Intellectual Property Rights in Sports Law: The Role of NFTs in Copyright Protection and Trademarks

Written by Avishi Berlia

A. INTRODUCTION

The digitisation of the global economy has introduced innovative methods for asset ownership and information distribution, particularly through Non-Fungible Tokens (NFTs). NFTs, constructed on blockchain technology, function as legitimate digital records of ownership for unique items, including art, collectables, music, and, lately, sports memorabilia. In the sports industry, these tokens are utilised to create various items, including video highlights and autographed memorabilia, providing fans with a novel way to engage with their favourite teams and athletes.

NFTs have rapidly evolved from speculative novelties to recognised commercial assets within the sports sector. They facilitate organisations, leagues, and individual athletes to directly monetise content, make cash from secondary marketplaces, and cultivate stronger connections with supporters. This concept, however, is not devoid of complications. The legal implications of minting and selling NFTs encompass various aspects of intellectual property law, especially copyright and trademark issues. These laws were not formulated with decentralised digital economies in consideration, resulting in various unresolved difficulties, including copyright ownership, license scope, and brand misuse.

This paper examines these legal challenges comprehensively. It delineates the essential characteristics of NFTs and their incorporation into the business frameworks of sports franchises. Subsequently, it examines the copyright ramifications of NFT creation and trading, concentrating on the limits of ownership and licensing. It also assesses the fair use concept for NFT minting procedures and examines practical enforcement challenges, especially in transnational digital environments. Further, the latter portion of the paper encompasses an examination of trademark issues and comparative legal frameworks in India, the United States, and the European Union. The research culminates in a series of practical proposals designed to ensure legal clarity and safeguard the interests of all stakeholders in this swiftly expanding domain.

B. COMPREHENDING NFTs AND THEIR SIGNIFICANCE IN SPORTS

NFTs are distinct digital assets that utilise blockchain technology to verify their authenticity and ownership. Each token is recorded on a decentralised ledger, making it immutable and non-reproducible. This architecture renders NFTs optimal for representing unique items in a digital format. The importance of NFTs is not in the digital file itself, which can be easily replicated, but in the cryptographic record of ownership associated with it on the blockchain.

In the realm of sports, NFTs are commonly employed to tokenise digital trade cards, highlight reels, autographed memorabilia, tickets, and significant in-game moments. NBA Top Shot, created by Dapper Labs in partnership with the National Basketball Association (NBA), was one of the initial significant platforms to implement NFTs in the realm of sports. This platform enables fans to purchase, sell, and exchange tokenised basketball highlights. These NFTs operate akin to conventional trading cards, yet are augmented by blockchain-based authentication.

European football clubs have emulated this trend. Juventus FC and Paris Saint-Germain have collaborated with blockchain companies to launch NFT-based fan tokens, granting holders access to exclusive merchandise and participation in decision-making polls, including selections for team bus designs and warm-up songs. The efficacy of these ads demonstrates that NFTs serve not only as financial instruments but also promote brand loyalty and engage fan culture. As an increasing number of clubs acknowledge the business and reputational significance of digital ownership, the legal regulation of these practices becomes increasingly essential.

C. COPYRIGHT CONSIDERATIONS OF NFTs IN SPORTS

C.A. Ownership and Licensing

A common misconception in NFT transactions pertains to the nature of the rights being conveyed. The acquisition of a conventional physical item, such as a jersey, implicitly grants the purchaser the right to utilise or resell it; however, the acquisition of an NFT does not inherently bestow intellectual property rights on the underlying content. Generally, the author or issuer of the NFT maintains the copyright, while the purchaser receives a restricted license to utilise the asset for personal or non-commercial reasons.

The NBA Top Shot terms of service explicitly delineate that users are granted "a limited license to use, copy, and display the art for personal, non-commercial use." The restrictions specifically prohibit the utilisation of the acquired highlight in films, video games, or ads without further authorisation. Notwithstanding this clarity, numerous buyers erroneously assume they are obtaining complete ownership of the underlying media when purchasing an NFT.

The ramifications of this misconception are substantial. In the realm of sports, unauthorised duplication of highlights, team logos, or player likenesses in NFTs may lead to copyright infringement. This has already commenced in legal arenas. In Miramax v. Tarantino, filmmaker Quentin Tarantino revealed intentions to sell NFTs using parts from the "Pulp Fiction" screenplay. Miramax initiated legal action, contending that Tarantino did not possess the rights to tokenise the content.   The conflict was eventually resolved, although it acts as a cautionary example for artists aiming to monetise NFTs derived from existing intellectual property.

C.B. Transformative Use and Fair Use Principle

The applicability of the fair use doctrine to NFTs presents another ambiguous issue. In the United States, fair use allows the unauthorised utilisation of copyrighted material under specific circumstances, including criticism, commentary, news reporting, education, or parody. The concept depends on variables such as the aim of the use, the nature of the copyrighted material, the quantity utilised, and the impact on the market.

Although the approach is theoretically sound, its implementation regarding NFTs remains unexamined in numerous countries. An exemplary case is Hermès International v. Rothschild, where artist Mason Rothschild developed a series of NFTs named “MetaBirkins,” replicating the luxury brand's renowned handbags with digital, fur-adorned counterparts. Rothschild asserted that his work constituted artistic critique and was therefore safeguarded by the First Amendment. Nonetheless, the court contested this, determining that the NFTs violated Hermès' trademark rights and lacked the requisite transformative nature for protection.

This decision may significantly impact the sports NFT market. Artists minting NFTs using sports team logos or photos of athletes may lack protection under fair use protections if their creations are found to induce brand confusion or diminish trademark value. This imposes a heightened need on NFT developers to secure explicit licenses when utilising copyrighted or branded materials.

C.C. Challenges in Enforcement

The primary problem with NFT copyright enforcement lies in the decentralised and pseudonymous characteristics of blockchain technology. Conventional intellectual property enforcement depends on the capacity to identify violators and initiate legal proceedings against them. Nonetheless, NFT marketplaces frequently permit users to maintain anonymity or utilise pseudonyms, complicating the identification of parties accountable for infringement.

Moreover, the transnational sale of NFTs frequently gives rise to jurisdictional complications. An infringement located in one country may create and sell NFTs with copyrighted material owned by a party in another country, prompting the inquiry of whether a nation's laws are applicable and whether any court can exercise jurisdiction. The decentralised structure of blockchain intensifies these issues, as material is frequently held on dispersed networks that exist beyond traditional legal frameworks.

Notwithstanding these obstacles, there have been effective enforcement endeavours. An Italian court ordered an injunction against a platform that had created NFTs utilising the trademarked emblems of Juventus FC without authorisation. This verdict established a precedent for European enforcement and indicated that courts may start to address NFT infringement in a manner akin to tangible intellectual property offences. Nevertheless, the compliance burden remains substantial, particularly for individual athletes and smaller organisations with constrained legal resources.

D. TRADEMARK CONSIDERATIONS IN NFT SPORTS ENTERPRISES

Trademarks function as essential brand identifiers, especially in the sports sector, where team names, logos, player likenesses, and event marks represent valuable commercial assets. The unauthorised creation of NFTs utilising these protected elements unavoidably leads to trademark infringement difficulties. In contrast to copyright, which necessitates significant replication to establish infringement, trademark law safeguards against consumer confusion, dilution, and misleading endorsement.

An eminent instance of a trademark dispute in the NFT sector is Nike, Inc. v. StockX LLC. StockX, a sneaker resale platform, developed a collection of NFTs depicting digital images of Nike footwear, contending that they were simply representations of physical items accessible via its “Vault” marketplace. Nike initiated legal action, claiming that the unapproved NFTs utilised its trademarks in a manner that could confuse consumers and diminish the brand's value. The current dispute depends on whether NFTs serve solely as authentication tokens or as independent products, a legal uncertainty that U.S. courts have yet to clarify.

European courts have commenced establishing precedent. In Juventus v. Blockeras, the Court of Rome determined that NFTs including the club’s trademarks, such as its name, colours, and player likenesses, were improper usage and issued a preliminary injunction. This ruling is one of the initial instances in Europe to consider NFTs inside the framework of trademark law, indicating that courts are willing to broaden conventional intellectual property protections to encompass the digital domain.

The enforcement of trademark rights for NFTs in India remains unexamined. Legal scholars contend that, due to the escalating significance of sports branding, Section 29 of the Trade Marks Act, 1999, about infringement, should reasonably encompass NFTs that create confusion or exploit the reputation of established marks. As Indian franchises, including IPL teams, commence the exploration of NFT launches, this legal domain is set for imminent scrutiny.

E. RIGHT OF PUBLICITY AND COMPARATIVE LEGAL PERSPECTIVES

E.A. The Right of Publicity in Sports Non-Fungible Tokens

A pertinent but separate legal matter pertains to the right of publicity, which denotes an individual's authority to regulate the commercial utilisation of their name, image, and likeness (NIL). In sports NFTs, athlete likenesses, names, and in-game activities are often tokenised, occasionally without specific permission.

The NFL Players Association (NFLPA) in the United States has actively advocated for the rights of its members. It recently complained to DraftKings, asserting that the company breached licensing agreements by creating NFTs with player photos without complete authorisation or revenue sharing. This conflict highlights the intricacy of differentiating between league-held rights and individual athlete rights inside decentralised systems such as blockchain.

In India, the right of publicity has been established through jurisprudence, notably in ICC Development (International) Ltd. v. Arvee Enterprises, where the Delhi High Court underscored that celebrities possess the right to prohibit the commercial exploitation of their identities. Nonetheless, the absence of formal codification engenders uncertainty regarding enforcement. The minting of cricket NFTs featuring prominent players necessitates immediate legal clarity regarding personality rights.

E.B. Comparative Legal Perspective

The international scope of blockchain requires a comparison method for regulating NFTs and sports-related intellectual property rights.

In the United States, law is evolving to accommodate digital realities via case law and statutory initiatives. Trademark owners are progressively registering marks for "virtual goods" under Class 9 with the USPTO, proactively safeguarding their businesses in virtual settings. Moreover, courts are increasingly inclined to classify digital tokens as commercial products, so subjecting them to conventional consumer protection legislation.

The European Union has escalated its actions further. Alongside the Juventus verdict, the EU Intellectual Property Office (EUIPO) has recently issued guidance indicating that NFT-related applications must clarify whether the products pertain to downloadable material, blockchain records, or virtual goods. This signifies an increasing institutional readiness to govern NFTs within current frameworks, modified for their digital characteristics.

In India, although courts have shown an understanding of digital infringement, the regulatory framework is predominantly underdeveloped. The Copyright Act of 1957 and the Trade Marks Act of 1999 establish a framework; however, neither explicitly references NFTs or blockchain technology. Organisations such as the IIPRD and the Ministry of Electronics and Information Technology (MeitY) have published discussion papers about digital assets; yet, legal reform remains unresolved.

F.  RECOMMENDATION

As NFTs increasingly converge with the global sports economy, it is imperative to establish effective legal frameworks that safeguard intellectual property while fostering innovation. Firstly, legislative reform is needed. Legislatures must revise current intellectual property laws to explicitly encompass digital assets and blockchain-based tokens. Trademark statutes should revise the definitions of products and services to encompass virtual assets, and fair use principles for digital works must be elucidated.

Secondly, international collaboration is essential. The decentralised characteristic of blockchain renders unilateral regulation ineffectual. A global treaty framework or standardised regulatory standards under WIPO or UNCITRAL could provide uniform enforcement across jurisdictions.

Third, prioritisation of education and awareness is essential. Stakeholders such as athletes, teams, and legal professionals should receive training on NFT licensing, smart contracts, and intellectual property compliance. Digital literacy enables rights holders to safeguard their intellectual property and engage equitably in NFT marketplaces.

Lastly, technological solutions must be devised. Smart contracts integrated within NFTs can facilitate automated royalty disbursements and enforce usage limitations. Metadata can encapsulate license details and expiration durations, guaranteeing that NFTs remain within their permitted applications.

G. CONCLUSIONS

The incorporation of NFTs into the sports sector has created dynamic prospects for fan interaction, revenue generation, and digital advancement. Nonetheless, these advancements have introduced complex challenges concerning copyright, trademark law, and the right of publicity. This paper has shown that numerous complications arise from basic misconceptions regarding NFT ownership and the extent of rights conferred to buyers. In the absence of specific permission, even ostensibly innocuous uses of team logos, highlights, or athlete likenesses may result in infringement claims.

Legal systems in various jurisdictions are starting to tackle these issues, yet discrepancies persist. U.S. courts have begun establishing standards through decisions such as Hermès v. Rothschild, while European courts have conferred trademark protection in cases like Juventus v. Blockeras. Conversely, India's regulatory structure remains nascent, with courts acknowledging digital intellectual property issues but lacking explicit statutory direction. This difference highlights the necessity for coordinated strategies and global collaboration.

A confluence of law reform, judicial clarification, and technical solutions is needed for progress. Legislators must modify current intellectual property laws to expressly encompass NFTs. Courts should continue to elucidate digital fair use and enforcement criteria. Additionally, smart contracts should be utilised to streamline licensing and compliance processes. The sports industry can completely adopt NFTs only through this comprehensive strategy, which ensures the respect and enforcement of intellectual property rights.

*The Author is a legal Scholar from Jindal Global Law School, India

(The Image used here is for representative purposes only)

References:

1.  Mark Conrad, ‘Non-Fungible Tokens, Sports, and Intellectual Property Law Issues’ (2022) 32(1) Journal of Legal Aspects of Sport 3.

2.  Dapper Labs, ‘NBA Top Shot’ <https://nbatopshot.com> accessed 22 April 2025.

3. Norton Rose Fulbright, ‘NFTs and Intellectual Property Rights’ (October 2021) <https://www.nortonrosefulbright.com/en/knowledge/publications/2631f758/nfts-and-intellectual-property-rights> accessed 22 April 2025.

4.  Farah Mukaddam, ‘NFTs and Licensing Risks’ (Venable LLP, June 2022) <https://www.venable.com/insights/publications/2022/06/nft-licensing-traps-and-trends> accessed 22 April 2025.

5.  NBA Top Shot, ‘Terms of Use’ <https://nbatopshot.com/terms> accessed 22 April 2025.

6. Miramax, LLC v. Quentin Tarantino, 2:21-cv-08979, (C.D. Cal.)

7.  ‘Quentin Tarantino Settles NFT Lawsuit with Miramax’ The Verge (9 September 2022) <https://www.theverge.com/2022/9/9/23344441/quentin-tarantino-pulp-fiction-nft-miramax-lawsuit-settled> accessed 22 April 2025.

8. Hermes International v. Rothschild, No. 22-CV-384-JSR, 2023 WL 1458126 (S.D.N.Y. Feb. 2, 2023).

9. ‘What the MetaBirkins Verdict Means for the Future of Web3 Fashion’ Vogue Business (February 2023) <https://www.voguebusiness.com/technology/metabirkins-hermes-lawsuit-verdict> accessed 22 April 2025.

10. Global Legal Post, ‘Juventus Launches NFT Player Cards’ (December 2023) <https://www.globallegalpost.com/news/juventus-secures-nft-trademark-victory-95809234> accessed 22 April 2025.

11.  Norton Rose Fulbright, ‘NFTs and Intellectual Property Rights’ (October 2021) <https://www.nortonrosefulbright.com/en/knowledge/publications/2631f758/nfts-and-intellectual-property-rights> accessed 22 April 2025.

12.  Mark Conrad, ‘Non-Fungible Tokens, Sports, and Intellectual Property Law Issues’ (2022) 32(1) Journal of Legal Aspects of Sport 3.

13.  Ibid.

14.  Mark Conrad, ‘Non-Fungible Tokens, Sports, and Intellectual Property Law Issues’ (2022) 32(1) Journal of Legal Aspects of Sport 3.

15.  Nike, Inc. v. Stockx LLC, No. 1:2022cv00983.

16. ‘Nike Sues StockX Over Unauthorized Sneaker NFTs’ Reuters (February 2022) <https://www.reuters.com/legal/litigation/nike-sues-stockx-over-sneaker-nfts-2022-02-03> accessed 22 April 2025.

17.  Juventus F.C. v Blockeras. s.r.l,143. 

18. Global Legal Post, ‘Juventus Launches NFT Player Cards’ (December 2023) <https://www.globallegalpost.com/news/juventus-secures-nft-trademark-victory-95809234> accessed 22 April 2025.

19.  IIPRD, ‘NFTs and Indian Trademark Law: A New Frontier’ (April 2023) <https://www.iiprd.com/nft-trademarks-india/>accessed 22 April 2025.

20. NFLPA Files Complaint Against DraftKings’ PSA Legal (October 2023) <https://www.psalegal.com/nflpa-draftkings-nft-complaint/> accessed 22 April 2025.

21. ICC Development (International) Ltd. v. Arvee Enterprises, 2003 SCC OnLine Del 2.

22.  United States Patent and Trademark Office, Acceptable Identification of Goods and Services Manual (2024 edn).

23. European Union Intellectual Property Office, ‘Guidelines on Virtual Goods and NFTs’ (July 2023) <https://euipo.europa.eu/ohimportal/en/guidelines-on-nfts> accessed 22 April 2025.

24. The Trade Marks Act 1999 (India), ss 2 and 29.

25. Ministry of Electronics and Information Technology, ‘Discussion Paper on Blockchain and Emerging Tech’ (2023).

26.  World Intellectual Property Organization, ‘Digital Assets and Intellectual Property: Challenges and Opportunities’ (2022) <https://www.wipo.int/nfts/en/> accessed 22 April 2025.

27.  Farah Mukaddam, ‘NFTs and Licensing Risks’ (Venable LLP, June 2022) <https://www.venable.com/insights/publications/2022/06/nft-licensing-traps-and-trends> accessed 22 April 2025.

28. Global Legal Post, ‘Juventus Launches NFT Player Cards’ (December 2023) <https://www.globallegalpost.com/news/juventus-secures-nft-trademark-victory-95809234> accessed 22 April 2025.

29. World Intellectual Property Organization, ‘Digital Assets and Intellectual Property: Challenges and Opportunities’ (2022) <https://www.wipo.int/nfts/en/> accessed 22 April 2025.