Technology
The rise of IP disputes in relation to NFTs
Snapshot
- The unauthorised creation and sale of NFTs may give rise to copyright, trademark and other IP infringement claims
- Ownership of an NFT has no impact on the ownership of any intellectual property rights protecting the content of that NFT
- Unless a tech company is the owner of the relevant IP or has permission to use it, then it should not be creating and selling NFTs using that IP
The boom in the sales of non-fungible tokens (NFTs) over the last couple of years has led to a rise in commercial disputes in relation to their ownership and exploitation, particularly based around trademark and copyright infringement claims.
NFTs are digital assets that are typically built on the Ethereum blockchain and are freely tradeable on digital marketplaces. They are often used as evidence of ownership of virtual goods, such as digital art or content, but the specific IP rights that attach to NFTs can vary.
Further Osborne Clarke Insights
Transatlantic litigation
Most of the high-profile IP litigation concerning NFTs has taken place in the US. For example, luxury design house, Hermès, sued Mason Rothschild for trademark infringement for the unauthorised creation or "minting", and sale of $1 million worth of NFTs called MetaBirkins. This was because the MetaBirkins depicted fur-covered versions of the luxury brand's famous Birkin bags.
Similarly, Nike brought a claim against online retailer StockX following its sale of NFTs of limited-edition Nike trainers.
Even US film director Quentin Tarantino found himself embroiled in litigation when he attempted to sell NFTs featuring exclusive scenes from the movie "Pulp Fiction", with Miramax claiming that the minting of NFTs was not included within Tarantino’s limited contractual rights for the film.
Most of these cases have either settled or have yet to reach a conclusion. However, on 20 July 2022, the Court of Rome became the first court in Europe to issue an injunction against the creation and marketing of NFTs that infringed registered trademarks owned by Juventus football club. This case is worth a closer look as it will have implications for the European market for NFTs in future.
The Juventus dispute
Blockeras marketed an NFT-based trading card product under its Coin of Champions brand. These NFTs featured images of famous players and one of them featured Christian Vieri in his Juventus FC kit with Juventus' trademarks clearly visible.
Vieri had permitted the use of his image, but Juventus had not. Consequently, Juventus sued Blockeras for trademark infringement and for breach of Italian unfair-competition laws and sought a preliminary injunction.
The Rome court ordered the preliminary injunction and concluded that the sale of Blockeras' NFTs infringed Juventus’ trademarks as it was likely to create the false impression that there was a connection between the two companies.
The Court of Rome appeared to embrace what has been called the theory of content and certificate separation - that is the idea that the content attached to an NFT is separate from the certificate of ownership provided by the NFT itself. The practical consequence of this is that the court specified that the injunction issued concerned both the digital content, including the player’s image bearing the trademarks, and the NFTs themselves.
Lessons to draw
What have we learned from the Juventus case and other NFT IP disputes so far? There is a common misconception that the minting of an NFT automatically gives its creator and subsequent purchasers rights to the content that has been linked to the NFT. This is not the case. The creator of the NFT may have rights to the content, either because they have created it themselves or have the necessary permissions, but these rights arise through normal IP law principles and are not created through the minting process.
It is becoming clear that it is often easier to rely on trademark rights rather than copyright. This is because in an NFT scenario, an infringer typically uses the trademark in relation to goods (the NFT) whereas it can be more challenging to demonstrate that an infringing copy of a copyright-protected work has been sold. As an NFT typically provides the buyer with a link to a pre-existing digital copy, the sale and subsequent use of an NFT does not necessarily entail a communication of the work to the public, in breach of copyright law.
Finally, although the Juventus decision suggests that brand owners can successfully enforce their trademarks against NFTs, many have already started to expand their trademark protection to ensure that they cover NFTs and other digital goods. While this may bring forward ownership disputes to the registration phase, for many brand owners this will significantly reduce the risk of more expensive claims further down the line.
Authors
Andy Holt, Lead author Associate, UK andy.holt@osborneclarke.com +44 207 105 7604
Gianluigi Marino Partner, Head of Digitalisation, Italy gianluigi.marino@osborneclarke.com +39 02 5413 1769
Robert Guthrie Partner, UK robert.guthrie@osborneclarke.com +44 20 7105 7662