Blockchain & Cryptocurrency

Welcome to our monthly NFT litigation roundup.

As the rise of Non-Fungible Tokens (NFTs) continues to soar, so too do the questions, legal issues and disputes around them. When faced with such a high growth phenomenon, the law can take time to catch up.

Boodle Hatfield is closely monitoring the developments and each month will bring you a roundup of the key NFT disputes to be aware of.

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The recognition of NFTs as property 

Janesh S/O Rajkumar v Unknown Person ("Chefpierre")

• In a landmark ruling in the Singapore High Court, the Court has ordered an injunction to stop the sale and transfer of a Bored Ape Yacht Club NFT on the Ethereum blockchain. The move to protect an NFT in this way is the first in Singapore and Asia.
• The dispute centres around a loan agreement between the claimant, an active dealer in crypto and digital assets, and the defendant, a frequent lender. As part of the agreement, the claimant transferred the NFT to an escrow account to be held until full repayment of a loan was effected. The claimant asked for a refinancing of the loan, and when the defendant considered the claimant unable to pay, the defendant moved the NFT to its personal Ethereum wallet before listing it for sale on OpenSea.
• The court filing states that this particular Bored Ape Yacht Club NFT is "one of the Claimant's most treasured possessions" of which he had "no intentions to ever part with or sell".
• The court has ruled that the NFT should not be sold pending the resolution of the dispute. With an injunction now preventing such a sale, the claimant is seeking an order that the defendant be compelled to accept repayment of the loan and return the NFT.
• The lead counsel on the case has commented that this is "the first decision in a commercial dispute where NFTs are recognised as valuable property worth protecting […] so more than merely strings of numbers and codes imprinted on a blockchain, the implication is that an NFT is a digital asset and people who invest in it have rights that can be protected".

This follows a ruling earlier this year by the High Court of England & Wales which recognised NFTs as legal property capable of being frozen (Lavinia Deborah Osbourne -v- (1) Persons Unknown (2) Ozone Networks Inc trading as OpenSea - for further details please see our April roundup here).

Trademark infringement 

 Hermès International & others v Mason Rothschild

 The background details of this case are covered by our February and April roundup and can be found here and here.

 UPDATE:

• As noted in our April roundup, Rothschild had filed a motion to dismiss Hermès' claim, on the basis of the First Amendment and the test in Rogers v Grimaldi. The "Rogers test" is used to protect First Amendment interests and establishes that the use of a trademark in artistic work is not an infringement if it (1) is relevant to the underlying message of the work; and (2) does not explicitly mislead as to the source or content of the work. Subsequently, on 4 April, Hermès filed an opposition to Rothschild's motion to dismiss.
• The Court has now rejected the motion to dismiss, allowing Hermès' case to continue. The Judge held that the Rogers test applied because the MetaBirkins “could constitute a form of artistic expression”, and that “Rothschild’s use of NFTs to authenticate the images” does not “change the application of Rogers: because NFTs are simply code pointing to where a digital image is located and authenticating the image, using NFTs to authenticate an image and allow for traceable subsequent resale and transfer does not make the image a commodity without First Amendment protection any more than selling numbered copies of physical paintings would make the paintings commodities for purposes of Rogers.” However, because Hermès' complaint includes allegations of explicit misleadingness, the motion to dismiss was denied.

Nike Inc v StockX LLC 

The background details of this case are covered by our February and April roundup and can be found here and here. 

 UPDATE:

• On Tuesday 10 May, Nike sought the Court's permission to amend its complaint against StockX. Nike claims that since it lodged its initial complaint, "additional facts transpired or were discovered that are highly relevant to [its] claims against StockX".
• Nike is arguing that StockX has altered its terms for the "Vault NFTs" referred to in the original filing which in turn means Nike needs to amend its claim. Nike argues that "StockX has made a series of modifications to its representations surrounding [the] Vault NFTs", for example deleting and/or replacing specific terms that had come to light in the claim as problematic and deceptive.
• Nike also wishes to add counterfeiting and false advertising claims to its existing lawsuit. Nike claims that it purchased four pairs of counterfeit shoes on StockX's website between December and January, despite StockX's promises that it only markets authentic shoes.
• Nike said "Those four pairs of counterfeit shoes were all purchased within a short two-month period on StockX's platform, all had affixed to them StockX's 'Verified Authentic' hangtag, and all came with a paper receipt from StockX in the shoe box stating that the condition of the shoes is '100% authentic'".
• StockX responded in a statement on Wednesday 11 May. StockX described Nike's filing as "nothing more than a panicked and desperate attempt to resuscitate its losing legal case against our innovative Vault NFT programme"; "Nike's challenge has no merit and clearly demonstrates their lack of understanding of the modern marketplace".

Copyright disputes 

Jay-Z / Roc-A-Fella Records v Damon Dash

 The background details of this case are covered by our March roundup and can be found here.

• UPDATE:
• As reported in our previous roundup, Jay-Z's legal team had previously stated that lawyers on both sides were in discussions to reach a settlement. It has now been confirmed that the opposing sides "have reached an impasse and are unable, at this time, to reach a stipulation to resolve their claims and counterclaims".
• Jay-Z's team have confirmed that they will be filing for summary judgment. They note their belief that this is the only way to stop Dash from "altering in any way, selling, assigning, pledging, encumbering, contracting with regard to, or in any way disposing of any property interest in the album Reasonable Doubt, including its copyright and including through any means, such as auctioning a non-fungible token (NFT) reflecting, referring or directing such interest".

Read the entire article.

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