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The Bad Boys of Business: Nike


A "just do it" approach on the field and in the boardroom.

Just do it.

With one of the most recognizable slogans in the history of retail, marketing, and, indeed, the world, Nike (NKE) is instantly familiar worldwide. Couple that with the sleek and simple "swoosh," and you have something very close to brand immortality.

Nike's footwear lines the racks of shoe stores, department stores, and even high-fashion retailers. Its headbands are worn by the greatest athletes in the world; its jerseys by professional and college sports teams alike.

But an empire isn't built without a little bloodshed.

Along the way, Nike has found itself on the wrong side of a number of lawsuits, and has learned the hard way that a "just do it" attitude in business can land you in scalding hot water. Among its high-profile issues: extensive labor violations, copyright infringement, licensing violations, racial discrimination… The list goes on.

Nike didn't respond to requests for comment on the incidents.

In 1998, San Francisco activist Marc Kasky filed a complaint against Nike alleging that the company made false claims about the treatment of workers at some of its overseas factories (the company had stated in a public relations campaign that conditions were compliant with US working standards). Independent studies revealed major flaws in employee safety and health, along with violations of minimum wage and overtime compensation policies.

The case got the attention of the California Supreme Court, which decided the statements made by Nike were "commercial speech" and could fall into the category of false advertising. The suit became a First Amendment issue when Nike appealed to the US Supreme Court, saying its statements were protected under free speech. But when the high court dismissed the case, saying it should never have reached that level, the California ruling stood. In 2003, Nike settled for a paltry $1.5 million. Human rights activists are undoubtedly still reeling.

Just do it.

Back in 2003, the company's Niketown store in Chicago came under scrutiny of the law when African American workers filed complaints of racial slurs used by managers. The black workers claimed the managers would have security unfairly monitor people because they felt a person's race made them more likely candidates for theft. The workers had also been segregated into cashier and stockroom positions after being looked over for promotions. Shockingly enough, African American Nike customers in this location were also subject to intense scrutiny. In 2007, the two sides agreed to a $7.6 million settlement.

As Nike says "just do it" to unsavory and sometimes hostile working conditions, it seems to have the same philosophy regarding patents and copyrights.

Back in 2007, Nike collaborated with Apple (AAPL) to create the Nike+iPod Sports Kit, which synced sneakers to iPods and recorded user's speed and distance while running. Sounds good, except for the alleged violations of four US patents held by Utah-based Leaper Footwear. The company claimed Nike began working on this technology in 2006, disregarding the patent which was acquired in 1998.

Just do it.

Prior to Michael Jordan's 2009 induction into the Basketball Hall of Fame, Nike was set to release, in compliance with the Hall, sportswear based on this event. This caught the attention of a Massachusetts company called SportsFuzion, which owned the rights to the Hall of Fame's trade names, logos, trademarks, designs, and photos for use in sportswear. The company had spent significant time negotiating with the Hall on the terms of the deal. Nike and the Hall of Fame went behind its back in marketing and manufacturing this special product line.

Just do it.

Then, in a high-profile suit filed earlier this year, Nike was sued by rocker Eddie Van Halen over the design of one of its Dunk Low sneakers. Halen claimed the design mimicked the copyright-protected pattern of his famed "Frankenstein" guitar, one that has been owned by the musician since 2001. Not only did the guitar feature an eerily similar red, black, and white pattern, but the band had previously released a line of sneakers featuring the same design. Nike has stated it doesn't believe the lawsuit has merit. You decide:

Just do it.

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No positions in stocks mentioned.

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