Nike Inc. said Thursday it was dropping its breach of contract lawsuit against Olympic running prospect Boris Berian, a case which has sparked tensions within the running world.

The sportswear maker said it wanted to "eliminate [the] distraction" of the lawsuit on the eve of the Olympic Trials, where Mr. Berian is a favorite to earn a berth to the Summer Games in Rio de Janeiro.

A Nike spokesman confirmed that Mr. Berian is no longer a Nike athlete.

Merhawi Keflezighi, an agent for Mr. Berian, said he and his client were "cautiously optimistic" the dispute is over.

Last month, the sportswear giant sued Mr. Berian, the world indoor 800-meter champion, alleging the 23-year-old violated his Nike endorsement deal when he agreed to a sponsorship with New Balance Athletics Inc. and declined what Nike described as a matching offer.

Nike had brought the lawsuit just weeks ahead of the trials to determine the U.S. squad for the Summer Games. A judge was expected to rule next week on Nike's request to bar Mr. Berian from competing in any non-Nike gear at the trials, which begin July 1.

"Nike legitimately exercised its right to match the New Balance offer and believe we would prove this at trial," the company said. "As a running company, we also recognize that this is a significant time for Boris and in light of the judge's decision to delay the ruling until June 28th, the eve of the Olympic Trials, we decided to eliminate this distraction for Boris."

The Berian case had become a point of tension within the sportswear industry. In particular dispute was the issue of so-called reduction clauses in endorsement contracts. These clauses give sponsors the option to reduce what they pay elite track and field athletes if a runner doesn't meet certain competitive standards.

A three-year $405,000 contract offered to Mr. Berian by New Balance in January didn't include reduction clauses; an offer from Nike matched the base pay but included several reductions, according to copies of the contracts filed in U.S. District Court in Portland, Ore.

Several Nike rivals, including Brooks Running Co., Oiselle Running Inc., and New Balance—which wasn't a party to the lawsuit—filed depositions in support of Mr. Berian, saying reduction clauses aren't standard in the industry.

One irony in the dispute is that if Mr. Berian makes the Olympic squad, he will be wearing Nike's swoosh. Nike is the official sponsor of the U.S. Track & Field team and is supplying the apparel that U.S. runners will wear in Rio.

Write to Sara Germano at sara.germano@wsj.com

(END) Dow Jones Newswires

June 23, 2016 23:25 ET (03:25 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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