How Litigation Helped Propel Nike’s Growth

How Litigation Helped Propel Nike’s Growth

Like so many of us, I own numerous Nike products. I slip on a pair of Nike’s when I go for a run.  I put on a Nike shirt when I go to the gym.  My smartphone even has some Nike apps to help me track my daily activity.

Yet for such an iconic company, I knew very little about its history. Then one day I heard Bill Gates being interviewed and helping promote the book written by Nike’s founder, Phil Knight, called Shoe Dog.

Shoe Dog tells the story of Nike’s rise to prominence from very humble beginnings.  The impetus behind Nike was the MBA master’s thesis that Phil Knight wrote entitled, “Can Japanese Sports Shoes Do to German Sports Shoes What Japanese Cameras Did to German Cameras?”  Shortly after graduating, Phil Knight set out to find out.

Initially Phil Knight’s company, Blue Ribbon, was nothing more than the American distributor for a popular athletic shoe made in Japan, Onitsuka.  However, a dispute arose between Onitsuka and Phil Knight’s Blue Ribbon.  That dispute also served as the impetus behind Phil Knight’s decision to start Nike, a company named after the Greek Goddess of victory.  Phil Knight no longer wanted to distribute someone else’s shoes. He wanted to make his own shoes.  But Nike needed money to start making shoes and to help ensure that Nike would be profitable in the long run.

Phil Knight and his company, Blue Ribbon, sued Onitsuka in Federal Court in Oregon. The basis for the lawsuit was that Phil Knight believed that Onitsuka had breached their agreement.  Phil Knight alleged that Onitsuka’s breach had cost his company thousands of dollars.  That was also vital money needed by Nike to get up and running at a pivotal time in its history.

With the aid of a competent legal team, the case went all the way to trial. Phil Knight and his company prevailed. If they had lost the case then Nike would probably not exist today. But by winning that case, Phil Knight was able to secure much-needed capital to help keep a new and struggling Nike up and running.

But even with the victory, Onitsuka still tried to undercut Phil Knight, his company, and even his lawyers. After the trial, Knight and his legal team went to Onitsuka’s San Francisco office.  They thought they were just going to sign the settlement papers and then get paid the funds Onitsuka was required to pay as a result of that lawsuit.  But Onitsuka’s representatives explained to Knight and his legal team that they could not get all of the money out of Japan.  So they only had some of the money, and not all of it. They urged Knight to accept it and sign certain papers confirming the acceptance of less money.  Knight and his legal team said no and walked out.  But just as they were about to get in the elevator, Onitsuka’s representatives came back and told them they had all the money.  The parties then finalized the paperwork to permit Phil Knight and his company to get paid.

Too often businesses view litigation from a defensive posture.  However, Nike would not be where it is today if it had not run to court to enforce its contractual rights against Onitsuka.  This is a great illustration of a company using litigation to help finance its future.  It also illustrates the importance of having legal counsel every step of the process especially in light of the fact that Onitsuka attempted to con Phil Knight, and his team, into accepting less than what was rightfully owed to them.  A trusted legal advisor should be with you every step of the process, and especially when it is time to secure payment.

I enjoyed reading Shoe Dog by Phil Knight and found that Phil Knight’s experiences regarding business litigation can be applied to today’s litigious society.  Phil Knight “bet his company” on litigation.  The litigation was hard fought and success was not guaranteed.  If he had lost that case then Nike may not even exist today.  My objective is to send you valuable content and I am open to suggestions, and recommendations, on any new and insightful books to read or topics to address.  If you want to share them with me then you can reach me at the office by calling 305-262-4433 or by email.