Fair use is a copyright doctrine. They're not suing over copyright, but trademark infringement under the Lanham Act. And the test there is whether confusion is likely as to the origin of the product. The fact is not only was it likely, it actually occurred, with many people condemning Nike despite their immediate denial of any involvement in the project.
There are probably better things to criticize Nike for, like their use of Third World slave labor to produce their overpriced products, but I think they have pretty solid trademark dilution and trademark disparagement claims.