Sneaker Wars Part 9: Nike’s Existential Crisis

Nike Cortez and Onitsuka Tiger Corsair
Nike Cortez and Onitsuka Tiger Corsair

Phil Knight and Bill Bowerman, co-founders of Blue Ribbon Sports (BRS) had thrown down the gauntlet. Despite being in a successful relationship since 1964 with Japanese sports shoe manufacturer, Onitsuka Tiger, and in the middle of an exclusive 3-year agreement to market the increasingly popular Onitsuka Tiger sneakers in the United States, the relationship in early 1973 had disintegrated.

At the end of 1971, BRS produced and sold sneakers under its own brand – Nike, thus challenging the integrity of their agreement with Onitsuka. But it was BRS which fired the first legal shot, filing a suit against the Kobe-based manufacturer, Onitsuka Company. As explained in Sneaker Wars Part 8, Knight and Bowerman believed that Onitsuka had breached their agreement by soliciting other distributors in America before the end of their agreement. Onitsuka then countersued claiming that their trademarks were violated and that they did not solicit other partners in the US until after BRS began marketing Nikes.

According to Kenny Moore in his book, Bowerman and the Men of Oregon, BRS and the leaders of Nike were facing an existential crisis. “If Onitsuka won, BRS would lose the exclusive right to sell the shoes Bowerman had designed. ‘This lawsuit,” Bill said, ‘is win or die.'”

Phil Knight and Bill Bowerman

You can read up on the details of the trial in Moore’s book and various articles on the internet. In the end, a federal judge ruled in Blue Ribbon Sports’ favor, although allowing both companies to market the same shoes in the US, under the condition that BRS had the right to sell them under the trademarked names, including the Cortez, according to this article in The Oregonian.

In the end, Onitsuka Company agreed to pay BRS an out-of-court settlement to end their legal conflict. It took a while to agree to an amount acceptable to both parties, but they finally did. When it came time to sign the agreement and receive payment, Phil Knight and a member of his company’s board, Doug Houser, went to meet the lawyers from Onitsuka company. Houser went on to explain the bizarre interaction that ensued:

The Onitsuka lawyer explained the unorthodox payment method as the result of the difficulty of transferring money out of Japan. He encouraged Knight and Houser to sign some documents.

“And I said, ‘Is that X dollars?'” Houser said.

“And they gulped and said, ‘Well no. It’s illegal to bring that much money out of Japan. And we couldn’t’ bring it all. That’s all you get. But it’s a lot of money and you ought to sign.’ They knew we were desperate and needed money badly.

“But it was grossly unprofessional. Grossly wrong. Morally wrong. Everything about it stunk.

“And Knight said, ‘Eff you. We’re out of here.’

“And we left the conference room and went out into the lobby, punched the elevator button and just like in the movies, just when the elevator opened, the conference room door opened and they hollered, ‘Don’t leave. We’ve got the rest of the money.’

“So we went back into the conference room, they opened a door to an adjoining conference room where there was a second steamer trunk and they said, ‘Now sign the papers.’

After they had officials from BRS’ bankers count the money to assure that their agreed-upon amount was paid in full, Knight signed the papers that brought an end to their legal conflict, and breathed new life into BRS. From that point on, Nike, the goddess of Victory and an emerging brand, began to spread her wings and fly.