Senators Want NFTs and IP Issues to Work Together

With a market cap forecast of over $35 billion for 2022, there’s no question that non-tradable tokens (NFTs) are hugely popular. However, the intellectual property rubric underlying these NFT offerings is inconsistent, confusing and in many cases in conflict with applicable law. These issues apparently came to the attention of North Carolina Senator Thom Tillis and Vermont Senator Patrick Leahy in a letter dated June 9, 2022 (based on their roles as Ranking Member and Chair of the Intellectual Property Jurisdiction Subcommittee). He requested the USPTO and the Copyright Office to undertake a joint study addressing a number of IP legal issues related to NFTs. Speaking of these roles and their broader interest in “the continued development and use of emerging technologies,” Senators asked the study to address the following non-exclusive list of questions:

  • What are the current applications of NFTs and the associated IP and IP challenges?

  • What potential applications of NFTs do you foresee in the future and what are their related potential IP challenges?

  • For current and potential future applications of NFTs:

    • How are transfers of rights applied? How does the transfer of an NFT affect the intellectual property rights in the related asset?

    • How are license rights enforced? Can and how can intellectual property rights in the associated asset be licensed in the context of an NFT?

    • How is the violation enforced? What is the potential breach analysis where an NFT is associated with a third-party IP-covered entity? Or where the underlying asset associated with an NFT is owned by the NFT creator and has been breached by someone else?

    • What intellectual property protection can be provided? What IP protection can be provided to the NFT generator? What if the originator of the NFT is a different person or organization than the originator of the associated entity?

    • How else does 17 USC § 106 apply?

  • What are the current and potential future uses for your agencies, internal and external, to use NFTs to secure and manage intellectual property rights?

  • How do existing legal protections for copyright, such as the DMCA, apply to NFT markets, and are these protections sufficient to address current infringement concerns?

We consider many of these issues for our clients. We’ve also shared some concrete examples of these intellectual property issues on this blog. For example, our article on the subject StockX The lawsuit explored how and whether the first sale and nominee fair use trademark doctrines apply to NFTs depicting physical goods protected by trademarks. In the same post, we summarized the many unanswered questions about IP that are at the heart of this case, which should reflect the core of the questions proposed for the study, such as the extent to which the benefits or costs of ownership of NFT are communicated beyond or separately from those related. by ownership of physical property?

In another recent post discussing the DMCA’s applicability to the NFT market, we noted that the Copyright Office published a report in 2020 describing the DMCA’s notification and takedown system as “unbalanced” and recommending ways in which Congress could change the current regime. . Our post discussed in detail the nuances of DMCA removal of an NFT stored on the server-based internet, as well as the nuances of hiding using an alternative to traditional location addressing (i.e., link) called “content addressing”. An additional post on this blog is surrounding NFTs and the DMCA, including, among other things, the extent to which an NFT miner who owns the copyright of NFT-related content may issue a valid DMCA takedown notice to an NFT marketplace operator. raised many issues. Request delisting of NFT if NFT has been distributed without a license to open content to the recipient. The Copyright Office can address these issues in any study that addresses the adequacy of the DMCA takedown regime to address the presence of infringing content on NFT marketplaces.

Senators have requested that the USPTO and the US Copyright Office respond to this request by July 9, 2022. If Agencies choose to undertake the work, Senators have requested that the work be completed by July 2023. However, the pace of innovation in NFT and the crypto space and IP issues and current active litigation related to NFTs could be market-driven answers to many of these questions even before the study is published. And of course, as technology, creativity, and business models continue to evolve at an incredible rate, there are likely to be new issues to consider.

Proskauer Rose Summer Associate Caroline Rimmer wrote this article.

© 2022 Proskauer Rose LLP. National Law Review, Volume XII, No. 189

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