What trade mark owners should know about NFTs
by Kajaal Nagindas & Jeremy Speres. Intellectual property implications need to be considered with regard to trade mark rights in the Metaverse and for NFTs.Tuesday, 19 Apr 2022
by Kajaal Nagindas & Jeremy Speres. As companies explore opportunities in the digital realm, the intellectual property implications need to be considered, especially with regard to trade mark rights in computer generated virtual reality environments, such as the Metaverse, and in the trading of Non-Fungible Tokens (NFTs).
The term “metaverse” is a portmanteau (combination) of the words “metaphysical” and “universe”. It comprises computer-generated virtual reality that encompasses entire world within worlds. It is built “on top” of the internet, making it an immersive experience. In the Metaverse worlds (“multiverses”), users interact with each other through avatars of themselves or other characters. They can explore this shared space, talk to each other, engage in various activities, play games, go shopping, and create their own worlds.
NFTs are a digital asset, or a type of token, that cannot be reduced to a common denominator. In other words, each token is unique and has a distinguishable identity. NFTs are not interchangeable and are traded on a blockchain. They have become popular in many different industries as they provide an opportunity to create scarcity of non-physical assets.
NFTs are valuable because they represent ownership of an entity or object, which is digital, in the physical world. They create a digital scarcity that is not possible with traditional cryptocurrencies. This creates a new form of virtual property that can be traded and exchanged as if it were tangible goods. The value increases as the number of users increase. NFTs are becoming popular for many reasons. The most important of them being that they are more secure and easier to maintain than any other type of token. They also provide a lot of utility to the user which makes them more valuable in the long run.
What is the link between the Metaverse and NFTs?
The Metaverse is the world of virtual reality which has been made possible by blockchain technology. NFTs are a type of digital asset that can be created on the blockchain. These assets range from virtual land to digital artwork. This means that users can create a unique and personalised world for themselves, as well as explore other people’s worlds.
Who owns NFTs and the intellectual property associated with it?
NFTs are owned by whomever holds the private key and they cannot be transferred without an explicit agreement with the token holder. Owning an NFT is not the same as owning the copyright or the intellectual property associated with it. The NFT does not give you legal ownership over the underlying asset associated with that token.
The intellectual property of the underlying asset remains the property of the owner of the intellectual property unless the terms of sale of the NFT provide otherwise. However, you would get an implicit IP right to use the digital content of the NFT and to capitalise the digital content on the NFT platform. For example, if you buy an NFT for Gucci handbags, the trade mark for Gucci remains with Gucci but you get the implicit IP right to use the digital content. When an unauthorised party tries minting, selling or reselling that Gucci NFT, using the underlying asset without the registered trade mark owner’s permission, this act may constitute trade mark infringement.
If there is a legal dispute concerning an NFT, the domicile of the seller, buyer and the NFT platform should be considered for determining which court of law has jurisdiction for the particular claim. When creating an NFT, the creator must ensure that the digital content does not infringe other parties’ intellectual property or privacy rights.
Which brands have filed trade marks for the Metaverse and NFTs?
Brands like Nike, Crocs, Hot Wheels, Bazooka, Walmart and McDonalds have filed their trade marks for the Metaverse. Mattel Inc, Nike, Puma, McDonalds, Estee Lauder, Louis Vuitton, Prada, Walmart, L’Oreal and NYSE filed trade mark applications for their NFTs. Celebrities that have filed trade mark applications for their NFTs are Dolly Parton, LeBron James, Logan Paul, Kobe Bryant and Jay-Z.
What does all this mean for trade mark owners?
The Metaverse will be a world that exists in parallel to our own. Therefore, the trade marks that we have in our current world, will have to be protected for the Metaverse too. Trade mark owners should consider extending their brand protection to cover virtual goods and services so that such rights are recognised in a virtual marketplace like the Metaverse.
As the concept of protecting trade marks for the Metaverse or for NFTs is relatively new, there is a bit of uncertainty in which classes the trade marks should be filed. At the moment, the following classes are applicable for the Metaverse:
- Class 9: Downloadable virtual goods for use in online virtual worlds.
- Class 35: Retail store services featuring virtual goods for use in online virtual worlds and virtual retail stores.
- Class 41: Entertainment services for use in virtual environments created for entertainment purposes, including virtual concerts and performances.
Currently, the following classes are applicable for NFTs:
- Class 9: Non-refundable token-based goods for use online and in virtual worlds; non-fungible tokens; digital tokens based on blockchain technology.
- Class 35: Provision of an online marketplace and registry for buyers and sellers of digital assets.
- Class 36: Financial services such as non-refundable token trading; issuance of digital tokens.
- Class 41: Providing online non-downloadable virtual goods.
- Class 42: Providing temporary use of non-downloadable virtual goods/digital media and non-fungible tokens (NFTs).
Since trade marks are territorial, if a separate Trade Mark Office and Judicial System are opened in the Metaverse, you may need to obtain protection there, in the same way as you need to obtain protection in the different countries.
Main image credit: Pixabay.com.
Kajaal Nagindas is a Senior Associate at Spoor & Fisher; and Jeremy Speres is a Partner at Spoor & Fisher.
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