John Terry, currently working for Chelsea at their academy, recently partnered with Ape Kids Club (AKC) to create a collection of NFTs and became involved in a potential intellectual property infringement claim.
This led to certain NFTs in the series and images within the NFTs being removed from John Terry’s collection.
It is reported that the content of John Terry’s NFT collection was not official partnered with any football rights owner such as Chelsea FC or the Premier League. As such, the question arose whether AKC had the necessary legal permission, for example by way of a license, to use the intellectual property in question.
The NFTs feature various intellectual property: Chelsea’s kit and badge, the England Kit and a number of famous trophies – including the Premier League, the Champions League, FA Cup and Europa League trophies. John Terry's promotion of the NFTs on Twitter invited investigation from such stakeholders as UEFA, the FA, the Premier League and Chelsea FC, Terry’s former club.
Relevant intellectual property rights and the legal position
The underlying intellectual property rights in such imagery typically include copyright, design rights and trade marks.
Copyright
Copyright arises automatically in original content. In this case, there is copyright in the underlying graphic works such as the emblems, crests and badges and in the trophies. Copyright is infringed in a number of ways, including by copying the work (as a whole or a substantial part) and issuing or communicating copies of a work to the public. There are a number of defences for copyright infringement, including fair use defences (although the many of these only apply to non-commercial uses - which is not the case with NFT collections of this nature).
In 2003, the courts found that Unofficial Panini Stickers which included club crests and badges and Premier league emblem (without a licence) infringed copyright and the defence of “incidental inclusion” could not apply as these elements were essential to the object for which the stickers were created and not incidental (Football Association Premier League Ltd v Panini UK [2003]). The same legal principles are applicable to the Terry NFTs.
Since 2014, there is a new “fair dealing” defence for the purpose of caricature, parody or pastiche and which could be used to argue these NFTs are not an infringement of copyright, however this defence has not yet been properly considered and determined in any case by the English courts (although there are cases that have not yet been decided by the courts where this defence has been raised).
Trade Marks
The various elements used in the NFTs (such as the trophies, emblems and badges) can be registered as trade marks. Trade marks must be registered in relation to particular goods and services. It is noted in this case that the FA, Premier League and UEFA all have trade marks similar to the elements used in the NFTs in some cases their registered trade marks cover goods such as “recorded or downloaded images” or other terms which are similar to NFTs. Trade marks are infringed by use in the course of trade of a sign which is identical or confusingly similar with a registered trade mark (i) in relation to identical or similar goods or services to which it is registered; or (ii) where the registered trade mark has a reputation and the use, without due cause, takes unfair advantage of, or is detrimental to, the distinctive character or repute of the trade mark. In each case, for there to be infringement there must be an impact on the function of a trade mark.
In defence, NFT creators might seek to argue that such use is merely decorative and not use of sign in the course of trade or that does not have an impact on the functions of the trade mark.
The case of Arsenal FC v Reed [2003] addressed football memorabilia and souvenirs. The defendant sold products bearing Arsenal trade marks, but argued because he made it clear that the products were not official and were not being sold by Arsenal they were used as a “badge of support” rather than a “badge of origin” and did not affect the function of a trade mark. The trial judge found in favour of the defendant, however the Court of Appeal determined that although the defendant's use of Arsenal’s trade marks did act as a badge of support or allegiance it also acted as a badge of origin and therefore was an infringement. Again, these principles would apply to Terry’s NFTs.
Passing off
A claim for passing off arises where rights owners have goodwill and reputation, there is a misrepresentation by a defendant (whether intentional or not) likely to lead the public to believe that the goods or services, offered by the defendant, are in some way connected with rights owner or have been approved of or otherwise endorsed by the rights owner - causing damage to the rights owner. In this case the stakeholders would argue that John Terry’s NFTs misrepresented that they were connected or licensed by the various stakeholders as they featured their well known marks in which they have a reputation and goodwill. Although the passing off claim in Arsenal FC v Reed was dismissed and not appealed, the Court of Appeal did make a passing remark that it was not convinced of the trial judge's reasoning for dismissing the passing off claim.
Design Rights
In the UK, registered designs and supplementary and community unregistered designs can protect 2D graphics (such rights can last from three to 25 years). Infringement of a registered design right occurs when a design is reproduced by a third party. With unregistered protection, the design must also have been copied. In this case it is not clear whether any registered or unregistered designs subsist in the underlying works.
What will happen?
Intellectual property provides the rights owners with an avenue to make money by commissioning the use of their intellectual property in exchange for financial consideration. As such, this issue could disappear if AKC obtain a licence and/or pay for the benefit to the rights owners for use of their intellectual property. This is dependent on the organisations in question, UEFA, Chelsea FC, the Premier League, the FA, wanting to be affiliated with AKC and that a commercially acceptable agreement can be reached. If not, these football organisations could issue legal proceedings against AKC (although the removal of the infringing NFTs and images from the collection may negate the need for any proceedings).
This high-profile example illustrates the pitfalls NFT creators can face. Even though John Terry may have a good relationship with Chelsea FC and the various football stakeholders, the NFTs have already been removed. Whether or not they return may depend on whether licences can be agreed.
This decision is a stark reminder that creators must consider whether they have the right to create the NFT i.e. they have obtained licences from the appropriate rights owners for the right to use any intellectual property contained within the NFT.
Recommendations and how Brabners can help
Rights owners need to ensure their intellectual property is adequately protected (e.g. by registered trade marks and design rights where applicable) and any license or assignment is appropriate and drafted clearly. Rights owners should consider having clear policies or licensing strategies and include new emerging revenue streams such as NFTs. Trade marks specifications should be drafted to include digital imagery and NFTs and future proofed as far as possible for new technologies. Legal advice should be sought to ensure intellectual property rights are properly used and maintained and so a proactive rather than reactive stance is taken which should minimise uncertain, costly and reputationally damaging disputes.
We can assist rights holders in their strategies and in identifying, protecting, exploiting and enforcing their rights, including registering trade marks and designs and by drafting and negotiating licences to NFT creators. In addition we can advise NFT creators, promoters and personalities on the risks of NFTs and how to mitigate them, get clearance for intellectual property rights contained in NFTs and/or seek suitable licences where necessary.
For more information please contact Grace Faint, Colin Bell or a member of the Technology or Sports Sector or the Commercial and Intellectual Property Department.
