by Traverse Legal, reviewed by Enrico Schaefer - April 6, 2022 - Non-Fungible Tokens (NFTs)
This is a story of an NFT project which got off to a great start but was built on a weak foundation by the game and NFT company Animoca Brands, blockchain game company which brands itself as “Driving digital property rights via NFTs and gaming to build the open metaverse.”
F1 Delta Time lost its trademark license to use F1 / Formula One as part of the F1 Delta Time game. The brand licensing deal apparently had a ‘term’ that expired. F1 did not renew the license. Since the game title and NFTs were based on the use of F1, the game, the NFTs, the website, and the social media channels using ‘F1’ all had to be shut down. NFT buyers obviously bought their NFTs, in part, based on the access to the F1 game, and association with F1. The value of the NFTs was also tied to the F1 brand.
While NFTs – aka token contracts- last forever on the blockchain ledger, the linked digital asset could be taken from you or have its value/utility diminished or extinguished. It is also a valuable and hard lesson for all NFT projects, brands, and IP owners. If the intellectual property of your NFT project is not established by contract, not properly licensed or assigned, or subject to termination, your entire NFT project could flame out on lap 5. While NFT owners have not yet sued F1 Delta Time, there is little doubt that viable legal claims exist. Regardless of whether lawsuits are filed against F1 or Animaco, the legal risks of NFTs are highlighted by this unfortunate but unavoidable license termination.
For the Against F1 Delta Time, the Licensor (Formula 1 Group/Liberty Media Acquisition Corporation), and Licensee (Animaco Brands) by Sub-Licensees (NFT Buyers)? This article will explore the real and hypothetical legal liability of the F1 Delta time NFT project so that other projects can avoid these mistakes. What many NFT projects forget, is that they can be sued in court by NFT owners. Securities law, contract law, consumer protection laws, and causes of action for fraud and misrepresentation are all possible legal claims. NFT buyers who paid hundreds of thousands of dollars for F1 Delta Time NFTs are not likely to go quietly down the road. A lawsuit would be needed to obtain copies of key documents which are no longer publically available.
There is no question that any civil liability could be against the two parties to the NFT purchase, the NFT project itself, and the initial NFT buyers. Subsequent buyers of the NFTs also have potential claims against the project owner.
There could be a liability against the trademark licensor who clearly knew the purpose of the F1 Delta Time Project, that NFT buyers would be relying on that license and may have reviewed materials as part of their license agreement. It would be interesting to ee the license agreement between Formula One and Animaco Brands. Stay tuned for a more thorough analysis in the coming week. In the meantime, here are some articles about the F1 license fiasco.
Owners of F1 Delta Time NFT Assets will supposedly receive the following surrogate value from Animaco Brands to pacify NFT owners.
It is unclear if this will be an adequate surrogate for the value of NFTs and associated tokens moving forward. In the meantime, NFT owners have taken a hit on NFT value, resale, and market demand.
Founding attorney Enrico is a seasoned consultant who guides companies, including law firms, in effectively integrating artificial intelligence (AI). With a wide range of consulting services, Enrico assists clients in harnessing the power of AI while ensuring ethical and responsible implementation.
Years of experience: 35+ years
This page has been written, edited, and reviewed by a team of legal writers following our comprehensive editorial guidelines. This page was approved by attorney Enrico Schaefer, who has more than 20 years of legal experience as a practicing Business, IP, and Technology Law litigation attorney.
