Digital Collectibles v. Galactacus Funware : An Interim Decision or Harbinger


By  Aastha Mathur on June 22, 2023

1.        Introduction

Earlier this year, Singapore based Digital Collectibles Pte Ltd (“Rario”) and five well-known Indian cricketers (“plaintiff cricketers”) filed a case in the Delhi High Court (“HC”) against Galactus Funware (“MPL”) and Phoenixplay Tech Pvt Ltd (“PTPL”). The suit was initiated due to the creation and sale of NFTs using the name, likeness, and information of the plaintiff cricketers.

While the main suit is still pending, a single judge of the HC rejected a please for interim injunction on April 26, 2023.[1] The judge made several observations concerning the principles of passing off, publicity rights, and the right of free speech. Although these observations are confined to the proceedings before the judge and do not affect the main suit, they are noteworthy due to their approach to NFT rights. This article examines the key facts that prompted the filing of the suit, the HC ruling and its notable features, as well as the potential impact on celebrity rights in relation to NFTs.

2.        Factual Background

2.1        Meet the Players

Rario operates an NFT trading service in India and various other parts of the world. It garnered attention in 2022 for securing a USD 120 million investment from Dream Capital[2]. With the intention of establishing a dominant position in the player NFT market, Rario invested approximately INR 1.5 billion[3] in the previous year to obtain exclusive licenses and partnerships with multiple cricketers.

Galactacus Funware operates under the name “Mobile Premier League,” and offers a game called “Striker” on its platform. PTPL developed Striker which enables users to buy, sell, trade, and rent digital player cards (“DPCs”), which are artistic representations of cricketers in the form of NFTs. These DPCs can be utilized to create a team in an online fantasy sports game. Each DPC accrues points based on the real-world performance of the player, as well as experience points and health points over time. These factors, along with the rarity of the DPC, affect the user’s overall score in the game.

2.2        The Broad Concern

Rario filed for an interim injunction against MPL and PTPL, alleging the unlawful use of player marks through the developed DPCs. Rario argued that this unlawful use has resulted in (i) unfair competition, (ii) unjust enrichment, (iii) tortious or unlawful interference with the economic interests of the plaintiff cricketers, and (iv) breach of personality rights. PTPL and MPL countered by asserting that DPCs are not intended to be traded independently but rather serve as an entry requirement for the online fantasy sports game. They argued that fantasy sports can only be played if all players are listed and identifiable. They further claimed that unfair use applies in this case only if users believe that the marks imply an endorsement by the plaintiff cricketers. Since DPCs for all cricketers have been created, and it is unreasonable for users to assume that every cricketer has provided an endorsement, no case of unfair use can be established.

3.        Ruling

The HC dismissed the petition for temporary injunction, ruling that MPL’s actions do not constitute unfair competition, unjust enrichment, unlawful interference with economic interests, or breach of personality rights. The court noted that the plaintiff cricketers, who are celebrities in their own right, do not suffer any economic harm to their interests, as they earn substantial amounts through various channels such as IPL auctions, BCCI contracts, match fees, brand endorsements, and sponsorships. Additionally, there is no violation of personality rights since consumers are not misled into believing that a specific cricketer has endorsed the DPCs. Finally, the court considered the balance of convenience and the potential for irreparable harm, which favored the defendants. The court observed that granting a temporary injunction during the ongoing Women’s Premier League and Indian Premier League could result in significant economic losses for the defendants.

4.        Salient Features

While deliberating on whether to grant the temporary injunction, the HC made noteworthy observations regarding the rights of the plaintiff cricketers to their persona and publicity in comparison to the defendant’s right of free speech. A brief summary of the observations is given below:

4.1        Scope of Publicity Rights

The plaintiffs claimed that the DPCs violated the publicity rights of the plaintiff cricketers. Publicity rights, also known as personality rights, encompass an individual’s right to control the commercial usage of their identity, including their name, image, likeness, or other distinct identifiers. However, publicity rights are not absolute and must be weighed against the principles of freedom of speech and expression. To establish infringement, it is necessary to demonstrate that the actions of the offending party appropriated the “persona” of the celebrity. The term “persona” refers to a unique and identifiable attribute of the celebrity, such as Michael Jordan’s signature shot. The HC relied on a previous ruling in the case of DM Entertainment v. Baby Gift House[4] (“DM Entertainment”), which established criteria for determining infringement, as well as a decision by a US court of appeals.

  • DM Entertainment

The suit was filed against the defendants for selling dolls that imitated the well-known singer Daler Mehndi and sang excerpts from his famous compositions. The plaintiff claimed that the defendants, without authorization, exploited the artist’s identity and likeness, and thereby infringed upon his exclusive right to market his personality. The HC granted a permanent injunction in favor of the plaintiff and established conditions that must be fulfilled for an act to be deemed an infringement of celebrity rights:

(a)   The plaintiff must be identifiable from the unauthorized use by the defendant;

(b)   The use must be sufficient, adequate or substantial to identify that the defendant have appropriated the “persona” or some essential attributes; and

(c)   The unauthorized appropriation resulted in unearned commercial gain.

  • Keller v. Elec. Arts Inc.[5]

The case before the US Court of Appeals involved the question of whether a video game that depicted college football players as avatars constituted an infringement of publicity rights. In the game, each player’s avatar accurately reflected their real-life attributes, including the player’s jersey number, height, weight, build, skin tone, hair color, and home state but not their name, likeness, or  statistical data. The court applied the “transformative use” test, and found that the use of the celebrity’s persona was almost identical to their real-life activities. Thus, the avatars infringed on the publicity rights of the athletes.

In the current suit, Rario and the plaintiff cricketers fail to demonstrate how the “persona” of the celebrities was misappropriated. The DCPs are artistic representations of the cricketers, with their names and statistical data. The use of artistic representations satisfies the “transformative use” test applied in Keller v. Arts Inc. Use of name and statistical data also is not protected since this information is easily available in the public domain. A case in point is DM Entertainment, where the unauthorized use of Daler Mehndi’s songs (i.e., a doll singing excerpts of his songs) was considered infringement since the /songs are subject to licensing.

4.2        Principles of Passing-Off

The plaintiffs additionally claimed that the use of DPCs by PTPL and MPL on their platform constituted passing off. This is a legal remedy under common law that serves as protection against the infringement of intellectual property. It prohibits unjust enrichment by an individual who falsely capitalizes on the commercial reputation and goodwill of another. This principle is based on the fundamental notion that one should not be able to profit from the efforts and hard work of someone else.

Rario alleged that the defendants relied upon the goodwill and reputation of the plaintiff cricketers for their own enrichment. To determine this, HC referred to ICC Development v. ARVEE Enterprises and Anr (“ICC v. ARVEE”)[6]:

  • ICC v. ARVEE

ICC was organizing the World Cup in South Africa in 2003, for which they created a distinctive logo and mascot and filed trademark applications. The defendants began a sales promotion strategy, using slogans like “Philips: Diwali Manao World Cup Jao,” accompanied by an image of a ticket with a fictional seat stating “Cricket World Cup 2003.” ICC sought an injunction against this promotion, arguing that its events have their own unique personality and this act amounts to passing off. HC observed that the defendants did not utilize any goods/services of the plaintiffs but merely created a slogan using the term “World Cup,” which is generic and non-exclusive. HC further observed that the intent of the sales promotion was to convey that purchasers of the defendants’ products had a chance to win a ticket to the World Cup. HC held that no case of passing off was made out since no reasonable person would mistakenly believe that the defendants were sponsors of the event, and ICC did not suffer any reputational or economic loss.

Similarly, the HC noted that MPL’s DPCs do not imply any form of endorsement or affiliation with the respective cricketers. DPCs were generated for all participating cricketers in the league, and it is unlikely any consumer would mistakenly believe that every cricketer displayed on MPL’s app and website provided an endorsement.

4.3        Right of Free Speech

The HC also compared Rario’s claims of passing off and infringement of celebrity rights with the defendant’s right to free speech. It recognized that an individual’s publicity rights should not impede free speech, as certain forms of expression such as caricatures, lampooning, and parodies should not be seen as infringing on an individual’s right to publicity. These forms of expression are often non-commercial in nature and play a vital role in exercising the right to free speech in a democratic society. It observed that unrestricted enforcement of a person’s publicity rights could produce a “chilling effect” on free speech. In Daniels v. Fan Duel Inc.[7], the Supreme Court of Indiana found the right of publicity to be subservient to the right of free speech, and was cited with approval in the present case.

4.4        NFT: Independently marketable object

At one point, the HC asked Rario point blank if it had an issue with the cricketer’s likeness being used in online fantasy sports. Rario replied in the negative, stating that its issue was solely with the use of DPCs as NFTs. Rario argued that DPCs are not just visual representations but goods in themselves, and celebrities should have the right to control their depiction through NFTs. While consumers may not be misled regarding MPL’s exclusive image rights, they choose to purchase the DPCs solely because they represent the cricketers. The HC disagreed with this view, and held that the primary use of the DPC is for playing the online fantasy sports game. It observed that trading of DPC cards was an added feature to enable users to make changes to the teams by trading cricketers with one another, thus allowing the user to wear the hat of a manager of a team.

If the HC is correct in holding that the DPCs are just an added feature of the fantasy sports game, then there is no requirement for them to be built as NFTs. MPL could apply other methods of authentication and this entire issue could have been avoided. The development and use of NFTs by the defendants is an economic venture in its own right. This is reinforced from PTPL’s website, which prominently displays profits achieved by its users through DPC trading, thus indicating that it is a fundamental and indispensable element of PTPL’s business model. Moreover, the DPCs themselves are intricately and artistically designed, to cater to the aesthetic requirements a consumer may have for trading or owning an NFT image.

5.        Conclusion

While Rario and the plaintiff cricketers have appealed this ruling, it undoubtedly comes as a setback for Rario, Dream Capital, and the numerous cricketers who desire some level of control over NFTs featuring their image and likeness. NFTs are perceived by many as a digital token capturing the celebrity’s persona, akin to timeless memorabilia. This ruling raises questions on whether such NFTs are merely a tool for an online fantasy game or hold some intrinsic significance. The final classification is yet to be determined.

[1] Digital Collectibles and Ors. v. Galactacus Funware and Anr., 2023 SCC Online Del 2306

[2] Dream Capital is the investment arm of Dream Sports, the parent company of Dream 11

[3] Approximately USD 18,196,710

[4] 2010 SCC Online Del 4790

[5] 724 F.3d 1268

[6] (2003) 26 PTC 245 (Del)

[7] 109 N.E.3d  390

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