Italian court rules on the first case of trademark infringement through NFTs

The Court of Rome has issued the first Italian decision on intellectual property rights infringement through the unauthorised sale of NFTs and took a position on some of the recurring issues in the various NFT lawsuits pending in the different jurisdictions.

The case was brought by a famous Italian football club against a company that marketed NFT digital playing cards depicting a well-known football player wearing the team’s strip, using the distinctive signs (both word and figurative trademarks) of the team. The NFTs were sold on a well-known marketplace and in the secondary market through resale by first buyers, from whom the respondent company nevertheless continued to receive remuneration.

First, in rejecting the respondent’s defences, the court found that the use of the football club’s trademarks by the creators of the cards in question had a purely commercial purpose, as it could not be justified by the public interest in the publication of the player’s image in light of his fame nor by educational or scientific purposes. The court held that though the player had played for the plaintiff team and had given consent for the use of his image on the cards, the respondent company was obliged to get permission to use the distinctive signs of the team itself. The fame of the team also contributed to the value of the digital image offered for sale with the NFTs.

The Court of Rome also ruled on the scope of protection of the trademarks registered by the football team, which according to the respondent, had not been extended to the classes relevant to the sale of NFTs. After pointing out that the signs in question undoubtedly enjoyed a reputation, the court noted that the trademark registrations expressly stated (particularly for class 9, which is relevant here) that goods not included in the Nice Classification and downloadable electronic publications were covered. Crucial for the finding of likelihood of confusion was that the team was already present in the field of crypto or blockchain games, based on similar technologies, through agreements with third parties. So the court concluded that the sale of NFTs by the respondent infringed the plaintiff’s trademarks, as it was likely to create the false impression that there was a commercial connection between the two companies.

The decision also held that the respondent’s conduct amounted to an act of unfair competition, including by misappropriation of values.

The court largely upheld the football team’s claims. It granted an injunction extended to the production, marketing, and promotion of the NFTs and contents at issue in the lawsuit. And the injunction also covered any other NFTs, digital content and products in general bearing the photograph included in the contested cards (even modified) or the distinctive signs of the team. It was deemed irrelevant that the respondent had ceased the production and marketing of the NFTs since the contract for the use of the player’s image was in place until 2024, and users would still be able to resell the NFTs in the secondary market.

The decision issued by the Court of Rome clarified the interpretation of the notion of “commercial use” and the scope of protection of registered trademarks. And it also confirmed the suitability of “dynamic injunctions” in relation to NFTs and metaverse-related infringements of intellectual property rights.

In the case, the football club acted directly against the company selling the infringing NFTs. But this option is not always available as in most instances the seller details are unknown. Most marketplaces have not adopted a system to authenticate their users and verify their identity and their title to mint and/or sell the digital assets. This makes it impossible to trace the seller who offered the infringing NFT on the marketplace. For this reason, right holders often consider taking action directly against the platforms (eg OpenSea, Rarible), which are subject to the general regime of liability applicable to Internet service providers, in their quality of hosting providers.

This situation should soon change given the entry into force of the Digital Service Act (Regulation (EU) 2022/2065), which under Article 30 introduced an obligation for online platforms to obtain the trader’s information. According to Article 10, information on users must be disclosed by ISPs only upon a court’s order. So, to get the full information, right holders might still have no other option than bringing a lawsuit against the platform to seek an order to disclose the users’ data and eventually act against them.