About the authors:
Robert Cumming: Robert is a partner, dual-qualified trade mark attorney and solicitor, and manages large international portfolios and complex multi-jurisdictional disputes for market-leading businesses.
Robert’s expertise lies in the strategic positioning of a brand. His experience managing international trade mark portfolios and complex cross-border litigation, complements his background working on large corporate transactions.
Chris Hoole: Chris is a partner, dual-qualified solicitor and chartered trade mark attorney, experienced in contentious and non-contentious intellectual property (IP) matters, including trade marks, designs, copyright and patents.
Working closely with a range of businesses, from blue-chip multinationals to SMEs, Chris provides tailored strategic and commercial advice to help IP-conscious businesses better protect and police their IP rights.
Vishal Dattani: Vishal is a qualified trade mark attorney, who assists clients with clearing and enforcing their Intellectual Property (IP) rights by providing tailor-made strategic advice. He works in both contentious and non-contentious IP matters, including trade marks, designs and copyright.
In part 1 and part 2, we explored what NFTs are and how they interact with IP rights. When the technology is moving at such as fast pace, the law often takes some time before it catches up. This article looks at the recent NFT-related disputes that have presented unique intellectual property issues for judges around the world.
Appleyard Lees are closely monitoring for case law updates, below is a roundup of some of the key cases in the UK and US that are ongoing (or settled).
Lavinia Deborah Osbourne v (1) Persons Unknown (2) Ozone Networks Inc trading as OpenSea  EWHC 1021 (Comm)
The High Court of England and Wales granted an urgent interim injunction application, by Lavinia Deborah Osbourne who owned two NFTs known as “Boss Beauties” (here, the two NFTs represented unique digital artwork). For background, the NFTs essentially vanished from her MetaMask crypto wallet which instigated her application to the court, who subsequently granted a “freezing order” preventing the Defendant from dissipating the assets. OpenSea (in its capacity as an intermediary and a digital marketplace) was required to provide information in order to trace the NFTs on the blockchain.
In what has been called a “landmark ruling”, the Court essentially recognised NFTs as a form of legal property (cryptocurrencies have previously been recognised as a type of asset capable of being frozen but this is the first time NFTs have had the same recognition). The ruling shows the flexible approach that the English courts are willing to take in relation to the new emerging technology. Judge Pelling stated:
“There is clearly going to be an issue at some stage as to whether non-fungible tokens constitute property for the purposes of the law of England and Wales, but I am satisfied on the basis of the submissions made on behalf of the claimant that there is at least a realistically arguable case that such tokens are to be treated as property as a matter of English law.”
D’Aloia v (1) Persons Unknown (2) Binance Holdings Limited and others  EWHC 1723 (Ch)
The High Court of England and Wales granted permission to Fabrizio D’Aloia (the Claimant) to serve proceedings on “Persons unknown” by way of an NFT airdrop (i.e. the NFT was sent straight into the recipients address on the blockchain through its crypto-wallet) in addition to the traditional method of service by email.
For background, the Claimant alleged that it was deceived into transferring cryptocurrency which was misappropriated by “Persons Unknown”, who operated a fraudulent clone brokerage website, leading to around 2.1 million USDT (a blockchain-based cryptocurrency, also known as Tether) and 230,000 UCDC (a tokenised US dollar) being transferred into various digital wallets. Specialists were able to trace the cryptocurrency working with Binance as an intermediary platform and several other exchanges.
This is a noteworthy development in the field of serving court documents. The English courts have previously permitted serving court proceedings via Facebook or Instagram, but service relying on an NFT is considered to be the first of its kind in the courts of England and Wales. It also means that circumstances such as court documents being lost in the post may no longer be an excuse for failure to partake in legal proceedings. Additionally, it demonstrates the ability of the crypto-space to identify fraudsters, (whose identities are often hidden) by tracing them on the blockchain – a welcome step towards greater consumer protection and transparency.
Miramax, LLC v. Quentin Tarantino and Visiona Romantica, Inc. (United States District Court, Central District of California, Case No. 2:21-cv-08979) – settled
Filmmaker Quentin Tarantino and production company Miramax recently settled a lawsuit in the US, that concerned NFTs based on the film, Pulp Fiction.
In 2021, Tarantino released an NFT collection that consisted of digital images and portions from the handwritten version of the Pulp Fiction screenplay (that did not include content from the film itself), which were auctioned on OpenSea.
Miramax sued Tarantino based on breach of contract, copyright infringement, trademark infringement and unfair competition. The crucial questions that would have been answered are as below:
i) whether US copyright law protects the right to convert a copyrighted work into an NFT and if so, whether copyright subsisting in the screenplay publication as a derivative work (i.e. the script, drafted by Tarantino) came first since it precedes the release of the film (as Tarantino contended) enabling Tarantino to create an NFT collection based on those screenplay rights and that Miramax’s rights are limited to the film only; or
ii) that Tarantino assigned all rights to and in Pulp Fiction to Miramax, resulting in the marketing and sale of NFTs relating to Pulp Fiction belonging to Miramax, therefore Tarantino’s acts constituting trade mark and copyright infringement & breach of contract (as Miramax contended).
Had it proceeded, the case would have been useful for lawyers because we are yet to see the application of sale rights (in this case, screenplay rights) that refer to prexisting IP that would have been contained in historical contracts (which did not explicitly mention NFTs).
The case emphasises the importance of considering emerging technologies such as NFTs when drafting new agreements. As for old agreements that have already been executed, judges will need to consider the intention of the parties and norms of the industry. More to follow in part 4 on smart contracts vs traditional contracts.
Hermès International v. Mason Rothschild – February 2023, 1:22-cv-00384 (SDNY) 
In one of the first lawsuits relating to NFTs, major luxury brand Hermès, has filed for inter alia trade mark infringement and dilution via the US courts against artist Mason Rothschild, in relation to the sale of 100 “Metabirkin” NFTs.
The fashion brand initially sent a cease-and-desist letter to the artist once it became aware of NFTs created with images that depict the furry/fuzzy famous Birkin bag (typically sold for thousands of dollars in the physical world), the first of which sold on 3 December 2021 for around $42,000 – it could be seen as an opportunistic drop.
Hermès also filed a complaint to the intermediary platforms facilitating NFT transactions, OpenSea, where the referenced “Metabirkin” NFTs can be bought or sold. OpenSea has subsequently removed the NFTs (although they have now reappeared on another platform named Rarible)
Rothschild has defended, relying on some interesting and innovative arguments relating to the US First Amendment freedom of speech and expression, which appears to have gathered support from the art community.
Rothschild has also filed a motion to dismiss request, which has been rejected by the courts.
Update since 8 February 2023: A first instance U.S. court has issued a decision finding that Mason Rothschild infringed on Hermès’ trade mark rights awarding $133,000 to the fashion brand. Hermès succeeded in establishing trade mark infringement, dilution and “cybersquatting” and Rothschild was not able to rely on the First Amendment defence.
The case is significant because it offers assurance to brand owners (at least in the US) as to the scope of protection offered in the digital space. Legal tests that exist in the physical world still apply to digital assets. The court concluded that offering the “MetaBirkin” NFT and website URL leads to confusion in the marketplace, and damages the French fashion brand’s exclusive rights that derive from the famous Birkin bag.
- There is always a balance to be struck between artists and their creative expression vs IP rights that belong to brand owners. In this instance, the degree of artistic expression was not distanced enough to afford the MetaBirkins creator sufficient protection to rely on the First Amendment. Artists should therefore tread carefully and seek legal advice before deciding to launch or promote a new brand.
- Given the evolving standards in digital technology, there may be a legitimate expectation that a brand (particularly a luxury fashion brand) wishes to expand and offer its goods and services in the virtual world as NFTs. Interestingly, Hermès’ does not yet offer its own NFTs, however, it may well do so in the future and indeed has filed various new applications at the U.S. Patent and Trademark Office on an intent to use basis.
Rothschild has an opportunity to appeal the first instance decision (to a specialist judge rather than a jury). Watch this space.
John Terry’s promotion of “Ape Kids Club” (no official lawsuit)
Last but not least, although it is not an official lawsuit in the courts of England and Wales, it is one of the UK’s most high-profile NFT cases.
John Terry’s (JT) promotion of “Ape Kids Club” (not to be confused with Bored Ape Yacht Club but we’re aware of the affiliation), concerned JT tweeting cartoons of baby apes. Some of those images contained trophies or club badges which are protected under trade mark laws by major organisations such as the Premier League, UEFA and Chelsea Football Club. These major football related organisations therefore investigated the potential infringement of their IP rights.
What is clear is that permission should have been sought (despite JT’s strong relationship with Chelsea FA and football stakeholders) in the form of a licencing agreement, since use of a mark belonging to another entity requires permission.
We also know that the offending trade marks have since been removed and are no longer available for purchase as NFTs. This high-profile example illustrates one of the pitfalls for NFT creators.
Clearly, NFT litigation is brewing. Until the law is more settled, Appleyard Lees anticipates more litigation and for new precedents to be established. For instance, trade mark law is relatively settled but NFTs are certainly testing some of the existing principles (which are set out in Part 2 of this series). This is an evolving area so it is essential to seek guidance from IP lawyers who are aware of and understand the novel issues.
To follow in part 4, we will provide a summary of the key considerations on smarts contracts vs traditional contracts.