Italy: NFT and trademark, the first Italian lawsuit

published on 14 September 2023 | reading time approx. 4 minutes

CryptoKitties, CryptoPunks and Bored Monkeys, the first attempts in 2017 to implement the use of blockchain technology for leisure. This is how NFTs (Non Fungible Tokens) have become virtual collectibles, like phone cards or stickers once were. Even if the translation of the word "token" is not immediate, what NFTs are says it in the word itself: something in fungible, not replaceable by any other asset. It is an encrypted code (hash) that is imprinted on digital res by registration on the blockchain, which makes that code and the file on which it is imprinted traceable, unchangeable, and irreplaceable, in a word: exclusive. The blockchain is a network, a digital ledger spread among all those who hold a node on that network. Therefore, to change a transaction/record on the blockchain requires the permission of all diffuse nodes, which makes it effectively impossible.

However, authenticity of the digital file does not mean originality and/or legitimacy of the work it contains. The right to make copies of a trademark, including the right to reproduce it in a digital file uploaded to the blockchain rests exclusively with the right holders or the individuals who have acquired the right under a valid contract.

On 20 July 2022 the Court of Rome ruled the first Italian decision regarding NFT and IP rights, issuing a preliminary injunction against the creation and marketing of NFTs depicting the trademarks of the well-known football club Juventus. This is a decision that could act as a forerunner at European level for future decisions on NFTs.

In the case at hand, a company operating in the IT sector, Blockeras S.r.l., created and marketed from 7 April 2022 to 4 May 2022, through the BINANCE NFT platform, which exploits blockchain technology, some NFTs associated with digital cards depicting a famous italian footballer, Christian Vieri, while he played for the football club Juventus in the years 1996 and 1997. Clearly visible on the digital cards were the football club's word trademarks, “Juventus” and “Juve”, and the football team's black-and-white vertically striped t-shirt, registered as a figurative trademark as well.

The company Brockeras S.r.l. asked the footballer the authorization to reproduce his image, but it did not request any authorization to the football club for the use of the clearly visible trademarks in the digital cards marketed.

Therefore, the company Juventus sued Brockeras S.r.l., which was responsible for the trademark infringement and unfair competition, to obtain an injunction against the production and marketing of the digital cards.

For the first time, the Court of Rome ordered an injunction against a company producing NFTs, taking a totally neutral attitude towards technological innovation and applying the principles of industrial law to the new technology. The creation and marketing of digital cards depicting a trademark in the form of a non-fungible token involves an infringement of such trademark.

First, in analyzing the possible trademark infringement and unfair competition, the Judge pointed out that the notoriety of the trademark at issue does not require its registration specifically for digital products or digital objects certified by NFT. Aside from this consideration, in any case, the Court considered that the football club registered its trademarks in Class 9 of Nice, in which under the heading of downloadable electronic publications such NFTs were also included. Moreover, the Judge highlighted that it was well known that the football club were also being operative in crypto games and blockchain games for a couple of years.

In its defense, Blockeras S.r.l.'s tried to argue that it was not necessary to obtain an authorization to use the trademarks due to the exception provided in art. 97 of the Italian copyright law. According to such provision, the authorization to reproduce the image of a famous person is not necessary if the person depicted is well-know and the reproduction is justified by information or didactic purpose.

This exception is related to the authorization needed to reproduce the portrait of a natural person and does not apply in case of trademark reproduction. In any case, the Judge clarified that the publication of the digital cards in question had an exclusive commercial purpose, therefore the authorization of the footballer had been correctly required and obtained but it does not exclude the need to also request the authorization of the trademark’s owner. The Court also considered that in any case the notoriety of Christian Vieri, the footballer, was also strictly connected to the well-known football team in question: thus, the digital image to be purchased assumes greater value precisely because it depicted the footballer wearing the Juventus t-shirt.

In this case, Blockchain was a means of exercising a purported freedom of expression - or of economic initiative - that overstepped the limits imposed by pre-existing exclusive rights, manifesting itself in a form of digital escapism that cannot entirely escape the rules of the real world.

In the light of these considerations, it is not disputed that the distribution of the NFT in question constitutes a trademark infringement, because of the confusion’s risk created in the consumer, who could be led to think that there was a commercial link between the company that created the digital cards and the football club.

Preliminary injunction could be issued if it exists an actual risk of irreparable damages for the trademark owner. The Court of Rome considered that such risk exists in the case at hand because of the diffusion of the NFTs, in relation to the possible dilution of the trademark and because of the infringement of the economic exploitation rights. The Judge taken into account also the secondary market of the NFTs, thanks to which Brockeras S.r.l. received a royalty for any re-sale.

At the end, the Court prevents any further production, marketing, promotion and offer for sale, directly and/or indirectly, in any way and form, of the NFTs and orders to withdraw from the market and remove from any website and/or any page of website NFTs were offered for sale and/or advertised.