Trademark Infringement by NFTs: International Scenario

5th July, 2024 - 6:55 am Categories: Intellectual Property Trademark 0 Comments

BACKGROUND AND CONTEXT

An analysis of the opportunities offered by the use of NFTs (“Non-fungible Tokens”) illustrates that such use may be considered a trademark infringement. This was recently clarified by the IP Chamber of the Court of Rome (Tribunale di Roma, decision n. 37165/2022 dell’11 luglio 2022). 32072/2022).[i] An analysis of the opportunities offered by the use of NFTs (“Non-fungible Tokens”) illustrates that such use may be considered a trademark infringement. This was recently clarified by the IP Chamber of the Court of Rome (Tribunale di Roma, decision n. 37165/2022 dell’11 luglio 2022). 32072/2022).[ii]

Specifically on a European level, it remains the first time that a legal decision had been made regarding trademark infringement through NFTs. Currently, Indian courts have not been able to engage in its discussion. Yet, because of NFTs increasing significance, it will not takes them long before they do. With the backdrop of the latest judgment passed by The Court of Rome, it is now necessary to elucidate how NFTs may be deemed under the purview of Indian trademark law.

TRADEMARK INFRINGEMENT BY NFTs: INTERNATIONAL SCENARIO

The UK

So far the regulation for NFTs is limited to almost nil in the UK however they are legitimate not like India which does not have a single legislation passed by the government of India that directly talks about NFTs.[iii] However, there are certain rules and regulations which state that cryptocurrency is prohibited in India, and also it is unlawful to mine or create, to possess or to deal with cryptocurrencies within the territory of India.[iv]

Due to this, there has been an ongoing investigation begun by the UK Parliament in November 2022 on the functioning, dangers, and opportunities of Non-Fungible Tokens (NFTs) and the encompassing blockchain procedure which is still proceeding.[v]

[Image Sources: Shutterstock]

The US

Disquietingly, in the United States, for instance, like in the United Kingdom, there are no explicit laws that oversee NFTs notwithstanding, some types of NFTs as cryptocurrencies may be governed by the federal laws of the country.[vi] NFTs may fall under SEC’s ambit somewhere Unique under US securities law, for instance, some types of NFT may be classified as security. In this case, they are under regulation of state and federal securities laws. This particular implies that each NFT must be evaluated based on its unique attributes and qualities to some degree. Another requirement that must meet for an NFT to qualify as security is that the buyer must likely to receive a reasonable profit. So, this is a rather intricate issue that needs to be backed up by awareness of certain rules and regulations of the SEC.[vii]

Italy – Rome’s Tribunal Verdict

One Real-life example of Trademark infringement by NFTs is Juveventus FC. Juventus, football club, has the word trademarks “JUVE” and JUVENTUS and a device trademark, which is a black and white striped T-shirt form football team wear with two stars on the chest. The trademarks primarily became popular due to extensive merchandising and selling across the different lines and categories such as apparels, toys and games, accessories etc., in conventional ways as well as through internet.[viii] The project “Coin of Champions” was founded in 2021 by a tech-start-up and most of the former and current athletes supported it because it is an online football manager game that is built on NFT player cards. There was a collection of playing cards in the form of NFTs which were on sale on a given NFT-platform between the dates 7 April 2022 and 4 May 2022. Of these, sixty-eight of the NFT playing cards sought to reproduce the trademarks in question. They display a message that features a photo of the ex-footballer Christian Vieri wearing the Juventus soccer jersey alongside the details of the club. Juventus had filed a plaintiff application concerning the use arguing that they had not give consent. These playing cards were sold as NFT and they fetched over $35 000 in addition.

The Court of Rome gave the following verdict, therefore supporting the case that trademarks could be infringed through NFTs in principle. Thus, based on the use of the NFT playing cards for commercial purposes without the consent of Juventus, the court identified the trademark infringement as well as unfair competition since Juventus had the right over the trademarks and they were unfair for exploiting the related advantages (Juventus was also involved in the sector at issue by selling merchandising products).[ix]

In relation to the overall trademark infringement argument the court went on to say further argument the court stated that the consent of the player depicted on the playing cards was not sufficient to permit all use of the trademarks in relation to the service. Even the player’s consent can license only the image rights of the player and not the proprietary rights of Juventus. The commercial of use of the NFTs also had had to seek the permission of Juventus as the trademark owner.

Another issue that the Court has rightly and adequately addressed is the fact that the Juventus trademarks were well-known trademarks since the Court felt that Juventus was the most successful Italian football team with many fans in Italy and other nations. That is entirely understandable because Piko and Minsk News are described in Mr. Ali’s application as “well-known trademarks” and this gives them a very wide sphere of protection. The Court also points out that nonetheless the ‘Juventus’ trademarks was registered in Class 9 of the Nice Classification for ‘digital downloadable publications’. Thus, there was an overlap in the first place in regards to the subject goods. The court also focused on the fact that protection of a trademark, including in the context of class 9, also covered such goods that could not be indicated in the Nice Classification as the ones related to the listed items but rather are the components of such items. “Class 9 thus also included downloadable digital files authenticated by NFTs.”[x] Court of Rome also makes a clear distinction between digital content which reproduces a trademark and the digital certificate as, indeed, a distinct legal item. Each of them, the material on the homepage of the digital content and the digital certificate was claimed to be a trademark infringement in the case under consideration. The Court held that NFTs had their own legal personality or identity and that they must be regarded as a separate object for legal classification.

 The EU

Court of Rome also makes a clear distinction between digital content which reproduces a trademark and the digital certificate as, indeed, a distinct legal item. Each of them, the material on the homepage of the digital content and the digital certificate was claimed to be a trademark infringement in the case under consideration. The Court held that NFTs had their own legal personality or identity and that they must be regarded as a separate object for legal classification.

A leaked draft of the EU’s proposal states that NFT platforms are not covered in the current definition of crypto asset service providers under the MiCA Regulation “to the extent they do not provide services in crypto-assets that are fungible and non-unique”.

The proposal adds: “In order to close this gap and mitigate associated money laundering and terrorist financing risks, NFT platforms should therefore be included in the horizontal AML/CFT framework as a separate category of obliged entities.”

The representatives of the EU have stated that they will reconsider the policy on NFTs following the exclusion of NFTs from the MiCA regulation. It has said that the European Commission will, ‘within 18 months, provide a wider reflection and a initiative of a new regulation to establish a framework on NFTs and respond to the new risks of that new market.’

However, there remains the potential for the amendment to still be voted down on March 28; nonetheless, the EU seems quite committed to guarantee that its regulation shall encompass all elements of the digital asset. That will just be followed by a vote whether we agree or disagree with the whole content of the text. If those votes are in favour of the changes then that will mark the start of the new epoch of NFT platform operators and issuers.[xi]

Australia

“Though the Australian government has recently announced proposals that would bring cryptocurrencies into the scope of regulation, NFTs, or digital assets are generally not prescriptively regulated in Australia.”[xii]

Author: Kaustubh Kumar, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

REFERENCES

[i] Tribunale ordinario di Roma, Diciassettesima sezione imprese civile, 19 Luglio 2022, RG n. 32072/2022.

[ii] Giulia Panigazzi and Margherita Barié, Court of Rome sides with Juventus in first European decision on use of trademarks in NFTs, World Trademark Review (Nov. 30, 2022), https://www.worldtrademarkreview.com/article/court-of-rome-sides-juventus-in-first-european-decision-use-of-trademarks-in-nfts.

[iii] Non-fungible Token (NFT) Regulation in the UK, Gherson (Apr. 05, 2022), https://www.gherson.com/blog/non-fungible-token-nft-regulation-uk/.

[iv] Non-fungible tokens (NFTs) and the blockchain, UK Parliament (Apr. 18, 2023), https://committees.parliament.uk/work/7038/nonfungible-tokens-nfts-and-the-blockchain/.

[v] Id.

[vi] The regulatory considerations of NFTs in the United States, Coin Telegraph, https://cointelegraph.com/learn/the-regulatory-considerations-of-nfts-in-the-united-states (last visited May 04, 2023).

[vii] Reeds Solicitors, Are Non-Fungible Tokens Legally Regulated?, Lexology (Mar. 22, 2023), https://www.lexology.com/library/detail.aspx?g=abdac300-8b09-40d2-853d-98a0db241fb2.

[viii] NFT infringes trade mark rights – Italian Court grants preliminary injunction in Juventus case, Lexology (Jan. 10, 2023), https://www.lexology.com/library/detail.aspx?g=b688270b-2714-4d78-bae6-caf8a272e8a8.

[ix] IP Twins, Trademark infringement via NFT: a landmark decision from Rome, Lexology (Nov. 25, 2022), https://www.lexology.com/library/detail.aspx?g=9f03c2fc-0d54-44b4-8c0c-cef62c9b9b9f.

[x] Class 9, WIPO, https://www.wipo.int/classifications/nice/nclpub/en/fr/?class_number=9&explanatory_ (last visited May 04, 2023).

[xi] Rahman Ravelli, The European Union, money laundering and NFTs, Lexology (Dec. 25, 2022), https://www.lexology.com/library/detail.aspx?g=54a39563-901d-47d1-bfad-1d437ed75f62.

[xii] K&L Gates LLP, A Brave NFT World – A Regulatory Review of NFT’s (Part 2), Lexology (Jun. 30, 2022), https://www.lexology.com/library/detail.aspx?g=b01c6df4-7b4a-4cad-a0ba-a3cee48a0ca5.