Football and NFTS: The first NFT-related judgment in Italy

On 19 July 2022it Court in Rome issued the first order regarding non-fungible tokens (“NFTs“) ever published by Italian courts – and the first known judgment issued by a European court dealing with the violation of intellectual property rights in the NFT industry. Addressing a widely debated issue regarding NFTs, this decision confirms that under Italian law, imprinting or owning an NFT does not confer ownership of the underlying intellectual property rights – unless the parties agree otherwise. In addition, the court removed any doubt about the enforceability of well-known marks that were not registered for classes of goods that include downloadable virtual products.

BACKGROUND OF THE CASE

In 2021, a European crypto company (“Respondent“) launched an online fantasy football game based on NFT Game Cards (“Card“), which enabled their owner to play online against other players with a team of six cards. Through this card game, players could create their own teams, with different athletes from different sports, and receive rewards and prizes (which meant that this the game falls under the growing category of games per merit.) The cards, of course, portrayed various athletes, including those who actively support this project.

Here’s the tricky part: one of the cards portrayed someone famous Juventus former player (the “Player“) wearing one Juventus jersey that obviously displays the registered trademarks of the Italian football team – specifically the word trademarks “JUVE” and “JUVENTUS” and the figurative trademarks consisting of the black and white vertical striped jersey with two stars on the chest (indicating that the team has won more than twenty championships) (“Trademarks“).

It is worth noting that in the same year, Juventus Football Club SpA (“Juventus“) also began marketing NFTs after entering into a licensing agreement with Sorare Sas. As a result of this partnership, the two companies launched Ethereum-based rare trading cards of the club’s world-renowned players, such as Cristiano Ronaldo.¹ Fans can also bid on Juventus NFTs powered by NFT Pro which feature a 3D and HD animated version of the team’s home shirt for the 2020-21 season.²

Given the team’s newly developed interest in this new industry, it didn’t take long Juventus to file an urgent action against the Respondent to stop the distribution of the cards displaying the trademarks without its prior approval.

PETITION AND DEFENSE

Juventus has filed a petition requesting Court in Rome to (I) prohibits Respondent from embossing and marketing the cards depicting the player wearing them Juventus jersey – as well as any other NFT displaying the trademarks; (ii) withdraw from the market and remove the allegedly infringing NFTs from any platform and/or website; (iii) identify the subjects involved in the various stages of minting and marketing the cards, as well as all information about the quantity and price of the cards; (iv) impose payment of a fine on 25,000.00 euros for each day of delay in complying with the resulting decision; and (v) order the publication of the judgment in national newspapers—as well as on the websites blokaras.com and coinofchampions.com and their FacebookInstagram and Twitter profiles.

The respondent sought to dismiss the petition by arguing that its actions were legal on the merits and that there was no inherent danger of delay (which is necessary to obtain an interim measure under Italian law). In addition, the respondent has presented this Juventus could not enforce the relevant trademarks as they were not registered for classes of goods that include downloadable virtual products, such as NFTs.

THE DECISION

First, the court addressed this last objection from the respondent, i.e. whether the trademarks are enforceable to prevent third parties from using them on NFT-related products when they are not registered for the corresponding category. For now, the judge recognized that the trademarks certainly have a reputation under Italian law. In the words of the judge, “It is a well-known fact that the aforementioned trademarks relate to the Italian football team that has won the most titles and has the most fans in Italy and abroad“and”the existence of widespread commodity trading activity in various sectors is documented.“The fact that Juventus trademark can be considered to have a reputation has direct consequences for protection granted under the Italian Legislative Decree of 10 February 2005No. 35 (“IP codeSection 20 of the IP Code actually provides that the owner of a registered trademark of repute shall have the right to prevent third parties from using it without their consent, even for goods/services dissimilar to those for which the trademark is registered – so as long as such use allows the third party to take unfair advantage of or is harmful to the trademark’s distinctive character or reputation.

Thus, the trademarks could also be enforced by Juventus to prevent third parties from exploiting them in minting NFTs – even if the trademarks were not registered for the categories that include NFTs. The court also considered that Nice class 9 covers downloadable electronic publications. This appears to be in line with the European Intellectual Property Office’s announcement that Nice Class 9 will be revised to incorporate the concept of downloadable digital files authenticated by non-fungible tokens. The EUIPO also clarified that “for the Office, the concept of non-fungible tokens in itself is not acceptable. The type of digital object authenticated by the NFT must be specified.”³

Going even further, the court ruled that the creation and commercialization of the cards constituted a violation of the trademark rights of Juventusas the use of the trademarks on the cards is likely to have caused confusion among consumers and/or as to the association of the two entities involved, contrary to what is provided by Section 20 IP Code.

The court predictably ruled that unauthorized use of the trademarks cannot be justified by the fact that the Respondent cleared the player’s image. In particular, the judge rejected the Respondent’s objection that use of the trademarks could be justified pursuant to Section 97 of the Act of 22 April 1941No. 633 (“The Copyright Act“), considering the public interest underlying the publication of the player’s image. According to the court, section 97 Copyright Law does not apply here, because the use of the trademarks does not serve a public interest – the embossing and marketing of these NFTs have a exclusively for commercial purposes.

Finally, because Juventus also operates in the football-related NFT sector, the court held that the Respondent’s unauthorized use of the trademarks gives rise to the hypothesis of unfair competition under Italian law. The judge actually ruled that the respondent used the distinctive features of the trademarks unlawfully, and at the same time the use made by the defendant was to the detriment of their distinctive features and reputation. Furthermore, it was also found that the Respondent’s use of the trademarks has diluted and tarnished them, with the risk of negatively affecting the trademarks’ function of providing an indication of origin.

Against this backdrop, the court ordered the equivalent to (I) stop the minting, marketing and promotion of the disputed NFTs, as well as any other NFT displaying the trademarks; and (ii) download them from any platform.

In light of the information that the respondent had already provided to the court on its own initiative, the court did not order the latter to disclose information useful in identifying the parties involved in the various stages of minting and marketing the cards. To this end, during the proceedings, the respondent also disclosed that the disputed cards generated income on 35,769.87 euros.

CONCLUDING COMMENTS

This decision is particularly important as this is one of the first cases dealing with the ownership of intellectual property rights underlying an NFT. It is in line with the approach taken by foreign jurisdictions when it comes to qualifying an NFT and ownership of the underlying intangible asset. It also confirms that the rush to trademark registration in the metaverse is not at the same level of haste as is found with regard to other trademarks.

Footnotes

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3. EUIPO considered that “the 12th edition of the Nice classification will include the concept of downloadable digital files authenticated by non-fungible tokens in class 9.“

The content of this article is intended to provide a general guide to the subject. You should seek specialist advice about your specific circumstances.