SUCCESS! NIKE WINS IN CONSTITUTIONAL COURT

UNCLAS MADRID 000606

SIPDIS

E.O. 12958: N/A
TAGS: KIPR ETRD ECON SP
SUBJECT: SUCCESS! NIKE WINS IN CONSTITUTIONAL COURT

REF: A. 2002 MADRID 2134

B. 2003 MADRID 780


1. (SBU) SUMMARY: After more than 14 years of court battles,
Nike has won a major victory in the Spanish Constitutional
Court that once again allows the company to use its trademark
(both the name and the swoosh) on apparel sold in Spain. On
February 16, in response to Nike's appeal of a negative 1999
Supreme Court ruling, the Spanish Constitutional Court sided
with Nike, annulling the other court's decision. It returned
the decision to the Supreme Court asking that it revise its
decision based on the findings of Constitutional Court
justices. Nike is hoping that the new Supreme Court ruling,
expected to be issued within the next 12 months, will be fair
and objective. They fear the new decision could be colored
by an ongoing battle for power between the two Spanish
courts. END SUMMARY


2. (SBU) For over fourteen years, Nike has been pursuing a
former Spanish business partner, Cidesport, in court in an
attempt to gain control of the Nike trademark in Spain. The
problem stems from Cidesport's surreptitious acquisition in
1981 of a trademark containing the Nike name. Nike neglected
to register its own trademark at that time. After several
unsuccessful attempts to negotiate a settlement, Nike finally
began litigation at the end of 1989. Nike was successful
with a string of lower court case victories, but in 1999 lost
a decisive appeal in the Civil Chamber of the Spanish Supreme
Court. (Note: The court has a Civil and an Administrative
Chamber.) The Supreme Court decision allowed the former
business partner to sell clothing in Spain with the Nike
name. Nike was also allowed to sell clothing, however, the
clothing could not bear the name Nike --- only the swoosh.


3. (SBU) Nike was successful in convincing the Spanish
Constitutional Court to accept an appeal of the Supreme Court
decision. The case had been pending over 3 years -- an
unusually long wait, partly due to the serious illness and
subsequent death of the justice assigned to the case. In the
interim, the Supreme Court issued other rulings harmful to
Nike including a 2002 Administrative Chamber ruling that took
the 1999 decision one step further and gave Cidesport the
right to use a "Nike Sportswear" logo on both footwear and
apparel.


4. (SBU) On February 16, 2004, the Constitutional Court
finally reached a decision favoring Nike. The Constitutional
Court annulled the Supreme Court's prior rulings, outlined
the various legal errors made by the Supreme Court, and sent
the 1999 decision back to the Supreme Court for a new and
"properly reasoned" decision. Industry insiders estimate it
will likely take a year for the Supreme Court to issue a new
decision, though some "returned cases" have been considered
in just a matter of weeks. In the meantime Nike has regained
use of its entire logo, both name and swoosh. Nike lawyers
and officials are cautiously optimistic. They say the
Constitutional Court's decision reflected a good part of the
reasoning they had used in their legal brief. They are
hoping the Supreme Court response will be objective.


5. (SBU) One final twist in the Nike case involves an
inter-court struggle for power between the Constitutional
Court and the Supreme Court that has been going on for years.
In at least one example in the past few years, the Supreme
Court took umbrage that the Constitutional Court returned a
decision for reconsideration. The Supreme Court revised its
decision, but did so in a way that met the Constitutional
Court's requirements, but essentially gutted the victory.
Tensions between the two courts escalated this month when the
Supreme Court accused the Constitutional Court of a judicial
misstep and humiliated the justices by requiring them to pay
restitution to a local lawyer.


6. (SBU) The 1999 Supreme Court decision barring Nike from
selling clothes with its logo in Spain has cost the company
tens of millions of dollars in separate production runs and
lost sales. Throughout the legal struggle, the company has
asked us on numerous occasions to advocate on their behalf to
various GOS ministries. While we have not wanted to
interfere in independent judicial proceedings, we have on
many occasions spoken and written to various GOS officials to
underscore the importance of intellectual property rights and
the negative implications of Nike's ongoing court troubles.
This week, in view of the latest judicial ruling, we have
been delicately asking relevant contacts if they believe the
inter-court feud could prejudice the final Nike Supreme Court
ruling.
MANZANARES