NFL Players Association ended its deal with Italian collectibles company Panini three years early in favor of rival Fanatics.
Panini could choose to keep its NFT markets open, though a coin probably won’t happen any time soon.
An escalating legal war between two top sports card companies raises questions about how digital collectibles like NFTs fit into the mix.
This week, the NFL Players Association terminated its deal with Italian collectibles company Panini SpA three years earlier in favor of rival Fanatics.
“Effective immediately, Fanatics has the exclusive right to make NFLPA-branded trading cards,” the statement reads. It is almost certainly aimed at the multimillion-dollar cardboard sports card market. What’s less clear is how this sudden withdrawal could affect Panini’s pro-football-themed NFTs.
The NFL Players Association did not immediately respond to an email from CoinDesk.
Fanatics made its mark in the trading card industry through licensing deals with the MLB, NBA and NFLPA, and the purchase of Topps – another trading card company – for $500 million, which led to an ongoing legal battle with Panini.
But what does this mean for the beaten NFL NFTs?
Not much, explains Ross Feingold, special prosecutor at Titan Attorneys-at-Law, based in Taipei.
The first sales doctrine, Feingold explains, outlines that the owner of a legal copy of a copyrighted work has the right to display, lend, sell, or even dispose of that copy without the permission of the copyright owner.
“I could draw a mustache on Shohei Ohtani [a baseball card], and then put it on eBay and sell it,” Feingold said. “Fanatics can’t come after me for infringement.”
So don’t expect the Panini-struck NFTs to disappear any time soon. The company did not immediately return a request for comment from CoinDesk.
The trading card industrial complex spent a lot of time in the courtroom in the 1990s as the licensing and limits of the first sales doctrine were tested. Feingold points to a few pivotal cases from that era that created the legal framework that will guide arguments in court, should a dispute over NFL NFTs ever go to court.
Over the years, and up to the early 2010s, there have been a number of court cases examining the intersection between the right of publicity – the ability for an individual to have the exclusive rights to monetize their likeness – the intellectual property right of team members. logos and the right of first sale.
Feingold points out that trading card companies simply ignored intellectual property conventions and licensing, leading to a trading card wild west that might have had the blessing of the players’ association but not the league, vice versa, or none of the above . .
A constantly evolving legal issue
As attorney Paul Lesko argued in his 2013 column Law of Cards, this is anything but a matter of course.
There have been several notable lawsuits, such as Kareem-Abdul Jabbar v. Upper Deck and Buzz Aldrin v. Topps, Lesko writes, that have taken place but have failed to provide clear guidance on when manufacturers should pay for the inclusion of athletes or celebrities in their products .
Lesko points to a 2013 decision by the Ninth Circuit, involving Electronic Arts regarding the NCAA Football series of video games, that has furthered debate and, arguably, could eventually support unlicensed use in the trading card industry.
The court’s reasoning, Lesko writes, emphasizes the importance of reporting factual data and historical events and distinguishes it from other commercial uses, such as video games, in which individuals’ likeness is used without explicit consent.
If there is one conclusion that can be drawn, it is that the right of publicity in the trading card industry is a complex issue involving many lawsuits, and that the uniqueness of the different publicity laws in all fifty states creates a minefield.
NFTs can specifically complicate things
In general, the first sale doctrine would prevent these now unlicensed NFTs from disappearing into the air.
But what if the first sale doctrine regarding NFTs itself was something that is not yet established?
A February 2023 paper by legal scholar Joshua Durham, published in the Wake Forest University Journal of Business & Intellectual Property Law, argues that the NFT landscape is evolving faster than the law.
“There is no ‘digital first sale’ doctrine. So NFT makers can legally reclaim secondary sales under current law, leaving you with nothing,” he wrote on X.
In the digital world, a first-sale doctrine requires that the same file cannot exist twice. In crypto parlance, the file cannot be double-spent – which blockchain prevents.
But the law has not moved with the times.
The US Copyright Office has rejected the idea of a “digital first sale” due to the inability to confirm the deletion of the original file.
“Policy makers have come to the conclusion that since digital broadcasts required a copy of a file (the work) to be reproduced, digital broadcasts infringed the exclusive right of reproduction,” writes Durham. “A digital distribution of a reproduced copy was therefore illegal and was outside the scope of the first sales doctrine.”
In theory, NFTs would offer a true digital first sale, but “any unscrupulous NFT maker can invalidate all secondary sales of their NFTs through the outdated reading of [the law]writes Durham.
Will anything actually happen?
Given that the sports card market has typically played fast and loose with traditional notions of copyright and monetization, which in turn has opened up a legal gray area, Feingold doesn’t think much will happen.
Panini could even keep its markets open, although you probably won’t see a coin happening any time soon.
“If Fanatics claims damages because of these NFTs, what is the damage? What have they taken from you?” he said. “There has always been an aftermarket for sports cards, like buying Mickey Mantle beginner cards. That’s the whole point of any collectible.”
Hypothetical damage would depend on the company’s success, which data from the chain suggests lags well behind its paper counterpart.
“Signed” NFTs by Dallas Cowboys Tony Romo go for a rock bottom $6 on Panini’s NFT marketplace, while their paper equivalents have an opening price of $600 on eBay.
In January, CoinDesk reported that Fanatics is selling its 60% stake in sports-focused NFT company Candy Digital. Is it that they want to hit a kill switch completely vertically and make these NFTs disappear completely?
Or they could just go about their business — license be damned — Feingold muses, and pay a settlement later.
It’s happened before.