BioSteel left “unquenched” in quest for injunction before Ontario Court

BioSteel left “unquenched” in quest for injunction before Ontario Court

“May Cheng, Nicolas Auger

In a recent Ontario Court decision, BioSteel Inc. v. Cizzle Brands Ltd., 2024 ONSC 5515, Justice Parghi denied BioSteel Inc. and DC Holdings (“BioSteel”) an interlocutory injunction to stop Cizzle Brands Ltd. and Cizzle Brands Inc. (“Cizzle”) from using similar packaging for its sports hydration drinks. This ruling, released on October 18, 2024, following an August hearing, underscores important nuances in intellectual property law and the challenges brands face in protecting their trade dress.

Background: BioSteel’s Unsuccessful Bid to Block Cizzle’s Competing Product

The conflict began after BioSteel entered creditor protection under the Companies’ Creditors Arrangement Act (CCAA) in September 2023. DC Holdings emerged as the successful bidder for BioSteel’s assets, including the intellectual property associated with its popular sports hydration drinks. Former BioSteel executive, Mr. Celenza, subsequently launched a rival hydration brand, Cizzle, alongside other former BioSteel team members. Cizzle’s new line of CWENCH drinks debuted in May 2024, sporting vibrant packaging that closely resembled BioSteel’s established look, albeit with the distinct CWENCH brand name.

These visual similarities drove BioSteel to seek an injunction, arguing that Cizzle’s packaging could confuse consumers and harm BioSteel’s market share and brand reputation. Yet, despite these apparent likenesses, the court ruled against granting the injunction.

BioSteel Sports Drink Rainbow Twist 12 Pack in Canada

 

 

 

 

 

BioSteel Sports Drink in Rainbow Twist, 12 Pack

“Image courtesy of BioSteel Canada. Available at BioSteel – Canada

CWENCH Sports Drink Rainbow Swirl in Canada

 

 

 

 

 

CWENCH Sports Drink in Rainbow Swirl

“Image courtesy of CWENCH Hydration. Available at CWENCH Hydration – Canada

Legal Analysis: Why BioSteel’s Injunction Was Denied

At the heart of the decision lies the three-prong RJR Macdonald test, used to assess injunction requests. Here’s how the court applied each prong:

  1. Strong Prima Facie Case
    BioSteel’s bid for an injunction faltered on the first prong, an unusual outcome in such cases. Justice Parghi concluded that BioSteel had not demonstrated a “strong prima facie case” or even a “serious issue to be tried” under the tort of passing-off. Typically, injunctions are denied at the second stage of the test, where the difficulty often lies in proving “irreparable harm.” However, the judge was not convinced that BioSteel’s brand recognition extended beyond its trademark to encompass the specific “get-up” or trade dress of its packaging.
  2. Goodwill and Brand Association
    While BioSteel argued that its packaging was synonymous with its brand goodwill, Justice Parghi found insufficient evidence linking the packaging design to BioSteel’s market reputation independently of its BIOSTEEL trademark. This absence of compelling evidence weakened BioSteel’s claim that Cizzle’s CWENCH packaging misrepresented their brand, thus failing to establish a case of passing-off.
  3. Impact of Injunction Denial
    As a result of the court’s decision, Cizzle may continue marketing its CWENCH drinks in their current packaging until trial. BioSteel still has the opportunity to present additional evidence at trial and may consider appealing the injunction denial. In the meantime, the competitive landscape remains unaltered, with both brands contending for market share in the hydration drinks sector.

Implications for Brand Protection and Trade Dress Claims

The BioSteel Inc. v. Cizzle Brands Ltd. decision highlights the complexities brands face in securing legal protection for trade dress elements, such as packaging design. The case underscores the need for clear evidence linking trade dress to brand goodwill, separate from trademark recognition. Brands pursuing passing-off claims may benefit from extensive consumer perception data that illustrates a direct association between trade dress and brand identity.

As the broader litigation continues, BioSteel must build a stronger evidentiary foundation if it hopes to successfully claim trade dress infringement. For now, the court’s decision offers a cautionary tale: securing an injunction based on trade dress requires more than surface-level similarities—it demands a compelling argument supported by evidence that consumers unmistakably associate the trade dress with the brand’s goodwill.

BioSteel left “unquenched” in quest for injunction before Ontario Court

Fundamental Changes under the Ontario Business Corporation Act: A Brief Summary

Gregory M. Prekupec, Rutendo Muchinguri

The Ontario Business Corporations Act (OBCA), RSO 1990, cB.16, governs how corporations in Ontario should operate. Understanding the key provisions of the OBCA is essential for corporate governance and for those drafting documents related to commercial transactions. One of the most critical sections for Ontario corporations to be aware of is Section 168, which addresses Fundamental Changes.

What are the Fundamental Changes Under the OBCA?

Section 168 of the OBCA outlines specific actions that require more than a simple majority of shareholder approval—these actions are known as Fundamental Changes. These decisions significantly impact the corporation and must be authorized through a special resolution, requiring at least a two-thirds majority of shareholder votes during a specially called meeting.

Examples of Fundamental Changes in Ontario Corporations

The following actions are considered Fundamental Changes under the OBCA, and thus require special shareholder approval:

  1. Changing the company’s name
  2. Adding or removing business restrictions
  3. Modifying the maximum number of authorized shares
  4. Creating new classes of shares
  5. Changing the designation, rights, or privileges of shares
  6. Altering issued or unissued shares
  7. Dividing a class of shares
  8. Authorizing directors to divide unissued shares
  9. Changing the minimum or maximum number of directors
  10. Amending the issue, transfer, or ownership rights of shares

Special Resolutions for Fundamental Changes

For any of the above fundamental changes to be validly implemented, the corporation’s Articles of Incorporation must be amended. According to Section 168(5) of the OBCA, these amendments require a special resolution—a vote that must pass with at least two-thirds of shareholder approval during a special meeting called specifically to address the proposed changes.

Why Understanding Fundamental Changes is Crucial

Corporations in Ontario must ensure that any action classified as a fundamental change is properly authorized by their shareholders. Failure to follow the proper procedure, including securing a special resolution, can lead to legal complications and invalidate the proposed amendments.

After the special resolution is passed, the corporation can proceed with the process of amending its Articles to reflect the approved changes.

Conclusion

Understanding the requirements for fundamental changes under the OBCA is vital for any corporation operating in Ontario. Ensuring compliance with these regulations protects the corporation’s legal standing and ensures that significant decisions are made with the appropriate level of shareholder approval.

BioSteel left “unquenched” in quest for injunction before Ontario Court

Champagne Problems: The Case of Pantone 137 XGC

Elizabeth S. DipchandHarneet Gill

LVMH Faces Setback in Veuve Clicquot Trademark Dispute

LVMH, a prominent French luxury goods company, was dealt a blow to its Veuve Clicquot enforcement strategy in a recent decision coming out of the EU Court overturning the earlier decision of the European Union Intellectual Property Office (EUIPO).

EU Court Ruling: Colour Alone Isn’t Enough for Trademark Protection

The exclusivity of the orange colour used for the packaging of the Veuve Clicquot champagne bottles was at the heart of the issue. The judgement, in favour of discount retail chain, Lidl, emphasizes that colour does not necessarily constitute a sufficient element to hold a trademark exclusively without the other trappings of use in association with the claimed goods or services.

The Legal Battle Over Veuve Clicquot’s Orange Packaging

LVMH’s use of the orange in association with Veuve Clicquot dates back decades and acquired distinctiveness in the EU in 2006. LVMH argued that Lidl’s Champagne packaging was confusingly similar to Veuve Clicquot’s label. Lidl, in turn, appealed the registration of the trademark arguing a lack of distinctiveness. The EU Court declared that LVMH did not have sufficient evidence to establish that the orange colour is a distinctive sign of a specific brand amongst European consumers – this was specifically the case in Greece and Portugal.

Lidl’s Challenge to Veuve Clicquot’s Trademark: Lack of Distinctiveness

While this battle over branding colour is not the first – Christian Louboutin and Yves Saint Laurent had a decade-long dispute over the right to produce scarlet soled shoes – this decision has opened the floodgates for additional disputes regarding the orange hue. Veuve Clicquot has been issuing legal warnings to other wine companies, over the last 20 years, for the use of this orange shade.

Implications for Other Brands: Can Colour Be Protected as a Trademark?

This decision also brings to mind many other companies whose brand identities are centered around a colour. Tiffany, Aston Martin, and Hermès with their blues, greens, and oranges. While companies may employ a myriad of strategies to entice their consumers, this judgement clearly illustrates that a colour may not necessarily be protected without taking consistent and coordinated steps to do so.

For deeper insights on colour trademarks and their implications, reach out to Elizabeth S. Dipchand at [email protected].

BioSteel left “unquenched” in quest for injunction before Ontario Court

It’s in the Cards: The Possible Tax Implications of Buying & Selling Trading Cards in Canada

By Mercedes Simon, Gregory Prekupec

Introduction to Magic: The Gathering (MTG)
Since the 1990s, the collectible trading card game “Magic: The Gathering” (“MTG”) has dominated globally as the most popular tabletop game, also effectively inventing the genre as it’s known today. Approximately 35 million players enjoy MTG, and the company has designed and printed 22,630 unique cards since its inception. New cards are released periodically by the company in expansion sets, wherein a player’s randomly purchased cards can vary in market value based on a combination of the cards’ rarity and playability (meaning relative strength when used in gameplay).

 

The One Ring and its Extraordinary SaleSome cards have rarely been printed as one-of-a-kinds, including “The One Ring,” released in July 2023 as part of a Lord of Rings set in homage to the works of J.R.R. Tolkien. The One Ring was, like all cards, randomly encased in an expansion set for one player to find as the nerdy equivalent of Charlie’s golden ticket. The lucky player was Toronto retail worker Brook Trafton, who went on to sell the card to American rapper and fellow MTG enthusiast Post Malone for $2.64 million.

 

MTG as a Case Study for Canadian Tax Law
While technically, ultra-rare cards are playable, these collectible items have become like other valuables sought after by their devotees. Given that collectible cards have evidently reached this level of popularity, a recent article noted that MTG is a perfect case study for how Canadian tax law applies to the sale and acquisition of trading cards.

Taxable Income and Trading Cards
Firstly, it must be determined if trading cards would result in taxable income. Under section 3 of the Income Tax Act, income is defined as anything from a productive “source” domestically and abroad, including office, employment, business, and property. The list is not exhaustive and can capture any income source with one or more of the following characteristics:

  • It recurs on a periodic basis;
  • It involves an organized activity, effort or pursuit;
  • It involves a marketplace exchange;
  • It gives rise to an enforceable payment; and/or
  • Where it involves a business or property, there is a pursuit of profit.

Assessing the Tax Implications of Card Purchases
For those buying cards, section 3 could be critical. Take the example of Trafton, who purchased an expansion set at a local game store only to discover what lay inside. Trafton’s windfall was irregular and non-recurring, making it more like a gift, inheritance or lottery winning— all of which Canadian tax courts have deemed exempt from section 3.

 

The Stewart Test for Taxable Income
Determining if a player’s cards are taxable should refer back to the Supreme Court of Canada case, Stewart v Canada, 2002 SCC 46, where a two-part test was developed to assess whether activities should be deemed business or property income under the ITA, section 9:

  • Is the activity done to pursue profit or a personal endeavour?
  • If not a personal endeavour, is the source business or property income?

Business or Hobby: Determining the Intent
The court clarified that the first element is only relevant where the activity has a personal or hobby element rather than purely commercial. In the case of MTG and other games, the activity is inherently hobby-based, primarily played by enthusiasts. Additionally, because expansion sets are inherently random, it seems little more than buying a scratch card. Given some cards’ value, some traders may monitor market trends to sell and acquire cards, making the activity more than a pure hobby. Additionally, MTG’s longstanding popularity has resulted in developing national and international “pro tours,” where qualifying players may receive cash prizes of $3,000 to $50,000. Winners are often also gifted expansion packs or individual, high-value cards.

 

Taxation of Trading Cards: Capital Property or Inventory?
For the second prong of the Stewart test, it must be decided if MTG and other cards were sold and/or acquired with a view to profit and then whether they would be deemed business or property. The ITA recognizes two main property categories: capital property and inventory. Instead, the income produced when a property is sold is critical to determining its categorization.

 

Intent to Purchase and the Tax Implications
Most crucially is the intent in purchasing, considering the objective circumstances of the sale and acquisition of property. In the case of trading cards, intent at the time of purchasing and whether they were purchased to be traded would weigh most heavily.

 

The Impact of Random Distribution on Profit Intent
On the one hand, MTG’s publishing company, Wizards of the Coast, widely marketed One Ring’s release, with collectors and re-sellers noting its high valuation. However, the pursuit of profit is dubious because, as stated, expansion sets are sold randomly. While a player could theoretically increase their odds by buying more cards, no organized effort or skill can result in acquiring a high-value card.

 

Exemption for Personal Use Property (PUP)
While the test mentioned above could result in cards being taxable, an exemption exists for “personal use property” (“PUP”), which may provide a route for hobbyists to avoid tax obligations. This exemption includes any property used primarily for personal use or enjoyment of the taxpayer. If classified as PUP, proceeds from selling cards will be the greater of $1,000 and the proceeds received.

 

Restrictions and Considerations for Collectors
One note which might be relevant to collectors is that multiple uses of the PUP $1,000 rule can be restricted where properties belonging to a set or series are disposed of separately to the same purchaser or several non-arms-length purchasers. However, were cards to be sold explicitly as a set, the potential tax consequences are out there. In the meantime, MTG fans should be assured that their decks, no matter how OP, are likely outside the scope of taxation.

BioSteel left “unquenched” in quest for injunction before Ontario Court

Division I Football Athletes Share their Thoughts on EA Sports’ NCAA Football Video Game Controversy Concerning Athlete NIL Compensation

By Kinsale Philip, Jake Pollack

Fans and athletes alike are enthusiastic about EA Sports’ plans to release an NCAA football video game (“Video Game”) in summer 2024—for the first time since 2013. The ongoing ethical debate over athletes’ Name, Image, and Likeness (“NIL”) rights in the Video Game, however, has grown more complex with each step of EA Sports’ athlete licensing approach.

EA Sports’ NCAA Football Video Game Controversy

 

In this scenario, NIL refers to a collegiate athlete’s right to get paid for commercial uses of their identity, which may encompass, among other things, product endorsements, video games, and social media marketing. This practice was strongly prohibited before 2021.[1]

There have been a lot of questions concerning NIL implications, particularly regarding how much athletes should be paid for their NIL. Football athletes are being offered $500 each without royalties if they opt into the Video Game.[2] Few media outlets have focused on NCAA football players’ perspectives despite the issue drawing an abundance of media attention.

We spoke with a Canadian FBS football athlete (“FBS Athlete”) who requested anonymity, Nolan Ulm (“Ulm”), a talented receiver and affable content creator from Kelowna, BC, who plays football at Eastern Washington University, and Ethan Yip (“Yip”), an explosive defensive back at William & Mary University who was raised in Surrey, BC, in order to gauge Division I athletes’ opinions of the Video Game.

Both Ulm and the FBS Athlete assert that being in a Video Game is essentially the materialization of a childhood dream; however, they draw attention to the primary concern that NCAA football athletes should be compensated commensurately “for allowing their name and likeness to be used” and that, in the existing licensing framework, athletes in the Video Game would not be “compensated correctly.”

EA Sports and their licensing partner appear to enjoy a unique bargaining position because they have emotional control over collegiate athletes as a result of generational nostalgia. Yip explains that the “NCAA football video game is huge… and everyone talks about how much they miss it.” Most twenty-something football fans and athletes can relate to the cover stars of the Video Game, Reggie Bush, Tim Tebow, and Robert Griffin III. They were undoubtedly shaped into the larger-than-life personas that they are today by the Video Game.

The Video Game’s release has been delayed since 2013 due to EA Sports’ struggle to facilitate a workable solution to pay and fairly licence the athletes that would be featured in the Video Game. Due to regulatory changes in 2021 permitting collegiate athletes to gain income from their NIL, EA Sports is now able to licence them.

NCAA athletes who receive compensation for their NIL are obligated to comply with the NCAA’s interim NIL policy, with conference and program rules, as well as with any applicable state NIL laws.[3] Thirty-two states had passed NIL legislation as of July 2023.[4] While this may be true, the “ ‘NCAA has been saying, until just recently, follow your state law if you have one,’ Jim Cavale, CEO and founder of INFLCR, said. ‘Now all of a sudden they’re changing their tune.’ ”[5]

Differences among state NIL laws may be resolved by federal legislation, but it is unlikely that federal law would pass because affected parties cannot agree on a single proposal. Simply put, some desire legislation that benefits the NCAA, such as the “Pass Act” proposed by U.S. Senators Joe Manchin and Tommy Tuberville, while others support athletes, such as the “College Athlete Economic Freedom Act” proposed by U.S. Senator Chris Murphy and U.S. Representative Lori Trahan.[6]

The FBS player considers that only a select group of renowned athletes end up entering into NIL deals and that the Video Game provides those lesser-known athletes an opportunity to be recognized. He states that “now the tough question is asking yourself whether you want to be in a video game [that] you have always looked forward to being in or give up potentially larger earnings.”

In Ed O’Bannon v NCAA, the United States Court of Appeals for the Ninth Circuit (the “USCA”) deliberated on an antitrust action against EA Sports, the NCAA, a licensing group, and two collegiate conferences.[7] The USCA held that the NCAA’s rules/bylaws unreasonably restrained trade and thus violated the American iteration of the Competition Act.[8] The decision resulted in the payment of financial settlements to athletes featured in previous NCAA Video Games.[9]

In his concurring decision that affirmed the USCA for the Ninth Circuit’s decision, United States Supreme Court (“USSC”) Justice Brett Kavanaugh even stated in NCAA v Alston that “the NCAA’s business model would be flatly illegal in almost any other industry in America.” with regard to the NCAA’s monopolization of American amateur sports.[10] As such, the USSC decided that the NCAA’s rules and bylaws violated antitrust law.

 

EA Sports’ Approach to Licensing

 

To cautiously address the player licensing challenge, EA Sports entered into a collegiate group licensing deal with OneTeam Partners (“OneTeam”), a business that specializes in managing athletes’ intellectual property. EA Sports and OneTeam’s group licensing deal gathers a number of individual NIL licences into one collective licence.[11] Its principle essentially hinges on a “co-branding force multiplier that maximizes the value of each licensee beyond its individual marketability.”[12]

According to On3, EA Sports plans to pay college football athletes a total of $5M USD (for approximately 11,050 athletes) through their deal with OneTeam.[13] The Video Game would include athletes from 130 Division I FBS football teams—excluding Division I FCS athletes.[14]

Given that athletes are frequently compensated based on performance and talent, many individuals object to the legitimacy of a deal that equally compensates athletes involved in the Video Game. The noticeable disadvantage of a group licence, therefore, is that each player’s NIL worth is treated identically, disregarding the meritocratic values embedded in American collegiate football.

The FBS Athlete argues that starters “or even second strings should receive a bit more [pay] than a fourth string,” because “athletes work their tails off to make it in these positions let alone starting so… they should be rewarded.” He believes that $500 is a reasonable starting rate, but it is insufficient for high-value NIL athletes.

The FBS Athlete however adds that in some ways, a deal that is not contingent on personal performance gives him a sense of security because he would not have to worry about receiving less or no money in the event of an injury. Additionally, it “could create more opportunities for athletes from poorer backgrounds… [because] many do not have the same access to endorsement deals as wealthier athletes.”

The FBS Athlete nevertheless posits that the Video Game’s earnings should be transparent and they “should take into account the amount of practice and skill needed to play, the number of games the player has played, the player’s impact on team performance, and the player’s overall contribution to the team.” This model, he says, would “incentivize athletes to work hard and improve their skills to maximize their earnings.”

Moreover, EA Sports’ offer of $500 USD per player is clearly meagre in comparison to settlements that averaged $1600 USD paid to athletes featured in past EA Sports college video games.[15]

Former Clemson centre and College Football Players Association (“CFPA”) vice president Justin Falcineli (“Falcineli”) has been vocal about athletes rejecting EA Sports’ NIL licensing offer. He calls it a “ridiculously low amount of money.”[16] Nevertheless, it is unknown how many athletes belong to the CFPA, and it is unlikely that they represent the majority opinion of FBS football athletes. The FBS Athlete, in fact, had never heard of the CFPA before our conversation.

Falcineli contends that he spoke with FBS football athletes who expressed a desire to turn down the offer and with those who wanted compensation in excess of $500 USD. Jalon Daniels, the University of Kansas’ starting quarterback, warned reporters that if athletes were given a small amount of money, there might be a boycott.

The FBS Athlete and Ulm expressed that a college athletes’ union presents pros and cons. Unions, do give athletes a voice in “decision-making” but they also state that “athletes would be subject to dues or other fees and the majority rules when decisions are made.” The CFPA does not charge membership fees for current college athletes but they do charge $50 USD for alumni.[17]

Student-athletes would almost certainly have to be defined as employees in order to legitimize the CFPA’s capacity to collectively bargain, which may be the case for FBS football and Division I basketball athletes as Johnson v NCAA continues its way through U.S. appellate courts.[18]

Mit Winter, an American sports lawyer and former Division I basketball athlete stated that a collective bargaining agreement is “immune from antitrust law,” giving a union like the CFPA authority to negotiate for athlete-specific rights.[19] By enhancing their conditions at work and instituting revenue sharing—when schools split income generated by sports with athletes—a recognized athletes union in collegiate football may drastically alter the quality of life for student-athletes.

The football space is well aware that, while receiving less pay, collegiate teams’ practices are much riskier and more physically demanding than those of professional teams.[20] Conversely, the National Football League’s (the “NFL”) 2020 Collective Bargaining Agreement mandates that athletes participate in a minimal number of contact practices and that they share in earning around forty-eight percent of revenues.[21]

 

Professional Football Athletes’ NIL Compensation

 

Falcineli suggests that his friends in the NFL are paid around $28,000 USD each for EA Sports’ use of their NIL in Madden NFL video games (“Madden”).[22]

In 2020, EA Sports renewed their contract with the NFL and their players’ association to continue to produce Madden for five years. The contract is worth $1.5B USD and provides $1B USD to the NFL Players Association (“NFLPA”).[23] EA Sports’ financial commitment to the athletes is illustrated by the NFLPA’s distribution of $500M USD out of the $1.5B USD to them.[24]

Yip critically drew our attention to the experiences of many young athletes who used to play the NCAA football game as much as they played Madden, if not more, and “since they discontinued [the Video Game], people have been wanting them to come out with it just as much as they want a new Madden out every year.”

The FBS Athlete, however, understands that the disproportionality in compensation between Madden and the NCAA Video Game exists because Madden involves professional athletes that “make football their full-time job.”

Justifications for the gap in pay between professional and collegiate athletes frequently cite that the NFLPA represents employees, unlike the CFPA, and that the NFL has about 1700[25] athletes compared to 11,050 in college football. On top of that, Madden outsells NCAA football Video Games.[26]

 

The Brandr Group, LLC v. Electronic Arts Inc.

 

Some college football teams are represented by The Brandr Group (“TBG”), a licensing company, similar to OneTeam. TBG submitted a request for a temporary restraining order to receive issuance of a preliminary injunction against EA Sports in June of this year for ignoring TBG’s group licensing agreements with schools; and, importantly, to obstruct the Video Game’s development.[27]

TBG claimed that EA Sports “was threatening [their] clients to comply or be excluded from the Video Game.”[28] TBG asserted, in other words, that it had exclusive licensing rights to the athletes who are members of the teams they represent and that EA Sports must negotiate with or obtain consent from TBG to acquire their athletes’ NIL licences.[29] Yet, some reports speculate that TBG’s lawsuit “is just as much about OneTeam” since the two companies are competitors and were once partners.[30]

EA Sports is headquartered in Redwood City, California and the Northern District of California Court’s threshold for a temporary restraining order is high.

The Court denied the application for temporary restraining order, with Judge Haywood S. Gilliam opining that TBG had not shown sufficient evidence that “the value of the students’ NILs would be diminished by their use in the Video Game.”[31] TBG could not prove that EA Sports’ deal with OneTeam caused “irreparable harm” to TBG’s clients’ NILs and to the public. Judge Gilliam concluded that TBG’s reasoning in their claim, above anything, emphasized the Video Game’s advantage to their athletes’ NILs.[32]

 

What is Next for EA Sports?

 

Ulm and the FBS Athlete were asked about alternate remuneration methods such as revenue sharing and hiring individual player agents to negotiate their NIL licensing deals.

The FBS Athlete stated that “if each athlete were on their own to negotiate with an individual agent, not everyone would be given a fair amount… [causing] higher profile athletes [to receive large sums and others with little to nothing].”

For Ulm, “revenue sharing is definitely a possibility but then I would not want to take away from my school’s growth” and he states that “player agents are the answer. If this is going to become pro sports then we need some management.”

EA Sports’ current desire is to release the Video Game sometime, in the summer of 2024, and for the first time, by paying collegiate athletes for their NIL.

 

 

 

 

 

[1] Piccola L., Amy. Duffy, Tricia. Schy R., Levi. “Your Guide to Federal and State Laws on Name, Image and Likeness Rules for NCAA Athletes.” Saul Ewing LLP. 14 March, 2022. https://www.saul.com/nil-legislation-tracker
[2] Nakos, Pete. “EA Sports to allow FBS athletes to op into 2024 video game.” On3, 17 May, 2023. https://www.on3.com/nil/news/ea-sports-to-allow-fbs-athletes-to-opt-into-2024-video-game-oneteam-partners/
Nakos, Pete. “Athlete Boycott Being Organized over 2024 EA Sports College Football Video Game.” On3, 7 June, 2023. https://www.on3.com/nil/news/college-football-athletes-association-organizing-boycott-of-2024-ea-sports-video-game/
[3] Piccola L., Amy. Duffy, Tricia. Schy R., Levi. “Your Guide to Federal and State Laws on Name, Image and Likeness Rules for NCAA Athletes.” Saul Ewing LLP. 14 March, 2022. https://www.saul.com/nil-legislation-tracker
[4] Piccola L., Amy. Duffy, Tricia. Schy R., Levi. “Your Guide to Federal and State Laws on Name, Image and Likeness Rules for NCAA Athletes.” Saul Ewing LLP. 14 March, 2022. https://www.saul.com/nil-legislation-tracker
[5] Prisbell, Eric. “The Big Story: NCAA NIL subcommittee developing a Plan B to federal legislation” On3. 10 July, 2023. https://preview.mailerlite.io/emails/webview/327565/93311344889038751
[6] Winter, Mit. “A flurry of federal #NIL bills have been released over the past few days. The PASS Act released by Senators…” Linkedin. 26 July, 2023.
[7] Ed O’Bannon, et al. v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
[8] Wolohan, John. “A Full Review of the O’Bannon v. NCAA Judgment.” Law in Sport. 21 August, 2014. https://www.lawinsport.com/topics/item/your-full-review-of-the-o-bannon-v-ncaa-judgment
Ed O’Bannon, et al. v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
[9] Ed O’Bannon, et al. v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
[10] National Collegiate Athletic Assn. v. Alston et al., 594 U.S. ___ (2021), No. 20-512, decided June 21, 2021. https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf
[11] Flagel A., Zachary & Marino A., Gregory. “Collegiate Group Licensing: a New Frontier in the NIL Wild West.” 29 August, 2022. https://www.foley.com/en/insights/publications/2022/08/collegiate-group-licensing-new-frontier-nil
[12] Flagel A., Zachary & Marino A., Gregory. “Collegiate Group Licensing: a New Frontier in the NIL Wild West.” 29 August, 2022. https://www.foley.com/en/insights/publications/2022/08/collegiate-group-licensing-new-frontier-nil
[13] Nakos, Pete. “Athlete Boycott Being Organized over 2024 EA Sports College Football Video Game.” On3, 7 June, 2023. https://www.on3.com/nil/news/college-football-athletes-association-organizing-boycott-of-2024-ea-sports-video-game/
[14] A tier below the FBS whose members’ institutions are smaller than those of the FBS. Division I FCS athletes are unlikely to be featured in the game because they were not featured in previous iterations and because the current proposed group licensing fee would only cover the costs of FBS athletes. However, according to a reporter who received access to EA Sports’ Video Game proposal to schools through an open records request, FCS athletes may become available in the game through downloadable/live content. Brown, Matt. “Here’s what the EA Sports College Football video game proposal looked like.” 10 March, 2021. Extra Points. https://www.extrapointsmb.com/p/heres-what-the-ea-sports-college
[15] Vannini, Chris. “EA Sports sued by the Brandr Group: What’s the future of the college football game?” The Athletic, 20 June, 2023. https://theathletic.com/4626567/2023/06/20/ea-sports-college-football-lawsuit/
[16] Nakos, Pete. “College Football Players Association organizing boycott of 2024 EA Sports Video Game.” On3, 7 June, 2023. https://www.on3.com/nil/news/college-football-athletes-association-organizing-boycott-of-2024-ea-sports-video-game/
[17] “Memberships — CFBPA college football athletes association.” (n.d.). CFBPA — College Football Players Association. https://www.cfbpa.org/member-cfbp
[18] Goldberg, Josh, Esq. & Gaines, Carter “What you need to know about Johnson v. NCAA” Greenspoon Marder, LLP, 1 May, 2023 https://www.gmlaw.com/news/what-you-need-to-know-about-johnson-v-ncaa/Johnson v. Nat’l Collegiate Athletic Ass’n, Civil Action 19-5230 (E.D. Pa. Dec. 28, 2021)
[19] Graham, Andrew. “As college football athletes inch toward employee status, what could they stand to gain from getting organized?” On3, 5 July, 2023 https://www.on3.com/news/as-college-football-athletes-inch-toward-employee-status-what-could-they-stand-to-gain-from-getting-organized/
[20] Graham, Andrew. “As college football athletes inch toward employee status, what could they stand to gain from getting organized?” On3, 5 July, 2023 https://www.on3.com/news/as-college-football-athletes-inch-toward-employee-status-what-could-they-stand-to-gain-from-getting-organized/
[21]  Graham, Andrew. “As college football athletes inch toward employee status, what could they stand to gain from getting organized?” On3, 5 July, 2023 https://www.on3.com/news/as-college-football-athletes-inch-toward-employee-status-what-could-they-stand-to-gain-from-getting-organized/
[22] Florio, Mike. “College Football Players Are Urged to Reject EA’s NIL Offer for Upcoming Video Game.” NBC Sports, 9 June, 2023. https://www.nbcsports.com/nfl/profootballtalk/rumor-mill/news/college-football-athletes-are-urged-to-reject-eas-nil-offer-for-upcoming-video-game
[23] Goldberg, Rob. “NFL, EA Sports Announce $1.5B Multiyear Contract Renewal for Madden NFL Games.” Bleacher Report, 28 May, 2020. https://bleacherreport.com/articles/2893853-nfl-ea-sports-announce-15b-multiyear-contract-renewal-for-madden-nfl-games
[24] Goldberg, Rob. “NFL, EA Sports Announce $1.5B Multiyear Contract Renewal for Madden NFL Games.” Bleacher Report, 28 May, 2020. https://bleacherreport.com/articles/2893853-nfl-ea-sports-announce-15b-multiyear-contract-renewal-for-madden-nfl-games
[25] Putnik, Gary. “NFL Players by College on 2021 Rosters” NCAA.com, 12 September, 2021. https://www.ncaa.com/news/football/article/2021-09-06/nfl-athletes-college-2021-rosters#:~:text=A%20total%20of%201%2C696%20athletes%20make%20up%20the%20NFL’s%20active%20rosters.
[26] Rodriguez G., Juan. “Madden NFL 13 Vs. NCAA 13: Madden Is Breaking Sales Records.” GameNGuide, 8 September, 2012. https://www.gamenguide.com/articles/3239/20120908/madden-nfl-13-vs-ncaa-breaking-sales.htm
[27] Nakos, Pete. “Court Denies the Brandr Group’s Temporary Restraining Order Motion against EA Sports.” On3, 30 June, 2023. https://www.on3.com/nil/news/ea-sports-college-football-the-brandr-group-temporary-restraining-order-denied/
The Brandr Grp. v. Elec. Arts, 4:23-cv-02994-HSG (N.D. Cal. Jun. 29, 2023)
[28] Nakos, Pete. “Court Denies the Brandr Group’s Temporary Restraining Order Motion against EA Sports.” On3, 30 June, 2023. https://www.on3.com/nil/news/ea-sports-college-football-the-brandr-group-temporary-restraining-order-denied/
[29] The Brandr Group, LLC v. Electronic Arts Inc., No. 4:2023cv02994 – Document 23 (N.D. Cal. 2023)
[30] Nakos, Pete. “Court Denies the Brandr Group’s Temporary Restraining Order Motion against EA Sports.” On3, 30 June, 2023. https://www.on3.com/nil/news/ea-sports-college-football-the-brandr-group-temporary-restraining-order-denied/
[31] The Brandr Grp. v. Elec. Arts, 4:23-cv-02994-HSG (N.D. Cal. Jun. 29, 2023)
[32] The Brandr Grp. v. Elec. Arts, 4:23-cv-02994-HSG (N.D. Cal. Jun. 29, 2023)

BioSteel left “unquenched” in quest for injunction before Ontario Court

Pandora’s Barrel of Monkeys: Seth Green’s Stolen Bored Ape NFT and Copyright Conundrum

By Zach Nickels, Elizabeth S. Dipchand  

 Image of Bored Ape #8398 AKA “Fred Simian” (image via OpenSea)

The recent theft of four of actor Seth Green’s (“Green”) NFT’s has stoked the fire for further debate about the intersection of personal property rights, licenses, and intellectual property rights in the context of NFTs.  Beyond Green’s obvious financial loss, the situation is complicated by the fact that he has spent several months developing an animated TV series featuring as the main character one of his stolen NFTs, Bored Ape #8398 AKA “Fred Simian” (“Bored Ape”).

Now, Green has a serious problem on his hands: he did not actually own the copyright in the NFT’s artwork as the (former?) Bored Ape owner, he only had a licence for its commercial use. As such, his ability to use Bored Ape in the show and his avenues for legal recourse are unclear.

The Facts

On May 8th, 2022 four of Green’s NFTs were stolen in a phishing scam, where the Bored Ape was eventually sold to a pseudonymous collector identified as “DarkWing84”. The Bored Ape was (unwittingly?) purchased by DarkWing84 for over $200,000 and transferred to a collection identified as “GBE_Vault” where it currently remains, and has since been frozen by the NFT marketplace OpenSea.

Although Green tweeted over the past weekend that he would like to get in touch with the DarkWing84 to “fix” the situation, the two have yet to make contact. In a recent interview with DarkWing84, she said that although he was interested in talking with Green, he had “no plans” yet for the Stolen Ape. Green has since tweeted that he would “rather meet DarkWing84 to make a deal, vs in court [sic]”. If this situation does escalate to litigation, it would provide a great opportunity to clarify how courts characterize NFTs and how NFTs square with intellectual property laws.

The Fine Print

At front and center in this conundrum is the nature of the rights acquired by purchasers of NFTs, here the Bored Ape NFT purchasers (“Owners”). Rights conferred by copyright ownership must be distinguished from rights arising from copyright licences which commonly grant permission to use under certain conditions. Copyrights provide an owner the exclusive right to produce, reproduce, sell, publish, perform or licence a work. In contrast, copyright licence only allows a licensee to do the specific thing(s) that the copyright owner allows them to do. In this instance, Green did not own the copyright to the Bored Ape – he only had a commercial licence to use the “Fred” as long as he owned the NFT.

Looking at Bored Ape Yacht Club’s (“BAYC”) rather sparse and somewhat contradictory Terms and Conditions (“Terms”), Owners own “the underlying Bored Ape, the Art, completely”. However, this section appears to only refer to personal property rights in the token and Art, as the Terms’ Commercial Use clause clarifies that Owners merely have an “unlimited, worldwide license to use…” the purchased Art for commercial purposes, as opposed to full copyrights in the Art. In other words, although the Terms say Owners own the Bored Ape and the Art “completely”, they actually do not own the copyright in the Art and only have a licence to use the Art commercially. In Canada, this is a critical practical reality given that any assignment of copyright ownership needs to be in writing and signed by the author. Although it is not explicitly stated, this commercial licence right seems to transfer with the NFT itself based on whoever owns it.

Since Green’s commercial use rights appear to be contingent upon his ownership of the Bored Ape and the licence seems to transfer with the token itself, his ability to feature the Bored Ape in his TV series with impunity seems to be in legal purgatory until this dispute is resolved. Unfortunately for Green, BAYC is unable to intervene in the matter, as their Terms explicitly state that “[u]sers are entirely responsible for the safety and management of their own private Ethereum wallets…” and that “at no point [will BAYC] seize, freeze or otherwise modify ownership of any Bored Ape”.

Apes As A Barrel of Monkeys vs Negotiable Instruments – Nemo Dat or Not?

While its not entirely clear how a court may respond to a request for relief from Green – presumably seeking to re-establish his ownership of the Bored Ape and commercial licence to use it in his TV series –it has not derailed consideration and debate from a few camps online.[1]

One avenue open to common law courts is the old common law rule of nemo dat quod non habet, namely, “no one can give better title than he himself has” (“Nemo Dat Rule”). In other words, you cannot give another person legal rights that you do not have yourself. Since the thief did not have legal rights to the Bored Ape at the time of the transfer, Darkwing84 could not acquire any legal rights in the Bored Ape  at the time of its purported sale,[2] including the licence for commercial use of the NFT’s Art. Under this principle the Bored Ape (and all associated rights he held before the theft, including the commercial licence) could revert to Green the same way stolen tangible personal property would, restoring his ability to use “Fred” in his TV series.  This approach would focus on maintaining Green’s personal property rights in the Bored Ape, despite the malfeasance of the thief and the DarkWing84’s lack of notice.

However, it would also be open to the court to apply one of the exceptions to the Nemo Dat Rule by considering the Bored Ape as a negotiable instrument instead of personal property. Negotiable instruments can be described as documents that guarantee the payment of a specific amount of money to a specific person, such as a bearer stock certificate. Negotiable instruments are essentially “tokens” that represent rights in something else – a characteristic that Bored Ape NFTs arguably share to some extent. From a policy perspective, tokenization serves a commercial purpose by allowing tangible items of trivial worth (i.e. pieces of paper) to represent monetary value.[3] NFTs could also arguably be construed as serving a similar commercial efficacy purpose.

This is an important point because when someone purchases a negotiable instrument for value without notice, the Nemo Dat Rules does not apply.[4] Thus, if DarkWing84 had no notice of the circumstances underlying the transaction and a court were to characterize the Bored Ape as a negotiable instrument instead of personal property or chattel, it is open for her to argue that Green may not be able to recover the NFT and potentially expose himself to liability for copyright infringement by using “Fred” in the TV series.

If Green had owned the copyright in the Art from the outset, recovering the NFT and restoring his status as an Owner to re-assume the commercial use licence would be a moot point. Ownership of the personal property that contains or incorporates a copyright protected work is not necessary for an author to maintain their ownership of the copyright in the work itself. For example, if Green was the author of an original work of (let’s say a portrait of “Fred”) instead of a merely a prior Owner of the Bored Ape NFT, it wouldn’t matter if the painting had been stolen or sold to a third-party. He would still own copyright in the work and enjoy the right to exploit it.

Don’t Wait Until You’ve Got A Monkey On Your Back – Understand Your Rights, Identify and Protect Your Intellectual Property

While we will have to wait to see how this situation unfolds, it serves as a reminder of the importance of understanding the intersecting legal rights associated with ownership of NFTs. Regardless of whether you are looking to mint NFTs, purchase them, or create derivative works based on NFT artwork, it is imperative you understand the scope and extent of your rights with respect to the NFT and its how they interact with other legal rights.

[1] Twitter user @gonbegood is one such commentator who has discussed what could happen to Bored Ape NFT Owners’ rights if their NFTs are stolen, depending on whether courts characterize the NFT as property/chattel versus negotiable instruments.

[2] Historically, one of the exceptions to the Nemo Dat Rule was the Sale In a Market Overt” exception. This exception held that where goods were sold in a market overt (a public and legally constituted market) according to the usage of the market, the Nemo Dat Rule did not apply. The idea was that in medieval times, if the victim did not bother to check their local market for their stolen goods, they were not being sufficiently diligent. Although the application of this exception has been abolished in Ontario by section 23 of the Sale of Goods Act, R.S.O. 1990, c. S.1., one can wonder whether OpenSea could be considered a market overt otherwise? Probably not.

[3] For an in-depth discussion of tokens and property law (which actually concludes that traditional property concepts do NOT support the idea that NFTs are true tokens), see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3928901 by Juliet M. Moringiello and Christopher K. Odinet.

[4] For example, see UCC SS 3-306; Bills of Exchange Act s. 55(1)(b).