Bracing for life without 'Air' Competition: The company's 17-year-old patents on air soles will end in 1997.


BEAVERTON, Ore. -- "We don't sell dreams, we sell shoes," goes the latest marketing slogan from Nike Inc.

How many? Thirty-six percent of the fragmented athletic shoe market in 1995. More shoes than any of its competitors since 1987.

At the core of Nike's success is Air, a line of shoes worshiped as a fashion accessory and admired for its high-tech, gas-inflated soles.

But Nike's "Reign of Air" is in doubt. And the threat comes from the unlikeliest of places: the U.S. Patent Office.

After 17 years, Nike will soon relinquish its rights to two "Air" patents. When the last of the nonrenewable patents expires September 1997, Nike's rivals are free to develop their own lines of atmospheric shoes.

Nobody can be sure which competitors, if any, will enter the Air Race. Some say brand-name, shoe manufacturers may be the ones to rush out with air models.

"Why not?" asks Sol Schwartz, showroom manager at Holabird Sports, a Baltimore sporting-goods company that is one of the nation's largest mail-order retailers of athletic shoes. "Everyone knows Air makes Nike special."

Others predict a glut of Air imitators in the bargain stores. As the thinking goes, such outlets would be havens for consumers hungry for shoes that look like Nike, but cost a fraction of the price.

"You'll see a lot of knock-offs," predicts Robert Liewald, USA general manager at Fila, a competitor whose U.S. operations are based in Hunt Valley. "But among [major] brands, nobody is trying to get where Nike is -- they'll be someplace else when you get there."

Nike is reluctant to speculate. Company President Tom Clarke deflects such questions, saying he doesn't know what other manufacturers are planning. But for the record, Clarke adds, "I think a smart competitor wouldn't do it."

"It's going to be very difficult for other companies to come in without more or less conceding that Nike was right all along."

Making footwear history

What's beyond dispute is Nike's leading role in footwear history. In little more than 20 years, the Oregon-based behemoth has transformed simple sneakers into little technology machines, complete with waffle soles and air cushions.

Even Nike names sound like machinery straight from the launch pad at Mission Control: Air Skylon Triax, Air Vapor Trainer Mid, Air Snak, to name a few.

That's a far cry from when a sneaker was exactly that: a sneaker. Names were pronounceable: "Chuck Taylors" or "Jack Purcells." Shoe tops were canvas. Colors were black, white and, for the extremely daring, fire-engine red.

Sneakers were for running and jumping. Mostly, they were for children. Price? $20, tops.

Today, athletic shoes are designed for skate boarding, hiking, cross training -- every endeavor including showing off. And each pair makes a fashion statement.

More than most brands, Nikes are pop art for the feet. They come in pastels, neons, stripes, solids. One eye-catching basketball model features huge air soles and -- just so consumers get the message -- the word "air" in letters larger than the average shoe horn.

Prices range as high as $140 a pair, but that's a pittance when the goal is to look cool.

And make no mistake: Nike is cool.

"Through their marketing, Nike has captured the thing that really plays well in America: the cut-loose, machismo image," says Doug Holt, assistant professor of marketing at Penn State University.

And, Holt points out, Nike is one of several shoe companies wrapping itself in the deeds of athletes such as Michael Jordan.

"Today's athletes are religious totems," says Holt, who conducts cultural and sociological research on consumption. "They're physically able. They're worshiped world over. When you put on the shoes Michael Jordan wears, you think, 'Maybe I'll get contaminated by a little bit of the magic.' "

Nike's unique system

If star worship works to Nike's advantage, so has the air sole. It's a unique system of gas-filled pockets and channels that minimizes jarring hits when shoe meets court or pavement.

Nike claims its cushioning system is the best, superior to alternatives, including Reebok's Hexalite, Brooks' Hydroflow, Etonic's Stable Air and Fila's 2-A.

Air may be unmatched in another critical respect. It can be explained.

"It's such a simple engineering concept, it's hard to beat," says Clarke, the Nike president, who is a former track coach with a doctorate in sports related biomechanics. "Everybody understands an air mattress or air in tires."

"It's so positive," says Paul Heffernan, a vice president at New Balance. " 'Light as air, fresh as air, like walking on air.' "

Dating back a decade, the company's most ambitious ad campaigns have been tailored to sell Air. Through the years, the company has pushed its major sub-brand with everything from a hit song to superstar endorsements. Ten years ago, it licensed the music and lyrics to the Beatles' "Revolution" to launch the shoe industry's first national TV campaign.

For long-term pitches, nothing matches the marriage of Air and Jordan, the Chicago Bulls star. Jordan was the first Nike celebrity to have a shoe co-named for him, "Air Jordan." Now, Nike's stable of celebrity spokesmen is deeper than most all-star squads, including a movie director, Spike Lee; one of baseball's best players, Ken Griffey Jr.; and a sometimes third baseman, Cal Ripken Jr.

'Air' is born

When Air had its first tryout in an athletic shoe 19 years ago, Nike had little idea what lay ahead.

Now, the Air shoe is the engine that drives a company with revenues in the billions and customers from Catonsville to Calcutta. Nowhere are the fruits of Nike's success more evident than at its opulent headquarters near Portland. The complex has restaurants, manicured lawns and a Japanese garden.

Each building bears the name of an athlete with ties to the company. A visitor might stroll from offices named for Steve Prefontaine and John McEnroe, or detour to the Joe Paterno Day Care Center.

The lavish setting is far removed from Nike's beginnings.

The company began in the early '60s, founded by Phil Knight and Bill Bowerman, Knight's former track coach at the University of Oregon. They ran a small, profitable company for a decade, slowly gaining on industry leaders, Adidas and Puma.

A turning point came in 1977, when Frank Rudy, an unemployed aerospace engineer, pitched an invention to Knight: the air sole.

Knight agreed to try a pair in his own running shoes. He liked the concept, telling the inventor, "I feel something I've never felt before -- we have a winner."

At the start, the soles had problems. When the didn't explode, they deflated. The air bags were too stiff, then not stiff enough.

Nike's first air-sole shoe, Tailwind, went on the market in 1978. But it wasn't until eight years later -- with sales in a slump and officials stung by an aerobics craze they hadn't foreseen -- that Nike figured out how to sell Air.

Needing something new, it reinvented Air.

In a stroke of inspiration, the company introduced air bags that peeked through the soles. For the first time, consumers could look at the see-through marshmallows. They loved it.

From a gimmick limited to a few models, Nike expanded Air to 50. From 1986 to 1993, Nike sold more than $2 billion in Air shoes. Now Nike remains No. 1 and continues to gobble market share. From 20 percent nine years ago, Nike's market share in the United States topped 36 percent in 1995. Reebok was a distant runner-up, at 20 percent.

"We're enjoying double-digit growth, says Heffernan of New Balance, "but Nike is in a league of its own."

Protection of patents

After nearly 17 years, Rudy's air-sole ideas remain among the most valuable in the business.

Likewise, patents stemming from the concepts are highly prized. Even today, they exclude competitors from selling shoes that borrow even slightly from Nike Air.

"Our lawyers have told me the strength of the two [air] patents comes along every 50 to 100 years," says Tom McGuirk, Nike director of Air Technologies. "If you're talking about chairs, the patents we've had prevented people from making chairs."

Not that some manufacturers haven't tried. In an industry in which lawsuits are filed at the drop of a shoestring, Air has been at the center of much litigation. Over the years, Nike has sued rivals Etonic and L.A. Gear, alleging infringement of protected technology. The companies denied the allegations.

Rudy's discoveries -- licensed to Nike -- are covered by so-called "utility patents," issued when inventors come up with a new composition or other improvement.

Once issued, patents are the property of the owner, though the life span of patents has changed since Rudy got his 16 years ago. Now, inventors receive 20 years from the date of application.

Because patents can't be renewed, expiration attracts a lot of attention from rivals. Pharmaceutical companies follow the dates closely, to time release of generic drugs to the end of patents protecting brand-name equivalents.

Whether they pertain to blood-pressure pills or sneaker soles, patent applications ultimately are filed at the U.S. Patent Office in Washington. Rudy's life work is cataloged there, including his two original air-sole patents; U.S. Patent 4,183,156, "basic air sole," which expires on January 15; U.S. Patent 4,219,945, "foam encapsulation," on September 2.

Rudy's inventions are explained over dozens of pages, in notes and diagrams incomprehensible to the nonpatent lawyer.

Thinking ahead

With a number of moves, Nike officials say, they long ago insulated themselves from harm that could have occurred when the patents expired.

They include Nike's purchase of Tetra Plastics, the world's leading manufacturer of air bags suitable for air soles. Nike's deal insures that Tetra Plastics only would make air bags for its shoes.

Eyeing the expiration date, Nike doubled its budget for research and design, says Clarke, the company president.

And Clarke points to numerous new patents obtained by Nike, which he says will give it the edge on air ideas into the next century. He mentions the latest evolution, "Air Zoom." The soles for the new Nike line are superior, he says, because they can be built thinly, and under higher pressure, innovations that improve the way Nike shoes look and perform.

"My number one point is we have moved far beyond what the [original] patents cover," he says. "To put out a shoe that looks 10 years old seems like a mistake. I wouldn't imagine our serious competitors would put themselves in that position."

At rival companies, executives insist they have little interest in latching on to Air. They extol the virtues of their shoes, as they debunk Nike claims that its air cushioning system is unmatched.

"There are lots of technologies out there," says Liewald of Fila. "Depending on what you're looking for -- cushioning, stability, energy return -- there are things out there better than air."

A Reebok vice president, Terry Tracey, is pushing a secret, soon-to-be released cushioning system. He says he can't speak about it yet, but does hint at what sounds suspiciously like next year's Reebok slogan. "This will make Air look stale," says Tracey.

Even so, most Nike rivals acknowledge this about Air: In the recorded history of athletic footwear, there's never been a slicker idea for selling shoes.

"Air is self-explanatory," says Schwartz, the showroom manager at Holabird Sports.

Says Heffernan of New Balance: "From a marketing standpoint, it's tough to beat Air. Nike handcuffed us with that. They took a good word out of dictionary."

Pub Date: 8/19/96

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