June 17, 2022 – Although NFT technology is relatively new, the intellectual property laws that govern it are not. Still, the growing popularity of innovative technologies like NFTs may raise new legal questions as brands expand their metadatabase presence.
In our last article we discussed how design patents can protect NFTs. Now is the time to consider how existing trademark and copyright laws can be used to protect brands, NFTs and NFT-related products in real life, and to consider the metaverse, a three-dimensional virtual world that often mimics the physical world we live in. metaverse can come together to play games, socialize and network virtually. Companies with a wider presence in the metadatabase can strengthen their trademarks and copyright protections in this area.
Trademark law and benefits of federal registration
A trademark is a name used to distinguish and distinguish the source of a person’s or company’s goods and services from other sources. Typically, trademarks consist of one or more letters (for example, Chanel’s interlocking Cs), a word (for example, Starbucks), an image (for example, Apple’s bitten apple), a shape (for example, Nike’s). swoosh) or colors (for example, red soles by Christian Louboutin). A subset of trademark law, a trade dress preserves the visual appearance of a product or its packaging (for example, the shape of a Hershey Kiss).
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There is nothing inherently unique about applying for trademark registrations covering NFTs. The trademark must be used in commerce, be distinctive, and be used as a source identifier for certain goods and services.
The critical issue is registering the sign in the correct class. The United States Patent and Trademark Office (USPTO), which oversees the registration of federal trademarks, divides trademarks into 45 classes of goods and services.
Individuals and organizations that print NFTs should consider filing in grades 9 (computers and scientific devices), 35 (advertising and commercial services), 41 (education and entertainment services), and 42 (science and technology services). Many brands across industries have applied for NFT trademark registrations, including Johnson & Johnson, 3M, L’Oréal, Coach, Gucci, Balenciaga, Wendy’s, Utz, Mastercard, Mattel, and Lion’s Gate.
A federal trademark registration provides two main benefits: (1) protection and (2) participation.
First, a federal trademark registration provides brand exclusivity because only the trademark owner can legally use the trademark as a name/mark for their NFT. Trademark ownership is also critical to combating counterfeiting. Just like in the physical world, trademark registrations are required to bring an NFT counterfeit claim.
Second, trademark ownership facilitates the development of advertising campaigns and licensing/collaboration opportunities, which is especially important when companies tap into metadata. For example, Balenciaga and Fortnite (owned by Epic Brands) have collaborated and this may expand to co-branded NFTs in the future. Indeed, Balenciaga has a business unit devoted to metaverse issues focused on virtual experiences and offerings.
NFT trademark lawsuit
Currently, two major lawsuits involving NFT and trademark rights are pending in the United States District Court for the Southern District of New York. These lawsuits are among the first major trademark issues involving NFTs to be sued.
Hermès International – Rothschild. As discussed in our first article in this series (“Exposing NFTs and intellectual property: what you need to know,” Reuters Legal News and Westlaw Today, May 10, 2022), Hermès sued artist Mason Rothschild after he began selling NFTs on display. Hermès “Birkin Bag” using the name METABIKINS. In addition to alleging that the BIRKIN trademark was infringed and diluted, Hermès claimed that Rothschild violated the trade dress for the Birkin Bag (here, the overall shape and design of the bag).
Rothschild was dismissed, citing the First Amendment defense. In doing so, Rothschild Rogers v. He relied on Grimaldi’s (2d Cir. 1989) test that the use of a sign in an expressive work is protected speech and thus not infringing (even if sold for profit) (1) the work is artistically relevant and (2) the use is “clearly misleading” is not.
In response, Hermès amended her complaint, providing additional context for the trademark infringement claims. Rothschild was reinstated, still relying on the Rogers test to support Hermès’ claim that his claims had failed.
On May 18, 2022, the court decided to dismiss the case. Although the court ruled that the Rogers test was at least valid for trademark infringement analysis, it refused to dismiss Hermès’ claims. The court decided that whether Rothschild’s use of the BIRKIN trademark was clearly misleading as to the source or content of the work was a factual determination that could not be determined at the stage of the motion to dismiss the case.
Nike, Inc. – StockX LLC. StockX, an e-commerce resale platform, launched The Vault in late 2022, allowing buyers to track ownership of physical products (e.g. sneakers) purchased on StockX and guarantee their authenticity. Nike subsequently sued StockX, alleging that its use of Nike’s famous brands in connection with StockX’s NFTs constituted trademark infringement.
Nike’s initial complaint alleged that StockX was printing NFTs using Nike’s trademarks without permission. StockX responded by explaining that NFTs are not physical products and claiming that their NFT does not infringe any of Nike’s rights. StockX’s response also claimed that each NFT is tied to a particular physical product that has already been verified by StockX.
As a result, Nike sought permission to file a complaint that was amended to include allegations of fraud and false advertising. Nike claimed to have made test purchases specifically from StockX and determined that at least four pairs of shoes StockX claimed to be genuine were actually fakes.
On May 24, 2022, StockX submitted a notice to the court announcing that it had no intention to challenge Nike’s pending move.
Copyright law in the metastore
Copyright protects original works of authorship fixed in the form of a tangible statement and gives its owner the right to copy and distribute the fixed work for a period of time. Types of works that can be copyrighted include paintings, photographs, illustrations, musical compositions, sound recordings, computer programs, books, poems, blog posts, films, architectural works and plays.
To receive proprietary copyright protection, a work must be “original”, meaning that the author created the work independently. Also, it must have at least a minimal level of creativity to be eligible for copyright registration. Many NFTs qualify for copyright protection.
Things get even more complicated when someone usually sells an NFT on the metaverse. Buying an NFT can be likened to buying a painting. Typically, the buyer acquires the rights to resell and exhibit the painting, but does not own the underlying copyright to the painting.
What the NFT buyer ultimately obtains may or may not contain a copyright, will be outlined in the smart contract associated with the NFT and will depend on the seller, platform and listing. This has caused some market confusion as NFTs are fairly new.
Recent transactions reflect this confusion. For example, OpenSea withdrew a Basquiat drawing NFT from an auction after the artist’s property objected to the seller’s claim that NFT’s sale would cover the rights to the physical artwork, including the right to destroy the artwork.
As another example, a group called Spice DAO spent $3 million on a rare copy of filmmaker Alejandro Jodorowsky’s book Dune and stated that it initially intended to assemble and sell NFTs based on the book. Still, the Spice DAO didn’t buy the copyright to Dune and thus was likely unable to convert it without suing the copyright holder.
In addition to obtaining registrations for trademarks and copyrights, which will provide the necessary tools to prevent others from misusing valuable brand assets, brands may also consider making a presence in the metaverse by presenting their products and merchandise, establishing virtual showrooms and taking other steps. expanding their footprints and enabling the use of their brands. Doing so not only provides companies with opportunities for expansion, but can also help prevent widespread unauthorized use of intellectual property rights by third parties and facilitate the enforcement of proprietary rights.
Brands should also monitor the metadata store for unauthorized uses of their trademarks, trade dress, and copyrights. Ideally, enforcement measures should be taken as soon as a violating NFT goes up for sale on an exchange, preferably before it is sold.
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