Like any modern novelty for which no updated legal framework exists, and notably in the intangible realm of technology, the arrival of NFTs in the world of business comes with a wealth of legal challenges, particularly in relation to intellectual property rights and copyright infringements.
What is the relationship between NFTs and trademarks?
Can an NFT cause trademark infringement?
Such questions have come to the foreground in a landmark ruling issued by the Court of Rome on 20 July 2022 (Docket Number 32072/2022).
Specifically, the Court of Rome issued a preliminary injunction to prohibit Blockeras S.r.l. from the creation and distribution of NFTs that utilised registered trademarks owned by Juventus Football Club.
These NFTs figured as part of Blockeras’ recently-launched NFT collection of “Action Cards”, a fantasy-football type NFT game, that included various images of former player Christian Vieri wearing the Juventus kit.
Blockeras had prior obtained Vieri’s authorisation for the use of his image; however, Juventus had not given Blockeras permission to use its registered black-and-white striped trademark, in both Vieri’s and other images. Juventus thus took Blockeras to court for trademark infringement, pointing towards the potential implications such as likelihood of consumers confusion and damage to business reputation.
Blockeras’ principal response to this claim was that Juventus’ registered trademark rights did not cover the downloadable digital goods made and sold by Blockeras.
However, the Italian Court responded affirming that the specific registration of these rights in the context of ‘digital objects’ or ‘digital objects certified by NFTs’ is fundamentally not necessary, since the NFTs constitute registered trademarks under Class 9 of the Nice Classification.
Hence Blockeras was banned from the production, marketing and sale of NFTs that feature images or trademarks of Juventus, and ordered to reimburse a sum of legal fees to the football club.
Why is this case significant?
The significance of the court’s ruling in favour of Juventus is manifold.
Firstly, the ruling sets a historical precedent, being the first time a European court has found an NFT to be infringing IP rights. As far as Europe is concerned therefore, the court’s bracketing of NFTs in Class 9 of the Nice Classification serves as an important reference for companies that seek to protect their trademarks in the new digital era, and reinforces the illegality of exploiting brand images and content without adequate permissions. In turn, the ruling emphasises the need for legal thoroughness; Blockeras only gained the permission of one party, and this short-sightedness came at the price of their prosecution before the court. Businesses that are involved in selling NFTs that feature third-party images must ensure the rigorous clearing of rights, ideally before the ‘minting’ process takes place.
Perhaps the legislative gaps in handling NFTs have a part to play here. Indeed, there remains significant ambiguity regarding the rights, services and goods covered by registered trademarks in a digital context. Indeed, it is worth pointing out that whilst an unprecedented ruling in a European Court, this case is certainly not the first to interrogate NFT trademark infringements. Previous high-profile NFT cases include Hermès’ suing of artist Mason Rothschild before the Southern District of New York for the misappropriation of its BIRKIN trademark, and Quentin Tarantino’s alleged breach of contract and trademark infringement for minting an NFT of the Pulp Fiction script, which resulted in production company Miramax taking him to court. When improperly administered, NFTs therefore hold the potential to jeopardise IP and personal rights, and these cases point towards a muddiness in legal waters, and thus a potential need for more NFT-specific legislation.
Secondly, the Italian Court’s ruling in favour of Juventus F.C. begs subsequent questions in terms of NFT enforcement, namely how will Blockeras remove the NFTs from circulation to respect the Court’s injunction, given their necessary immutable and perpetual nature. There are a few possible ways that this could be done, yet each with their own respective challenges. Subject to the current NFT-holders’ corporation, which may not be guaranteed, the NFT could be transferred back to the owner of the infringed trademark, or alternatively, transferred to a genesis block or ‘zero-address’, which prevents it from being further circulated on the blockchain. The zero-address essentially ‘burns’ the crypto asset, yet is also reliant on the unguaranteed cooperation of current NFT holders. A third possibility is to delete the digital content that is linked to the NFT via the ‘smart contract’. Each block that represents an NFT contains a hyperlink to a data pack with the NFT’s visual representation, and thus, Blockeras could ensure that these visual representations are deleted, thereby rendering the hyperlink in the NFT smart-contract a dead link, leading to nothingness. However, Blockeras lacks the means to prevent the creator from re-uploading the visual content to the NFT at a later point, thereby continuing the trademark infringement.
Ultimately, it has been made clear that the wider legal picture in response to NFTs and the metaverse is evolving, but incomplete, and that legal and regulatory structures, both in a European and worldwide context, are yet to find all the answers to modern technological challenges. This ruling by the Italian Court of Rome nonetheless constitutes a significant step in this juridical evolution, and sets both a historical precedent for Europe, and a clear cautionary message to protect trademark and personal rights from infringement.