Under Armour Sues Nike: Is it Worth it?
Feb 22nd 2013 9:04PM
Updated Feb 23rd 2013 1:00PM
If you ever had any doubt that mid-cap athletic apparel specialist Under Armour was at war with Nike , consider this your proof.
According to an AP report Friday afternoon, Under Armour has filed a trademark infringement suit against the industry behemoth, claiming that Nike has tried to create confusion by illegally using variations of Under Armour's "I will" catchphrase.
To be sure, Nike recently launched advertising campaigns which use phrases including "I will finish what I started," and "I will protect my home court."
Sound familiar? That's because both statements are eerily similar to Under Armour's well-known slogan which reads, "Protect this house. I will." In fact, according to the complaint, Under Armour has been using the "I will" phrase on its products, and in its marketing campaigns, since 1998 -- long before the company was a visible threat to Nike's empire.
That's why Under Armour is not only asking for a permanent injunction to prevent Nike from using the trademarked words, but is also seeking to recoup damages. It is asking Nike to "destroy all products, packaging, and signs that use the tag line [and] pay Under Armour all profits arising from the use of the phrase."
Is it worth it?
But at a tenth of the size of Nike, is Under Armour in over its head? Nike's $3.5 billion in cash at the end of last quarter represents more than 70% of Under Armour's entire market capitalization, so we know Nike's capable of buying plenty of time to defend itself.
Heck, Nike might even see this as a perfect way to slow Under Armour's progress in encroaching on its turf. After all, in its most recent quarter, Under Armour proved that it's finally gaining traction overseas, as it saw international revenue increase 30% year over year. In addition, Under Armour's fourth-quarter footwear revenues gained 43% from the year-ago period, to $45 million. While that's still barely a sliver of the $3.3 billion Nike pulled in from footwear last quarter alone, every incredible growth story has to start somewhere.
Of course, Under Armour's never been easily intimidated, and has remained steady in its resolve to challenge the world's biggest names in athletic wear. Speaking at an investing conference in 2011, founding CEO Kevin Plank went so far as to call Nike out by saying:
Basketball is a great example where one company dominates 90 plus percent of the market. And what I can commit to you is that I'm not going to make predictions on exactly how much market share, but I would much rather be sitting where we are because it's coming. We will take market share. It's a freight train. And I believe that the opportunity we have is great.
In the end, regardless of the outcome of this lawsuit, investors have always known that Nike wouldn't give up its empire without a fight.
Today's news, however, shows that Under Armour is more than willing to take it outside.
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The article Under Armour Sues Nike: Is it Worth it? originally appeared on Fool.com.Fool contributor Steve Symington owns shares of Under Armour. The Motley Fool recommends Nike and Under Armour. The Motley Fool owns shares of Nike and Under Armour. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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