Sportswear Company Outplays Nike, Loses Anyway

It's a classic underdog tale—an upstart company devises a brilliant product plan, employs pluck and good fortune to make their dream a reality, and takes on the big boys....and then is summarily crushed by a large, multinational corporation.

Three years ago, a small company called SportsFuzion saw an opportunity. They convinced the Basketball of Hall of Fame to sell them "exclusive worldwide rights to the Hall of Fame's trade names, logos, trademarks, designs, and photos for use in sportswear." At the time, those rights didn't seem that valuable, because who buys a hat that says "Hall of Fame" on it? But SportsFuzion, was thinking ahead because they knew that in three years Michael Jordan would be in the Hall of Fame, and people will buy anything even remotely associated with Michael Jordan.

So, they took their idea—and their licensing rights—to Nike and made their pitch. And Nike passed. Michael Jordan and the Hall of Fame isn't really going to work for Brand Jordan. Thanks, but no thanks.

Then two months later, the Hall of Fame suddenly decides they don't want to be in business with SportsFuzion. They want to renegotiate their contract. Oh, and look at that ... Nike is now selling their own Jordan Hall of Fame gear! Yes, in a shocking turn of events, one of the richest companies in the world had gone behind the back of a smaller, weaker competitor and cut them out of their biggest deal ever. That almost never happens.

Does SportsFuzion have a case? Does it matter? Because this is not a inspiring sports movie, I'm going to say it doesn't. The money they could have made in a fair deal would have been lost in Nike's couch cushions, but you don't become the most powerful sports company on Earth by sharing. So yeah, sorry, SportsFuzion. That's what you get for thinking too much.

Full press release on the lawsuit below:

NIKE and the NBA Basketball Hall of Fame Sued for Fraud and Other Claims by SportsFuzion Over Michael Jordan Products

Boston, MA, June 24, 2009 – SportsFuzion, Inc., a sportswear company and the exclusive licensee of the Basketball Hall of Fame's sportswear has filed a lawsuit in Norfolk Superior Court in Massachusetts against NIKE, Inc. (NYSE: NKE) and the NBA Naismith Memorial Basketball Hall of Fame alleging breach of contract, tortious interference with contract, fraud, and other counts for general and punitive damages. The lawsuit comes after NIKE and the Hall of Fame conspired to eliminate SportsFuzion by manufacturing, marketing, and selling sportswear related to Michael Jordan's upcoming Hall of Fame induction. Since 2006, SportsFuzion has been the owner of the exclusive worldwide rights to the Hall of Fame's trade names, logos, trademarks, designs, and photos for use in sportswear.

Leveraging Michael Jordan's highly anticipated Hall of Fame induction, NIKE will release its Air Jordan Hall of Fame (HOF) Collection into the market this summer. NIKE recently launched a major campaign to promote these products. This campaign includes the website www.getyourbasketballon.com featuring several videos of the fictitious character – Leroy Smith – who supposedly inspired Michael Jordan to greatness. It is estimated that NIKE could sell over $100 million of Michael Jordan Hall of Fame products worldwide.

Beginning in 2005, legal teams for SportsFuzion and the Hall of Fame spent nearly a year negotiating the exclusive worldwide licensing agreement. More than three years ago, SportsFuzion created the concept and a detailed marketing plan around a product line for Michael Jordan's induction into the Hall of Fame. "In 2005, I knew that Michael Jordan's induction would be the biggest event in the Hall of Fame's history and, like his impact on the NBA and the game of basketball, this product opportunity was enormous," said Andrew Mirken, president and co-founder of SportsFuzion.

"SportsFuzion was built around my love and passion for basketball and my admiration for Michael Jordan," said Mirken, who has coached high school boys' basketball for almost 20 years. "Having the opportunity to work with Michael Jordan and all of the great athletes in the Hall of Fame was the dream of my lifetime. Having NIKE and the Hall of Fame go behind our backs to cut us out of the deal has become my worst nightmare."

After entering into the exclusive worldwide license agreement with SportsFuzion, senior level executives at the NBA helped arrange numerous meetings for SportsFuzion with Adidas/Reebok, Mitchell and Ness, and others in hopes of product partnerships being formed. Beginning in the fall of 2006, SportsFuzion met multiple times with top executives from Brand Jordan. After being provided with a copy of SportsFuzion's agreement with the Hall of Fame and after being educated about the opportunity, NIKE turned SportsFuzion down. Among the NIKE executives that considered SportsFuzion's proposal were Howard White, VP Sports Marketing Brand Jordan, who, on November 21, 2007 wrote SportsFuzion saying, "I just wanted to let you know that we've looked at the opportunity with the Hall of Fame from all angles. Our marketing people have looked at it along with our product team. At this time the team feels that it's not an opportunity that we can make happen. We really appreciate the time and consideration that you've given us here in Brand Jordan with Michael going into the Hall of Fame but we've explored every opportunity and at this current time there isn't a fit."

Two months later in January 2008, the Hall of Fame contacted SportsFuzion to "renegotiate" its contract. "It became clear to us that NIKE wanted to do a deal directly with the Hall of Fame and that meant the Hall of Fame had to get out of their agreement with us," said Steve Barlow, co-founder, lead investor and SportsFuzion Board Director. "It was a complete surprise when the Hall of Fame told us they did not understand the totality of the rights they granted our company and that our agreement was not good for the Hall of Fame. Nike's recent Michael Jordan Hall of Fame launch was a total shock to us because we had financed and built the company around this exclusive licensing agreement, and always operated in good faith. We sensed something unethical was in the works – and unfortunately we were right."

SportsFuzion, Inc. is a Massachusetts-based sportswear company that owns the exclusive worldwide rights to the Basketball Hall of Fame's trade names, logos, trademarks, designs, and photos for use in sportswear. SportsFuzion is represented in this matter by Fish & Richardson, the largest intellectual property law firm in the world.

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