From NFTs and trademarks, to blockchain and copyright, and the wider metaverse and IP, the fast-evolving digital landscape offers both risk and reward to IP owners. In this article, we examine the implications for IP rights of recent digital developments and offer advice on how to manage IP threats and opportunities.
Developments in NFTs, cryptocurrency and the metaverse are already having implications for IP rights and strategy. If blockchain, cryptocurrency, the metaverse, NFTs and trademarks are not yet on your list of day-to-day IP priorities, they will soon be.
What are NFTs?
Non-fungible tokens or NFTs are one-of-a-kind non-interchangeable tokens that typically take the form of pictures, gifs, audio and video files, and can be used to represent nearly any unique physical or virtual property.
First launched in 2007, NFTs currently make up a booming multi-billion-dollar world. As an example, the sale of a pair of virtual sneakers by RTFKT Studios (pictured below) raised US$31 million in just seven minutes in March 2021.
Ownership status is guaranteed by blockchain technology, which means that it can be easily tracked and proven. Creator status is verified in the same way, so those that create (or ‘mint’) NFTs can sell and earn royalties, as well as determine the scarcity and value of their creations.
What is the metaverse?
The metaverse is the term coined to describe a fully-realized digital world, in which complete infrastructures, environments and assets exist in the digital space. As brands and consumers have increasingly shifted into the digital world, the metaverse has gained a lot of momentum but it is still not fully developed.
Interesting developments in the metaverse, such as Decentraland, are starting to gain traction, however. Decentraland is a first-of-its-kind, blockchain-based, decentralized 3D virtual world, in which users can create content and purchase digital assets (as NFTs) using cryptocurrency on the Ethereum blockchain.
NFTs and trademarks: What do tokens and the metaverse mean for IP?
Right now, there is considerable uncertainty and lack of clarity about NFTs and trademarks, and indeed IP rights in general, as can be seen by looking at recent NFT news.
For example, there have been cases where buyers assumed that copyright was automatically transferred when they purchased an NFT, when in fact copyright is not automatically subject to an NFT transaction (as with The Crypto Bros Who Thought They Bought the Rights to Dune).
There have also been cases where sellers and marketplaces sold NFTs that later turned out to be plagiarized or fake (as was the case recently with 80% of the NFTs sold by OpenSea).
Another common scenario is where an NFT is based on an IP-protected work, which gives rise to discussion of whether the NFT is infringing third-party rights or is its own individual work of art. The MetaBirkin (pictured below) is one such example.
In 2022, French luxury designer house Hermès sued the digital artist responsible for the MetaBirkin NFTs (fuzzy representations of its well-known Birkin handbag) for trademark infringement, trademark dilution and cybersquatting in the US. The artist is selling the NFT using MetaBirkins as a brand name, including launching a dedicated metabirkins.com website.
With the lawsuit still ongoing (MetaBirkin’s creator recently filed a motion to dismiss the case), brand owners and creators alike will be eagerly awaiting the court’s ruling and any subsequent appeal.
NFTs and trademark protection
While, from a brand owner’s perspective, the IP implications of NFTs are yet to be fully seen, existing legal systems and mechanisms do offer some protection for their trademark rights. Article 9 of the EU Trademark Regulation (EUTMR) protects trademarks with reputation, for example, while platforms such as Decentraland have introduced IP enforcement and protection takedown mechanisms, as is the case with other digital platforms.
Nonetheless, this is still early days in the battle for IP ownership rights online. As our experts shared during the webinar, steps should be taken, where possible, to protect valuable brand assets, whether that be issuing your own NFTs (and filing trademark applications to protect them) or filing defensive trademark applications for potential (future) products.
It may also be that the future of IP management could well include a solution that uses tokens, such as NFTs, to secure ownership and protection.
IP tokenization and blockchain tools are already starting to be introduced, both to timestamp and prove ownership (as with Questel’s Orbit Blockchain software) and to assist in the fight against anti-counterfeiting.
The EU IP Office (EUIPO) has been exploring blockchain as a means to ensure product authenticity, while the World IP Office (WIPO) has been investigating ‘potential applications of blockchain technology in IP ecosystems’ for all types of IP assets, including both registered and unregistered rights.
Benefits of a proactive strategy for NFTs and trademarks
Many lessons can also be learned from brand owners’ own forays into this new digital world. Footwear giant Nike is just one of many companies currently making headlines for tokenizing its products on the Ethereum blockchain. It applied for its CryptoKicks patent at the USPTO in 2019 citing the need to ’ensure authenticity of assets, increase brand value, create new revenue channels, and generate additional consumer experiences’. (Nike also acquired virtual sneaker company RTFKT Studios in December 2021.)
Other brands have been equally quick to recognize the marketing benefits of NFTs. Food chain Taco Bell auctioned a limited run of digital tacos to great fanfare in early 2021, soon followed by the McDonald’s McNFT. Meanwhile, Clinique (part of Estée Lauder) launched a limited-edition NFT as part of a social media competition to reward customer loyalty and luxury brand house Gucci launched its own metaverse and NFT project Gucci Grail in March 2022.
This article is a summary of our recent webinar ‘The age of metaverse and NFTs‘ presented by Carrie Duijn-Boergonje, a Senior Trademark Advisor at IP consultancy firm Novagraaf, part of the Questel group.
Interested to find out more? Contact us for specific advice or support, or watch the recording of our recent webinar The age of metaverse and NFTs: How to prepare and protect yourself for this new world.