Trade mark enforcement actions against infringing NFTs
Juventus F.C. successfully challenges the use of its trade marks in an NFT collection but enforcement issues remain
In a decision publicised at the end of 2022, the Rome Court of First Instance handed down its judgment against Italian-based Blockeras S.R.L., (Blockeras), granting an injunction in favour of Juventus F.C., which mandates the cessation of use of Juventus’ trade marks by Blockeras for commercial purposes.
Background: “The Coin of Champions”
Blockeras operates a blockchain-based fan token called The Coin of Champions, promising holders that they will see their “…purchasing power, increased exponential[ly] from the growth […] thanks to the activity of all [sportspeople] testimonials”. In other words – the popularity (and therefore, value) of the Coin of Champions was expected to increase because of the number of sportspeople endorsing it. The list of those sportspeople, called “Ambassadors”, includes some of Italy’s most beloved footballers like Marco Materazzi and Christian Vieri, as well as players with some international appearances for Squadra Azzurra like Alessandro Diamanti and Brazil’s ex-defender Ricardo Rocha. It is Vieri’s involvement, and in particular the use of his photo in a Juventus kit, which lies in the centre of this dispute.
Alongside the Coin of Champions token, Blockeras also launched an NFT collection of “Action Cards” which were intended to be used by holders to participate in its fantasy team-like “NFT Game”. The NFTs were launched on the Binance NFT platform and depicted at least a number of the Ambassadors, depicted as playing for different teams. For example, we understand that there were at least four separate variations of NFTs depicting Vieri, shown below.
While it is understood that Vieri authorised the use of his image in the Coin of Champions project and the NFTs in particular, Juventus, whose shirt he was wearing, did not give authorisation for the use of its registered figurative trade mark depicting a black and white vertical striped shirt with two stars on the chest. The club brought proceedings against Blockeras, seeking an injunction against the use of the marks for commercial purposes.
The Rome Court’s judgment
Blockeras defended Juventus’ claim by asserting that, amongst other things, the trade mark in question was not registered in relation to “downloadable virtual goods”.
The Rome Court was unimpressed with the argument, noting that the registration of the figurative trade mark expressly indicated that it also concerned products not included in the Nice Classification (an international trade mark classification of goods and services established by the Nice Agreement of 1957), which are inherent in digital downloadables. Also relevant was the fact that Juventus itself had entered the fan token market (NB. as far back as 2018). Therefore, granting the injunction, the Court held that:
“…The creation and marketing of the cards in question involves a counterfeiting of the brands in question, thus realizing the risk of confusion, […] such as to be able to mislead the public as to the existence of a particular trade or business link group between [Blockeras] and Juventus”.
Enforcement issues in NFT injunctions
As readers may be aware, NFTs utilise various blockchains, most often the Ethereum one for its stability as a platform for “smart contracts”. As immutability is one of the fundamental features of blockchain technology, simply “deleting” an NFT is impossible in the strict sense of the word. What are the legal workarounds for this problem, where entities need to comply with a Court injunction and remove an NFT from circulation?
Option 1: Send back to the trade mark owner
The first possible solution requires the current holder of the NFT to transfer it to the owner of the infringed mark. However, this approach requires the cooperation of the current owner, who will rarely be the person against whom the injunction was made (who may also have paid for that NFT), as well as the cooperation of the original trade mark owner. These two dependencies on consent can pose real challenges with the enforcement of an injunction, even where the defendant wishes to comply with it. In other words, applying a hypothetical: if Blockeras wanted to go down this route, it would have to attempt to contact the owners of all NFTs containing Vieri’s image in a Juventus shirt and ask them to transfer those NFTs back. Assuming such contact was possible, and the current holders were willing to cooperate, this approach would require Juventus to create an account in the relevant NFT marketplace, to receive the NFTs, which they might be unwilling to do.
Option 2: Send to a “genesis” (dead-end) address
The “genesis” block is a special block within a blockchain which is hosted at a zero-address (literally, an address full of zeros), making it impossible for any transaction out of the block to be signed with a private key due to current limitations of cryptography. Outgoing transactions from genesis blocks are therefore practically impossible, whilst nothing prevents incoming ones. Those blocks (i.e. blockchain locations) are used to “burn” NFTs or other crypto assets, by limiting their further circulation on the blockchain. This is the closest practical example of “removing” something from a blockchain, although, strictly speaking all crypto assets in a genesis block are still very much part of the chain. In the present case, using this hypothetical approach would allow Blockeras to circumvent the need to obtain Juventus’ cooperation to receive the infringing NFTs but would not solve the first, and arguably larger, problem of having to secure the cooperation of the current holders of those NFTs.
Option 3: Delete the image/video file linked to the NFT
The “smart contract” incorporated into each block representing an NFT will typically contain a hyperlink to a data package, hosted on a cloud, a (private) server or a P2P file storage network, which contacts the visual representation of the NFT – an image, a video or other medium. Depending on the means of hosting of the file, a party seeking to comply with an injunction may be able to seek deletion of it from its location, making the visual representation of the NFT impossible as the smart contact will be leading to a “dead” link.
This approach would be possible where a creator has hosted the image or video on its own servers or on a cloud, but nearly impossible in a P2P network. A major drawback in practice is that there is nothing preventing the creator from restoring the file at the original location in the future, therefore reversing the initial “de-coupling” and continuing the infringement.
Whilst the Courts of England and Wales have not yet had to decide on any material matters involving intellectual property in the context of NFTs, one can arguably expect from them similar reasoning to that of the Rome Court. Moreover, the European Union Intellectual Property Office (EUIPO) has already provided guidance that NFTs fall within Class 9 of the Nice Classification, therefore limiting (as far as the EU is concerned) the scope for any arguments within the narrative pursued by Blockeras.
As evident from the discussion above, the enforcement of injunctions against the creators of infringing NFTs is not always an easy task. In the present case, we were able to find one example of an infringing NFT which still appears on a blockchain, sitting with its original purchaser (NB. at the price of US$50).