Your Honor, what the record shows, and it is what it is, is that the petitioner is actively engaged in designing and bringing out new footwear products--

Justice Stephen G. Breyer: Period?

James W. Dabney: --Period.

Justice Stephen G. Breyer: Okay.

So I take it that this case really boils down to, should you have -- should they have or you both have another chance to say what the new footwear will be -- look like under a new standard, or is there enough here already to say, well, really, the judges could conclude that there is no real likelihood that you're going to produce something that won't look like what's already been produced?

James W. Dabney: We would respectfully submit that when you apply the mootness doctrine, since we're not talking about picking a fight here, we're talking about someone who was sued once -- once bitten, twice shy -- that when someone has been sued for alleged infringement has asked for a judgment that would eliminate any need to think about whether or not a new shoe will attract--

Justice Antonin Scalia: Yes, and I assume that was your point, that you shouldn't be put through the trouble of figuring out whether the new shoes that you produce are close enough to the old one to be covered or are not.

You're at risk--

James W. Dabney: --Exactly.

Justice Antonin Scalia: --right?

James W. Dabney: Exactly.

Justice Anthony Kennedy: --And I would think that you would add this as well, that for a competitor to demand that the other competitor tell its plans, its marketing, is, to say the least, patronizing, and -- and probably quite injurious in and of itself.

James W. Dabney: That would itself be--

Justice Anthony Kennedy: But again, there's -- do I just know that because I'm a judge, or is there someplace I can look for that?

James W. Dabney: --The law is that as I stand here today, the government has registered a claim that the petitioner is duty bound not to bring out the shoe shown in the registration, number one, which according to the respondent is one of the best selling, most profitable shoe styles of all time; and also, as I stand here today, the law is that petitioner is at risk if it brings out a shoe that is going to be giving rise to a plausible claim--

Justice Ruth Bader Ginsburg: But, Mr. Dabney, are you saying that this device of the unilateral covenant is no good unless it says that you will never be sued for any shoe that you ever produce?

Is -- are you saying that the covenant is no good, or that this covenant is deficient?

James W. Dabney: --I'm saying that the respondent bore the burden of proving that the covenant completely and irrevocably eradicated all the facts.

Justice Ruth Bader Ginsburg: So -- if -- if you are uneasy about the covenant as it exists, why didn't you say, judge, this covenant doesn't give us adequate protection, it should be amended, and then say what you think you need to be adequately covered?

James W. Dabney: Because the petitioner asks for judgment in accordance with law, and it would prefer not to be the involuntary licensee of the respondent that sued it.

Justice Sonia Sotomayor: Well, does that mean that if they gave you a covenant that said, vis-a-vis your company, our trademark, the form of this shoe, is invalid, we won't sue you for anything, either an exact duplicate or any colorable imitation thereof with respect to this design; would that be enough for you?

James W. Dabney: Your Honor, again--

Justice Sonia Sotomayor: I know you want to help everybody else--

James W. Dabney: --Not -- no--

Justice Sonia Sotomayor: --but why wouldn't that be--

James W. Dabney: --That's -- that's not actually right.

The reason why -- 70 years ago, Learned Hand created the metaphor the scarecrow patent.

And the reason scarecrows are effective is not because they are likely to climb down from the pole, but because from a distance and being looked at quickly, the way people in the marketplace have to react to official government records of claims, they're deceptive.

So--

Chief Justice John G. Roberts: You get a lot of what this extra stuff, you know, that you say, well, even if this is all right, they're not going to sue me for that, there's all the collateral damage.

You get a significant amount of that by the covenant not to sue.

Nike can't go around giving out these covenants left and right because if they do, they will undermine their own trademark.

James W. Dabney: --Your Honor, the covenant actually reasserts the allegation that these shoes infringe.

The covenant does nothing more than purport to waive--

Chief Justice John G. Roberts: Where does it -- where does it do that?

James W. Dabney: --It says it right on the -- on page, I believe it is 96 of the record where it says, in the second whereas,

"the actions complained of no longer infringe or dilute at a level sufficient to warrant the substantial time and expense. "

I mean, it libels--

Chief Justice John G. Roberts: Okay.

So if you take -- if that were taken out, is your case the same or not?

James W. Dabney: --There would be one small little less bit of injury in this case.

That's--

Chief Justice John G. Roberts: Well, I guess maybe this is the same question Justice Ginsburg was asking.

You're -- you're a lawyer in this area.

You want to write a covenant that will satisfy the fellow on the other side, but what does it say?

Can you do that, or do you have to say: The only way this case can be rendered moot is if the trademark is totally invalidated?

James W. Dabney: --When someone seeks--

Chief Justice John G. Roberts: No, no, that's kind of a yes or no answer.

Can you write a covenant that says something other than the trademark is totally invalidated?

James W. Dabney: --No.

Chief Justice John G. Roberts: No.

Justice Sonia Sotomayor: --So--

Justice Elena Kagan: But why?

Justice Sonia Sotomayor: --what you're saying is you--

Chief Justice John G. Roberts: So you're saying that in this case there's no way -- I mean, I thought it was a practice that was not unprecedented for parties to grant covenants of this sort.

You're saying this is unheard of, nobody can do this?

James W. Dabney: The practice in this case dates to 1995.

This is a totally recent, controversial practice that has never been embraced by this Court at all.

In fact, it was articulated in a case two years after--

Justice Elena Kagan: But that's not the question, Mr. Dabney.

The question is, is there any covenant that exists in the world that would make you feel secure?

And I suppose I'm having a little bit of difficulty with the answer, with an answer that says: No, there is no covenant that you can write that would make us feel secure.

James W. Dabney: --The reason is, Your Honor, that the registration causes informational injury, and what the respondent is trying to do is to hang on to government action that disadvantages its competitor while--

Justice Sonia Sotomayor: --But I don't know why -- but my solution was that they would give you a covenant that I suggested as a possibility that would say, vis-a-vis you, you can imitate, counterfeit, use this design, only vis-a-vis you.

Why doesn't that protect you fully?

Because what they're saying to you is, copy the design if you want, so long as you're not using another trademark.

But that's not the issue.

The issue is whether you're infringing this design.

James W. Dabney: --The question the trademark practitioners get asked every day is whether something is available, and so long as that question is asked, a covenant that's in the file of a company is not going to prevent deception and confusion of people who look and say, oh, this is a protected design.

Justice Ruth Bader Ginsburg: Mr. Dabney, that's a different answer than the one you gave me when I asked the same question.

You said, because we don't want to be an involuntary licensee of Nike.

James W. Dabney: That is a second form of injury that we have now, as Justice Scalia pointed out.

Right now we cannot just ignore the claim and bring out either this -- a YUMS version--

Justice Ruth Bader Ginsburg: But can you -- can you just explain to me, you've given a name to this carte blanche that -- that Nike would give you.

What is the significance of your being an involuntary licensee?

It's not something that you wear as a brand.

James W. Dabney: --What we've substituted is instead of getting a judgment in accordance with law that expunges the allegedly invalid government-registered claim of right to exclude competition and sale of goods in favor of the chance to litigate with our arch rival to see whether they will prove--

Justice Ruth Bader Ginsburg: Then you're going back to saying the covenant -- no covenant is any good.

James W. Dabney: --A covenant that leaves the covenantor in possession of the unreviewed government benefit that it got--

Justice Stephen G. Breyer: I mean, maybe you could suggest to me that we should change what the law has been or not follow it here, but where I'm taking the law from is Friends of the Earth.

James W. Dabney: --Yes.

Justice Stephen G. Breyer: And in Friends of the Earth it says a defendant, namely Nike, claiming its voluntary compliance moots a case, and what they're claiming is that this -- a covenant moots the case, moots the case, the covenant they gave.

There's the formidable burden -- you know, it's formidable, you're quite right -- of showing it is absolutely clear, correct, that the allegedly wrongful behavior, namely their suing, but their suing in respect to this kind of shoe could not reasonably be expected to recur.

And they say, since we promised in an enforceable promise not to repeat this behavior ever, 100 years, how could it be expected reasonably to recur?

How could our behavior, namely suing for infringement in respect to a shoe like this, be reasonably expected to recur given our covenant?

And your response to that is?

James W. Dabney: The claim the counterclaim seeks to extinguish is not simply the particular rights of action that they have covenanted not to exert.

The claim that is sought to be extinguished is the much broader government-registered claim of right to exclude competition in the sale of shoes that embody that design.

Chief Justice John G. Roberts: Mr. Dabney--

James W. Dabney: Yes.

Chief Justice John G. Roberts: --if you had the various interests that you're asserting now -- we're not talking about mootness, but we're talking about Article III standing.

James W. Dabney: Yes.

Chief Justice John G. Roberts: I'm looking at what you're alleging, that you have plans to introduce particular shoes.

People are considering investing in your company.

Your opponent has intimidated retailers.

If you brought a suit by yourself, is that sufficient to establish Article III standings?

Are those the sort of concrete and tangible injuries that we've required?

James W. Dabney: I would say we have very distinct and concrete and palpable injury in that--

Chief Justice John G. Roberts: Just because you plan to introduce a particular line of shoes, you can bring a lawsuit?

James W. Dabney: --No.

Chief Justice John G. Roberts: No.

Okay.

Just because people are considering investing -- somebody who came in and said, I've got this company, people are thinking of investing in it, and therefore you want to proceed with your lawsuit?

James W. Dabney: It is undeniable by law that the petitioner's cost of operation, the petitioner's risk of operation is increased because of--

Chief Justice John G. Roberts: Well, that surely would not establish Article III standings.

Everybody's cost of operation is increased whenever there's any trademark at all because you have to check and see whether it violates a trademark.

James W. Dabney: --Yes, but we're a direct competitor which we say is currently subject to an unlawful restraint on our freedom to operate.

Justice Ruth Bader Ginsburg: Mr. Dabney, suppose there had been no infringement claim, could you have -- but you're in the shoe business and you're worried, could you have brought a declaratory action or an action for an injunction to have the trademark declared invalid?

James W. Dabney: When our shoes were launched, it obviously never even occurred to the petitioner that they could be deemed an infringement of any rights of this respondent.

So the answer is we were not injured at that point.

But now that we've been sued -- once bitten, twice shy -- we now have been told by the respondent that it claims a far-reaching claim of right to exclude competition in the sale of goods.

Justice Ruth Bader Ginsburg: So you say you could not have brought a suit to cancel?

James W. Dabney: The three-part test of injury-in-fact is universally applicable.

So we did not allege and I don't believe we had injury-in-fact when our shoes were launched.

So, no, of course there would not have been a suit that could be brought at that time.

But since we're in a mootness case and we've been sued and we've been told and have all these defamatory allegations about and dragged our company's name through the mud, the situation is different, as Your Honor has said.

Justice Elena Kagan: But if that's the case, if the difference is that you've been sued, then it should be adequate protection if you know that you won't be sued again, and that's why there's the question of what kind of covenant would give you adequate protection that you won't be sued again.

James W. Dabney: If the, as I said before, if the only injury we were complaining about and trying to extinguish was the injury that flows from being sued again by this respondent, then I suppose you could -- you could conceive of a covenant that would extinguish that injury.

But in trademark registration practice, it has been routinely heard by Federal courts -- we cite two on page 8 of our reply brief -- that the kind of injury that petitioner is complaining about in this case has been heard and adjudicated by Federal courts for decades.

We cite two cases 85 years apart.

Justice Ruth Bader Ginsburg: But, Mr. Dabney, you told me you could not bring such an independent suit, you have to be stoned once.

So you can bring it as a counterclaim, as you did here, once there's an infringement suit, but you did say that you could not just walk into court and say, I want an injunction invalidating the trademark.

James W. Dabney: Well, let me clarify.

The Petitioner totally agrees there has to be injury in fact in all cases.

And so my answer to your question in this hypothetical question is, we would have to allege adequate injury.

And the Chief Justice suggested that increased cost of capital might or might not qualify for injury in the initial standing case where--

Chief Justice John G. Roberts: No, I suggest it might not.

James W. Dabney: --Might not, that's right.

[Laughter]

So we have increased cost of capital, increased costs of -- of design, and, of course, we have the legal burden and duty to refrain from making shoes now that would give rise to a plausible claim on the part of the Respondent.

If there are no further questions, I would like to reserve the rest of my time.

Chief Justice John G. Roberts: Thank you, counsel.

Ms. Anders.

ORAL ARGUMENT OF GINGER D. ANDERS, FOR UNITED STATES, AS AMICUS CURIAE, SUPPORTING VACATUR AND REMAND

Ginger D. Anders: Mr. Chief Justice, and may it please the Court:

A trademark holder can moot a declaratory judgment action seeking to invalidate a trademark by offering the plaintiff a sufficiently broad covenant not to sue.

Whether the covenant eliminates the controversy between the parties should be analyzed under the voluntary cessation doctrine.

The analysis that the government is proposing is both a way of determining whether the covenant has eliminated any concrete dispute between the parties and also a framework for the parties to use to negotiate the appropriate scope of the covenant.

Justice Sonia Sotomayor: Ms. Anders, what -- there is a question about why a competitor should have to produce to its competition its future plans of development.

I mean, the marketplace, especially in fashion, importantly, likes to keep quiet what it's doing because it doesn't want other imitators to beat it to the punch.

So given that interest, why isn't their claim that they're being inhibited because of the requirement to produce their products or their intended products enough to establish injury in this case?

Ginger D. Anders: Well, once the -- once the defendant offers the covenant, then the question becomes whether there is anything that the plaintiff is intending to do, its current activities or its concrete plans for anticipated activities that would fall outside the covenant and potentially be infringing.

Because if those activities exist, then the covenant has not--

Justice Sonia Sotomayor: Well, then what did--

Justice Anthony Kennedy: Could we say there is just a presumption that if you're in the business that you probably are interested in future design, period?

Ginger D. Anders: --I don't think that -- I don't think that presumption would establish a concrete interest.

The question here is whether--

Justice Anthony Kennedy: Wouldn't establish a--

Ginger D. Anders: --It would not establish that the plaintiff has a concrete interest.

The question is whether the dispute between the parties is reasonably likely to recur, and if the plaintiff cannot point to anything that it's currently doing or that it's planning to do--

Justice Sonia Sotomayor: --I read this affidavit as saying, we're in the shoe industry, we're going to make new shoes regularly.

We want to copy their shoe.

We don't think it's protected by trademark.

We want to copy it -- they don't say, and that's something on rebuttal that maybe Petitioner will explain, that we want to copy it exactly.

But what they're saying is, we want to copy it because it's a free form.

That's really what I read their affidavit as saying.

So if -- why do they have to actually -- do they have to produce their design to prove they're doing that?

Ginger D. Anders: --I think what they have to do is they have to state that they intend to make products that may be outside the covenant, and now--

Justice Sonia Sotomayor: But saying it is enough?

That's what I thought their affidavit said, and I thought the court below said, no, you've got to show us the product.

Ginger D. Anders: --I think the -- the affidavit says that they intend to produce new shoes as a general matter.

It doesn't tell us what those shoes may be, whether they -- it doesn't give us a way of knowing whether they might fall outside the covenant.

And I--

Justice Sonia Sotomayor: Please, now go back to my question.

Is it enough to just say it, or do they have to produce the designs so that the court and Nike can decide -- it is Nike, right?

the court and Nike can decide whether the shoe is a colorable imitation or an exact copy.

Ginger D. Anders: --I think that could depend on the breadth of the covenant.

I think in some cases, for instance, if the covenant doesn't cover any future products, it may be enough for the plaintiff to credibly allege we intend to make future products that aren't covered.

Justice Sonia Sotomayor: I agree with you.

Ginger D. Anders: So I also think that it may depend -- the less far along a party's plans are to make its shoes, the easier it will be for the defendant to say it is speculative that your plans will actually mature into something that doesn't--

Justice Elena Kagan: Well, Ms. Anders, take this case where Already says, you know, we're not really going to say anything particular.

We're just going to say that we're in the business of making shoes, and we might make a shoe.

Would that -- would that -- that would not be enough under your standard; is that correct?

Ginger D. Anders: --I think that's right.

I think if the parties went back on remand in this case, and we do think there should be a remand here, but if the parties went back and we had the exact same facts and Nike said that anything that was a colorable imitation of Already's shoes was covered by the covenant and Already came back and said, just generally, we're making new shoes, I think in that situation it would be relatively easy for Nike to show that the possibility that Already would be impacted by the covenant -- or impacted by the trademark, I'm sorry -- would be speculative.

Justice Elena Kagan: Given what Already has said in this case, why is it that you think that we should remand?

I mean, it sounds as though we're remanding for no purpose, given what Already has said throughout the course of the litigation and, indeed, in this Court today.

Ginger D. Anders: I think there are two reasons.

The first is that when this Court establishes a new standard, it often, it traditionally will remand to allow the courts, the lower courts to apply that standard in the first instance.

And the second is that there was some uncertainty about what the covenant meant below.

So Nike represented that the covenant covered the existing shoes and Already said in its motion to dismiss briefing that it thought that the covenant did not--

Justice Anthony Kennedy: --But its future -- its future shoes are clearly, and I thought the counsel for the Petitioner might have added this in his answer to Justice Sotomayor, that its future shoes are not covered by this.

And if Nike has the heavy burden of proof, can it have discovery and take depositions on what their plans are, what their marketing plans are, what designs they're thinking about?

Ginger D. Anders: --I think that would be one way for Nike to try to establish that the dispute is not reasonably likely to recur.

It could get discovery into--

Justice Anthony Kennedy: So then the covenant not to sue gives Nike an advantage that no other manufacturer has.

Ginger D. Anders: --I don't think it does give the--

Justice Anthony Kennedy: Do you mean any manufacturer without -- without any litigation can ask Already, well, tell us your plans, what shoes are you thinking about?

Ginger D. Anders: --Well, once Already produces -- once Already identifies what its future activities may be -- and, again--

Justice Anthony Kennedy: But why should Already have to do that to anybody?

Ginger D. Anders: --Well, we think it makes sense for Already to have to -- have to at least identify here what activities it thinks may not be outside the covenant, and I don't think that hurts Already, and the reason is that if Already's evidence convinces the court that the case isn't moot, then Already gets its adjudication on the related--

Justice Anthony Kennedy: So Nike has an advantage over Already that no other manufacturers had.

It can demand what its future plans are.

Ginger D. Anders: --Well, it will get -- the trademark will be adjudicated if Already convinces the Court the action isn't--

Justice Anthony Kennedy: Let me just ask one question on that, and it's a little bit off of what we've been talking about.

You say in your brief, well, now don't worry.

What you can do is you can go to the trademark, the PTO board, and they'll adjudicate this mark.

And so, you know, you can really go out of the courts and go to the administrators.

Suppose Already goes to the administrative agency and loses, can it have judicial review?

And is there -- is standing easier to show once there has been an adverse action in the administrative office?

Or are we right back where we started, so once you go to the agency and you try to appeal, the court says, well, this is an Article III court, we need a case of controversy, and you're right back where we are now?

Ginger D. Anders: --Well, a couple of points on that.

The first is that we are not proposing that the Court should dismiss discretionarily every action just because the TTAB exists and can adjudicate--

Justice Anthony Kennedy: That was a big part of your argument.

You were telling us, oh, don't worry, you can always go to the patent level.

Ginger D. Anders: --What we're proposing here is that as a function of the Court's broader discussion under the Declaratory Judgment Act and United States v. W. T. Grant is that when the Court believes that it probably does have jurisdiction but it doesn't think that the likelihood of a dispute is -- is really that great, that in that situation it can discretionarily dismiss.

So that would be a situation in which there is Article III--

Justice Anthony Kennedy: My -- my question is, is the Article III requirement that Already has the same in this case as it would be if they sought judicial review from an adverse order of the administrative agency?

Ginger D. Anders: --The administrative agency's standing rules are broader than Article III, so it would -- it is easier to get--

Justice Anthony Kennedy: I'm talking about going to court.

Ginger D. Anders: --And so once it goes to court, there may be rare cases in which Already, as the party that lost, if it isn't injured in fact by the TTAB's decision itself, that it would not have the necessary Article III injury to seek judicial review.

That hasn't -- to our knowledge, that has not occurred, but it is possible that that could happen because 15 U.S.C. 1064 makes the TTAB standing requirements broader than is in Article III.

Justice Ruth Bader Ginsburg: Ms. Anders, you did say, if I recall correctly, that Congress regarded the PTO as the preferred form for cancellation proceedings.

The statute sets up the PTO proceeding, but it also allows the claim to be brought in court.

So what -- what shows that Congress meant these claims to be -- to go to the agency in preference to the court?

Ginger D. Anders: Well, I think Congress didn't set it up as an exhaustion requirement, so I don't think it's that Congress preferred for all of these claims to go to the TTAB, but the TTAB is the expert body that -- that adjudicates cancellation of validity issues all the time.

So we think there could be circumstances in which it would be particularly appropriate for a district court to consider the existence of the TTAB proceeding.

For instance, if there's a related proceeding pending before the TTAB or there's a concurrent proceeding, something like that, we think it would make sense for the district court in considering whether to dismiss the action to take that into account.

Chief Justice John G. Roberts: I thought your answer to Justice Kennedy's question might be that the -- an adverse decision from the agency covering you is an additional injury, in fact, that gives you Article III standing, unless the -- unless the basis for the agency's decision is you don't have any injury.

Ginger D. Anders: I think there could be some circumstances in which the TTAB's decision would create injury-in-fact if it said something about the scope of the trademark, something like that.

So there could be situations in which 1071 would then allow the losing party to get judicial review.

Chief Justice John G. Roberts: Thank you, counsel.

Mr. Goldstein.

ORAL ARGUMENT OF THOMAS C. GOLDSTEIN ON BEHALF OF THE RESPONDENT

Thomas C. Goldstein: Mr. Chief Justice, thank you very much.

May it please the Court:

You will want to have available to you the cert petition and the small volume of the Joint Appendix.

In our submission the Court needs to adopt a rule that has balance to it, and that is there -- it has to be possible to resolve one of these cases through a covenant not to sue of appropriate breadth, but it also has to be the case that a covenant not to sue can't just always eliminate the other side's injury.

And so, it's going to depend on the covenant and it's going to depend on what the other side says about its plans.

And our point in this case is that you should adopt the following rule: And that is, if you have a covenant not to sue and it covers everything that the other side alleges an intent to produce, then there is no more injury.

If it doesn't cover that, then there may well be injury, and our point--

Justice Sonia Sotomayor: How do you deal with the point that's been discussed with your adversary, they have to show you everything they intend to produce?

What entitles you to that showing?

Thomas C. Goldstein: --Absolutely.

So one thing that's very important to recognize -- two things about trademark practice.

First is that in all of these cases, remember, most of the time the question of trademark or patent validity will just be a suit for invalidity.

It might be a counterclaim.

This happens all the time.

And in all of these cases, including this case, there is a protective order, and there is one in this case.

And the protective order says that a party can designate its material so that it's lawyers' eyes only, and so that no business person from the other side is entitled to see it.

So that, Justice Kennedy, with respect, it's actually not true that this is an unusual situation or that we would get some special advantage.

In every single patent or trademark invalidity case, after this Court's decision in MedImmune, the party alleging invalidity in order to show its standing has to say, we intend to make a product that is regarded as potentially infringing.

Justice Sonia Sotomayor: What if they simply said--

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: --you have the trademark, we think it's invalid, we want to copy your shoe?

We want to copy just the form of your shoe because that's what the trademark involves.

And once we have the invalidity, that's what we're going to do.

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: Would that be enough of a showing?

We don't have plans right now because your trademark stopped us from having the plans, but the minute your trademark is -- isn't validated, for sure we're going to do it because it's going to mean great sales if we put our name on it rather than your name.

Thomas C. Goldstein: The answer to your question is going to be yes, but it has two parts to it.

The first is -- because I really want to focus on precisely what you said.

You said first, what did they simply say?

Now, if they were to simply say it, there could be a factual inquiry into whether they're telling the truth or not.

We could debate.

We could have a fight about the actual evidence.

But let's assume they could prove it, and that is, the district judge was told by Already or whatever other competitor, we want to make a counterfeit.

In that case, unquestionably, unquestionably, there would be a continuing Article III injury, and let's then go to your understanding of what the declaration in this case actually says.

So, first, let me start with how the case came to you, and that is the court of appeals, what it understood the record and the district court understood the record to be, and that is going to be in the petition appendix at page--

Justice Ruth Bader Ginsburg: Mr. Goldstein, how the case came to us, how this case originated was a counterclaim.

Thomas C. Goldstein: --Yes.

Justice Ruth Bader Ginsburg: And at the time the counterclaim was asserted there was certainly Article III jurisdiction over the counterclaim, right?

Thomas C. Goldstein: That's absolutely right.

And we accept, for present purposes, that there is going to be a reduced requirement under the voluntary cessation doctrine.

We briefed why we don't think that's true, but I assume for the purposes of these answers, that the Court is going to apply the heightened burden on us to show that the case is over.

And we believe that we showed beyond -- that we really resolved this case, when we didn't really dismiss our claim with prejudice, but we affirmatively granted them a covenant not to sue that covered not only their existing products but, Justice Kennedy, their future products -- and I'm glad to take you to the language of the covenant -- because they are the colorable imitations of their current products.

Justice Elena Kagan: Do you that this covenant covers an exact copy of your shoe?

Thomas C. Goldstein: It does not.

And if the other side had said in the district court, we have an intention -- and this is Justice Sotomayor's point, we have an intention, we have a desire to make a copy of your shoe, then there would be a case or controversy.

And it's in--

Justice Anthony Kennedy: Is -- is -- is the petitioner -- do you anticipate that the petitioner will agree with you, that this covers future products?

Thomas C. Goldstein: --Yes, because although the cert petition says that it doesn't, we have quite stridently pointed out in our briefing that that was completely inaccurate.

And I'll just -- let's go to the covenant.

I don't think this is really that hard or that controversial.

So, if we go to the Joint Appendix at pages 96 to 97, and so -- and -- and I remind you that the -- the question presented is -- is exactly what you're saying, Justice Kennedy.

I'll read it so you don't have to turn back to the cert petition.

And its premise was that the registrant promises not to assert its mark against the party's then existing commercial activities.

So now I'm in the covenant itself on page 97A, and this is what we promised not to sue them about.

We have promised not to sue them, and I'm five lines down from the top, on account of any possible action based on or involving trademark infringement, unfair competition or dilution, under state or Federal law based on the appearance of Already's current, okay, that's not future or previous footwear product designs and any colorable imitations.

And that's what -- and that's what--

Justice Sonia Sotomayor: The colorful imitations -- colorable imitations are colorable imitations of their shoe?

Thomas C. Goldstein: --That's exactly right.

Justice Sonia Sotomayor: You haven't promised to not sue them over colorable imitations of your shoe?

Thomas C. Goldstein: That are not colorable imitations--

Justice Anthony Kennedy: But you have two categories.

You have current and previous as to which the covenant runs to everything.

Then you have what you say is future, and that has to be a colorable imitation.

Thomas C. Goldstein: --That's exactly right.

Justice Anthony Kennedy: So it -- so it -- so it does cover some future designs, and they're correct about that and you're incorrect.

Thomas C. Goldstein: Justice Kennedy, I -- I may have confused things.

This is the situation with the covenant.

Our covenant not to sue covers everything they have made in the past, everything they were making at the time and every future product of theirs that is a colorable imitation.

Our point is not that it covers every future shoe of theirs.

We're on the same page in that respect.

You are absolutely right, Justice Kennedy, that there are shoes that they could make in the future that would not be covered by the covenant.

There could be an injury about that.

And so, my point about the record in the case and how the case was developed and how we might have modified the covenant if they had told us anything, suggesting -- suggested anything outside the covenant they might want to make is let's look at what they actually told the district court and the court of appeals about what their intentions were.

Justice Ruth Bader Ginsburg: So it's -- so it's a question of -- of deficiency in their pleading.

Suppose they amended that counterclaim and said, as soon as we are able, we want to do a counterfeit.

Thomas C. Goldstein: Yes.

It is not a deficiency in the pleading.

It's a deficiency in the proof.

So my point about this, it's very important for the Court to understand that this case was not dismissed just on the pleadings.

It wasn't just an insufficiency in their allegation.

And they said, actually, we have more that we want to say, because we actually can explain to the courts that we want to make other shoes.

The case was decided on a fully developed record.

We moved to dismiss.

They submitted five declarations in response that described their intentions precisely.

Justice Elena Kagan: But suppose in a different hypothetical case they had said, what we want to do is to copy Nike's shoes--

Thomas C. Goldstein: Yes.

Justice Elena Kagan: --what then should have happened then, in your view?

Thomas C. Goldstein: Okay.

So I do -- I would love to return to what actually happened, but in that hypothetical, what would happen is that our motion to dismiss would be denied, unless and until we could prove that what they were saying wasn't true, because it is absolutely the case, and it is a strong point in our favor, that you can't evade an attempt to invalidate your trademark through a covenant not to sue, because you can't give a covenant not to sue over a counterfeit because you are in real risk of being deemed to have abandoned the mark because you're just--

Justice Ruth Bader Ginsburg: Why?

Why?

I know you said that in your brief, but if you give it -- yes, if you -- if you say the -- the whole world can copy it.

But this covenant would give it to only one manufacturer.

Thomas C. Goldstein: --That's correct.

Justice Ruth Bader Ginsburg: So why would you abandon -- why would giving a covenant to Already amount to abandonment of your mark?

Thomas C. Goldstein: Okay.

It is not a settled question in the law.

There is no case that has considered this question.

What a party claiming abandonment would say is that we would have licensed Already then to increase its production and its distribution, but even if one didn't agree with that, Justice Ginsburg, my point would be this, and that is you can't continually evade an attempt to invalidate your mark, because certainly the degree -- we would agree that if you give a second one of these things out or the third one, you would be abandoning the mark.

I have some actual facts for you about this, and that--

Justice Stephen G. Breyer: What is it -- I would like to know.

I mean, I assume you ask them, do you have any current or future plan to produce a shoe that would violate our mark--

Thomas C. Goldstein: --Yes.

Justice Stephen G. Breyer: --or that might, which does not look at all like the present -- your present shoe, and isn't even colorably like your present shoe, do you have a plan to do such a thing, are you in the process, is it likely?

And they say, no, it's not likely.

That's the end of it, they're just as if they manufactured cell phones.

Thomas C. Goldstein: Yes.

Justice Stephen G. Breyer: But if they were to say, you know, we make new shoes all the time--

Thomas C. Goldstein: Yes.

Justice Stephen G. Breyer: --and this is some kind of thing we might well consider, and we have people working on it; and they are considering whether to do it or not, it's well in the works -- they win.

Okay?

What did they say?

Thomas C. Goldstein: Page 173 of the Joint Appendix.

They had every opportunity to describe exactly what you wanted to know about, Justice Breyer.

We moved to dismiss the case--

Justice Sonia Sotomayor: I'm making this as simple as I can.

Thomas C. Goldstein: --Okay.

Justice Sonia Sotomayor: I'm a shoe manufacturer.

I want to make new designs, and I want to be free to make the designs that I want.

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: If this mark isn't validated--

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: --I intend to copy as much of it as I can.

Thomas C. Goldstein: Sure.

Justice Sonia Sotomayor: I don't have any records of doing the planning because the trademark was there.

Thomas C. Goldstein: Sure.

Justice Sonia Sotomayor: But for sure, given my current shoe--

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: --and the fact that they thought I imitated them--

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: --meaning you--

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: --you invalidate the mark, I'm going to copy as much of it as I can.

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: Would that be enough?

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: In your mind you're saying--

Thomas C. Goldstein: Yes, that would be fine.

Justice Sonia Sotomayor: --You could do discovery then?

Thomas C. Goldstein: Yes.

And Justice Sotomayor--

Justice Sonia Sotomayor: And the discovery is going to show what?

Thomas C. Goldstein: --Well--

Justice Sonia Sotomayor: The president comes in and says exactly what I said.

There are no plans--

Thomas C. Goldstein: --They're going to win.

They're going to win, Justice Sotomayor; and so for your vote, I am resting my entire case on the fact that you're understanding that this is what their affidavit suggests that's just not right.

Chief Justice John G. Roberts: Counsel, could you go back to Justice Breyer's question and answer that?

Thomas C. Goldstein: Yes.

Yes.

So page 173 -- because there is a record here.

You -- you don't have to hypothesize; this was all on the table in the district court.

We said, they have no intention, no desire, no nothing, to make something that is not unambiguously covered by the covenant; and Justice Ginsburg did point out in passing that if they said something to the contrary, we would have modified the covenant.

So here's what they said, and I -- it would take a lot of your time for me to read all seven paragraphs on page 173, but they don't--

Justice Sonia Sotomayor: --Yes.

You don't have to read to us.

Thomas C. Goldstein: --So these paragraphs do not say -- they do not suggest, they do not imply, even between the lines, an intention to make something that is outside the covenant.

They just don't.

And that's--

Justice Stephen G. Breyer: What they say is that they changed this at the rate of a mile a minute.

You know, they have -- they have stuff they put out, and we have the YUMS and the sweet, whatever it is and the Jelly Bean and so forth, and we keep changing it.

And so I don't know.

I mean, it doesn't seem clear one way or the other.

If it is -- if I come to that conclusion, is it the case -- I thought perhaps in looking at this that the line I quoted, remember, which puts a lot of burden on you, from Friends of the Earth, is not quoted in the district court, not quoted in the Court of Appeals, so perhaps the thing -- I think the SG wants something like it.

Thomas C. Goldstein: --Yes.

Justice Stephen G. Breyer: So you say, okay, this is the standard; it's tough for Nike to show this; you seem to have conducted this case without that standard quite in mind.

It's tough for Nike, but they can do it, you know, depending on the facts, and you have these protective orders, da, da, da.

So send it back, use the right standard, and give Nike a chance and give them a chance, and that way we--

Justice Sonia Sotomayor: I thought what they were arguing--

Justice Stephen G. Breyer: --What about that?

I would like to know what the answer to that question is here.

Thomas C. Goldstein: Okay.

Do you want--

Chief Justice John G. Roberts: Answer Justice Breyer's question.

Justice Stephen G. Breyer: Excellent.

Thomas C. Goldstein: --All right, Justice Breyer, so you've got a choice.

You could let us win now or you could say, well, maybe you will win on remand.

Justice Stephen G. Breyer: Well, that's your opinion, that you will win on remand.

Okay.

Thomas C. Goldstein: Okay.

Right.

[Laughter]

Right.

And Justice Breyer, I have two answers for you.

Number one is going -- the first one is going to be about the facts of the case, and the second is just going to be jurisprudential.

The first one is, what more could one imagine in such an opinion that you would ask Nike to do on a remand?

Justice Stephen G. Breyer: I would ask Nike, I suppose, Nike could say, you know, I read the page 73 and you changed things at the rate of mile a minute, and we looked at YUMS and Jelly Bean and they're sort of like our shoe but we didn't think enough, but you did think enough, and are some of these changes that could happen at a mile a minute -- is there any reason to think, you know, that they won't look really colorably even like what you just did, but nonetheless is a pretty good point that they might infringe our -- our present trademark.

Thomas C. Goldstein: Justice Breyer--

Justice Stephen G. Breyer: That's a long question, I don't know if I'll get a good answer.

Thomas C. Goldstein: --Well, I hope you'll get a good answer.

The -- my point is this, Justice Breyer: what you've just said on remand, what we would do is ask a question.

We wouldn't try to prove and anything.

My point is this: Already has told the district court, the court of appeals, and this Court everything that it wants to say about its intentions.

It has had every opportunity in every court to have its lawyers simply say, Justice Sotomayor, this is not an accident.

The reason they are not saying that they want to make a covenant of the -- a copy of the Air Force 1 is that they don't want to make a copy of the Air Force 1.

There is no reason in the world to send this back to give -- ask Already again the question that has been asked in three separate courts.

I said I had a jurisprudential answer to you as well, and that is the case was presented to you as presenting a question of law, and that is, can you have a covenant not to sue that will end a case like this?

And if you tell the lower courts, we don't know, you are doing, I think, not as much of a service to the development of the law as you could.

It is a much more sound approach, we think, to say Already had the chance to build its record--

Justice Ruth Bader Ginsburg: Mr. Goldstein, can you inform us of when this practice of the unilateral covenant in order to moot a -- a cancellation claim, when -- how long has it been around?

Thomas C. Goldstein: --It is still -- it has been around for at least 20 years.

It is still not very common for the very important reason that trademark owners know that if they hand these things out, they are at risk of having their mark invalidated; and second they know that it doesn't avoid a -- a determination of the validity of the mark because a party like Already can always go to the Federal agency, the TTAB.

So I said I have some actual facts, and the facts are these: although Nike has a broad trademark portfolio, it has only once in its history issued a covenant not to sue.

It is in this case.

Justice Anthony Kennedy: That's because it usually sues.

Page 114 of the Joint Appendix says,

"Your Honor, over the past 8 months Nike has cleared out the worst offending infringers. "

"Now Already remains as one of the last few companies that was identified on that top ten list of infringers. "

I mean, that -- that's your company's policy, that's your attorney, I take it.

Thomas C. Goldstein: We -- Justice Kennedy, we do enforce our trademarks.

You say we usually sue.

I will tell you that we have filed six trade dress actions in the company's history.

Now, you had said, because I think it's the other side's -- the impression the other side has given, that we are getting a special advantage over them.

I think it's really important to recognize for purposes of standing doctrine and mootness doctrine that of all the shoe manufacturers in the country, the one that is least likely to be injured by this trademark, there is only one; and it is Already, because they are the only company in the entire world that has a promise that's substantial not to be sued under this trademark.

We are the one -- they are the ones that are least likely to come into conflict with Nike.

Now, they--

Justice Anthony Kennedy: Well, but that's because you gave them the covenant after you sued them.

Thomas C. Goldstein: --Yes.

Yes, that's right, but we did give them the covenant, that's my point.

After the covenant -- we didn't merely withdraw the case.

I have one other piece of fact.

Justice Antonin Scalia: What -- what -- what's the consideration -- I used to teach contract law.

This is, you know -- you can just give a covenant like that?

Thomas C. Goldstein: Yes, we're judicially estopped.

It's not a contract.

We are estopped and they have -- the district court acted in reliance on it, construed it, and so we are bound by it.

It's not a contract.

I did have one other fact for you, because the other side has given you this impression that once bitten, twice shy; that if you are sued once for a trademark -- they have a special fear that they're in the cross hairs, that we're watching everything that they do.

So when they made this argument--

Justice Anthony Kennedy: They are on the top ten list of infringers.

[Laughter]

Thomas C. Goldstein: --Yes.

They are on the top ten list of infringers.

But after that -- after that they and they alone got a covenant not to be sued, under the -- they are the -- they are in the specially protected position, not a specially disadvantaged position.

I did, however, when they made this argument in the reply brief try to figure out if that is true.

Is it actually the case that a person who is sued once has a legitimate worry that they will actually be sued again, so you should lower the -- the mootness or standing bar still further.

So we looked at every single trademark action between 2000 -- January 1, 2000, and December 31, 2004, all of them.

There were 593, and over the next eight years we tried to figure out how many times did the plaintiff sue the defendant again.

It happened six times.

So--

Justice Stephen G. Breyer: I see that.

But I thought your response to Justice Kennedy was a different one.

I liked it because it was that -- the concern that Nike can go and find out the competitor's plans is true, but it exists whenever a -- a -- a manufacturer brings a trademark infringement case, because that manufacturer has to show he is now making the product; or if not, he intends to.

And if it's a question of intends to, then the defendant can go and look and see if that's true.

Thomas C. Goldstein: --Yes.

Justice Stephen G. Breyer: And your response, I took it, to that was there are procedures that deal with that, they're called protective orders, and so is that -- have I got that right with your argument?

Thomas C. Goldstein: You could not -- you could not be more right.

Justice Stephen G. Breyer: That's what your argument is, yes.

Thomas C. Goldstein: It's also the truth that -- that it is what happens in every single patent and trademark invalidity case.

If you believe that gives rise to Article III injury, then every party has standing to challenge every competitor.

Justice Ruth Bader Ginsburg: Mr. Goldstein, what about Federal Rule 41(a)(2)?

It says if the defendant has pleaded a counterclaim, and you have recognized that there was Article III jurisdiction over that counterclaim, the case may be dismissed on the plaintiff's request over the defendant's objection only if the counterclaim can remain pending for independent adjudication.

Thomas C. Goldstein: Yes.

Justice Ruth Bader Ginsburg: So on the face of it, it seems that that rule fits this case to a T; that is, the -- plaintiff wants the case withdrawn, defendant objects, and the question is can the counterclaim remain pending for independent adjudication.

Thomas C. Goldstein: Yes.

I think the reason they did not pursue the Rule 41 argument in this Court and abandoned it is that it's completely understood if the party that's instituting the claim says I'm not going to pursue my case at all, there simply is no Article III jurisdiction.

And so even without a Rule 41 dismissal, there is no case or controversy remaining in the case.

The district court -- the court of appeals might also have said when it's dealt with this issue on 8(a) and 9(a) of the petition appendix, that they actually acceded to the dismissal of our claims, they're happy to have our claims gone, and you can't say we'll take the dismissal of the -- sorry -- the plaintiff's claim but want to have the counterclaim remaining.

Justice Anthony Kennedy: You -- you referred just in a fleeting way to the fact that they can go to the PTO and to the board.

Thomas C. Goldstein: Yes.

Justice Anthony Kennedy: What about my question, and I wasn't -- it was probably my fault--

Thomas C. Goldstein: No, I understand--

Justice Anthony Kennedy: --I didn't quite understand the government's petition.

Is the standing burden any less after there is a -- an administrative adjudication and you go to court for judicial review?

Thomas C. Goldstein: --The Chief Justice suggested an argument that could be made.

It is an argument that we disagree with.

We've looked at the cases.

We think that it's a point in their favor, Justice Kennedy, that while you can go to the TTAB, they wouldn't be able to appeal to an Article III court.

I think that's a point in their favor.

A point in our favor, however, is this notion of scarecrow trademarks hanging out there on the fields is inaccurate because of the ability to go to the TTAB in the first instance; they're experts.

And second, remember what I said to Justice Sotomayor.

Anybody in this market can say we want to counterfeit the Air Force 1 -- we just want to make a copy of it, it's not complicated -- and they will have the right to bring a claim to invalidate the mark.

So we can't leave the trademark hanging out there.

I have kept trying to come back, and if I could in my remaining time, to the understanding of the lower courts about the record, because I said, Justice Breyer, I think it would be much better for you to resolve the case because they had the opportunity to build a record, the case came to you on two courts' understanding of the record, and so if I could take you back to 14(a) and 15(a) of the petition appendix.

Justice Ruth Bader Ginsburg: May I interject just one thing that I would like you to clarify?

Justice Breyer started out by saying the standard comes from Friends of the Earth.

Do you agree?

Because, as I recall, your brief doesn't -- doesn't even cite Friends of the Earth.

Thomas C. Goldstein: That's not correct, Justice Ginsburg.

So on -- we do disagree because of the Court's decision in Deakins that this a voluntary cessation case, but we accept for present purposes, so you don't think I'm fighting the hypothetical.

Assuming that voluntary cessation principles apply, here's how they apply: When you not just dismiss the case, but you grant the covenant not to sue, and the covenant not to sue says I won't sue you over what you're doing now or anything that I can imagine you doing in the future, because you haven't told me anything else, then you have ensured that the controversy can't arise again, and you've met the Voluntary Cessation Doctrine.

If, on the other hand, the other side comes forward with a declaration from an officer, some other form of proof that says, no, I'm worried I might do something outside the covenant, I would definitely want to make a counterfeit, then the case is going to go on.

But this case is not that hypothetical case.

On 14(a), the first full paragraph, seven lines from the bottom,

"Given the similarity of YUMS' designs to the '905 mark and the breadth of the covenant, it is hard to imagine a scenario that would potentially infringe the '905 mark and yet not fall under the covenant. "

"YUMS has not asserted any intention to market any such shoe. "

And then in footnote 5 on 15(a),

"Given the absence of record evidence that YUMS intends to make any arguably infringing shoe that is not unambiguously covered by the covenant, this hypothetical possibility does not create a definite and concrete dispute. "

That's how the case should be resolved.

You should say, yes, there can be other cases where the covenant is too narrow; yes, there can be other cases where someone does allege a desire to make a counterfeit.

Those are different cases.

But do not, I suggest to you, remand when the facts have already been developed in this case.

If we lose on this record, we lose on this record.

But if we win on this record, we win on it because the record has been built in this case and it is settled.

Justice Sonia Sotomayor: --You are saying that you've met -- if we decide you bear the burden of proof, you're saying, you -- you could live with that.

Thomas C. Goldstein: Yes.

Justice Sonia Sotomayor: And your burden was met by their submissions.

Thomas C. Goldstein: Our burden was met by our submission of the covenant which dealt with every product they're making and every colorable imitation in the future of it.

And when they didn't then come back and say, actually, we want to make something that might be outside the covenant, then it was -- that's -- that's when we won the case.

Thank you very much.

Chief Justice John G. Roberts: Thank you, counsel.

Mr. Dabney, you have four minutes remaining.

REBUTTAL ARGUMENT OF JAMES W. DABNEY ON BEHALF OF THE PETITIONER

James W. Dabney: Your Honor, the covenant -- the affidavits in this case were prepared about five weeks after this completely unexpected development in the middle of a hard pressed litigation was made, and the position that the Petitioner made to the district court was there is obviously subject matter jurisdiction here, not just because of the Rule 41 point, but that you can't say, well, we have a case that raises these three issues, you could, say, enter a single judgment right now, the plaintiff's claims are waived because they've waived them, the trademark is invalid, and the registration was unlawfully issued and should be granted.

Courts issue judgments on the basis of alternative holdings all the time, and the only reason why we're even talking about this is that Judge Sullivan bifurcated the proceedings so that we dealt with this one issue in isolation and then the other thing came up separately.

So we said we think there's a case right now, but if you doubt it, we request leave to amend our counterclaim to assert claims for invalid procurement of registration and other things that could have been asserted.

So the state of the record reflects the -- the suddenness with which the -- the plaintiff most unexpectedly did what it now says in public it's never done before and dropped its claim so unexpectedly in the case.

So there's no question but that if -- if it turns out that it's not enough to say that we're actively engaged and we want to do all of the things any person in a normal position would want to do, and we have a concrete interest, the -- the defendant can certainly allege more than what it has been alleged.

The--

Justice Sonia Sotomayor: His challenge, you said to have a chance in three different courts to say directly and unequivocally if the mark is invalid, we're going to imitate, and you haven't been willing to do that.

James W. Dabney: --Your Honor, the Petitioner has been trying now for two and a half years to establish its right to do that.

It was not our understanding that, under the law as it stood, that the -- in addition to saying we have an enormous commercial interest in doing this, and we are seeking the right to do this since--

Justice Sonia Sotomayor: What's your commercial interest?

James W. Dabney: --The commercial interest is to partake of this very large and lucrative business that the Respondent's evidence shows in this case.

Justice Sonia Sotomayor: So are you willing to make the statement he's asked you for?

You keep equivocating on the answer.

You know, it's like I don't want to say it, is what you're telling us.

James W. Dabney: I -- I think it is -- first of all, the Petitioner, up until now, has said what he said.

I could stand here and say I believe that if the registration were cancelled, it is highly likely that the Petitioner would bring out a YUMS shoe.

Justice Stephen G. Breyer: Okay.

So, look, how are you hurt then?

Because suppose he wins here.

Now, you, if you have the president of the company say, hey, I'm going to do an exact copy, go bring a -- go bring a cancellation action.

If you can't quite say that, you know, you can start one -- you can't quite say that, but he says something sort of vague about it that's close, go to the PTO.

And if he can't say anything like that at all, well, then, maybe you should lose.

I mean, that's -- that's -- what's the practical problem with that?

James W. Dabney: The practical problem here is that in the procedural posture of this case, which is analogous to a summary judgment situation, all inferences, all reasonable inferences need to be drawn in favor of the nonmoving party.

The suggestion that we had the opportunity to develop the record is completely incorrect.

There wasn't even oral argument on this motion.

The district court never gave us any opportunity to put in evidence other than to come in and say we have what we believe is a basis for jurisdiction now, Rule 41(a)(2) precludes you from dismissing our counterclaim, but if you think what we've alleged now is not enough, we request leave to amend our pleading.

So to force us to start all over again in a new suit is -- would be fundamentally unfair to the Petitioner, and what we're seeking here is simply judicial review.

We're seeking the -- the ability to obtain extinguishment not just of the particular claims that this Plaintiff saw fit to waive, but the much broader government-registered claim of right to exclude competition in the sale of shoes, and the fact that--

Chief Justice John G. Roberts: Thank you, counsel.

The case is submitted.

James W. Dabney: --Thank you.