Nike Accused of Legal Bullying in Trademark Battle: Court Calls Out 'Bad Faith' Tactics

In a classic "David vs. Goliath" scenario, small businesses often find themselves battling giants, as was the case between Lontex, a Norristown, PA-based company, and sportswear titan Nike. Lontex, which produces compression sportswear under its "Sweat It Out" brand, found itself in a legal battle with Nike, accusing the sportswear giant of infringing on its "Cool Compression" trademark. A 2021 jury trial ruled in favor of Lontex, but the road to that verdict was anything but smooth.

Nike’s legal strategy, as revealed in a recent court-ordered report, was to drown Lontex in legal expenses. Former Pennsylvania Supreme Court Judge Jane Cutler Greenspan concluded that Nike engaged in “bad faith” litigation, intentionally aiming to "kill Lontex’s business" by overwhelming it with legal costs. Nike's deep pockets allowed it to fight this battle in ways that a smaller company like Lontex could not afford, reinforcing the imbalance that often exists in intellectual property battles between small businesses and corporate giants.

The trademark dispute began when Lontex, which had been selling its "Cool Compression" technology since 2008, noticed in 2015 that Nike was using the same term to describe its compression apparel in its "Nike Pro" line. After Lontex sent a cease-and-desist letter in 2016, Nike delayed any meaningful action, dragging Lontex into a costly legal confrontation. According to Judge Greenspan's report, Nike’s behavior was not just typical corporate overreach but a calculated effort to burden Lontex with legal fees, effectively trying to eliminate its competition through financial exhaustion rather than on the merits of the case.

Although Lontex was awarded $791,000 in compensatory and punitive damages, this amount pales in comparison to the $100 million Nike reportedly made from its infringement. What’s more troubling is that Lontex was initially awarded its legal fees—close to $7 million—due to Nike’s unethical behavior, but the Third Circuit Court reversed that order, calling for a “special master” to review whether exceptional circumstances justified the legal fee award. Judge Greenspan’s recent report argues that Nike’s “outrageous” conduct warrants this rare exception, and both parties are awaiting the court's next decision.

This case highlights the difficulties small businesses face when protecting their intellectual property against large corporations. Lontex founder Efraim Nathan explained how Nike’s actions also harmed Lontex’s relationships with key customers, including sports teams and coaches, making it even harder for the smaller company to compete. While the competitive marketplace is never a level playing field, when larger companies engage in such blatant overreach, it undermines the integrity of the system.

Nike’s actions in this case are not an isolated incident, and the company’s corporate culture has been questioned before. In 2018, Nike faced a class-action lawsuit from former employees alleging gender discrimination and sexual harassment, leading to significant changes in leadership and internal policies. Female athletes, too, have spoken out against Nike, with high-profile cases from stars like Allyson Felix and Mary Cain shedding light on the company’s questionable treatment of women athletes.

Now, with declining revenues and an upcoming change in leadership as Elliott Hill steps into the CEO role, Nike faces the challenge of repairing not only its financial performance but also its reputation. As industry experts have noted, Nike's actions in this case, and others, point to a broader issue with the company’s corporate culture—a culture that may lack the social responsibility its competitors have embraced.

For small businesses and entrepreneurs, the Lontex vs. Nike case serves as a cautionary tale. Intellectual property is a valuable asset, but defending it can be an uphill battle against companies with significant resources. This case reminds us of the importance of perseverance, but also of the need for reforms in the legal system to protect smaller businesses from being buried by legal expenses in battles that extend far beyond the courtroom.