The European Union Intellectual Property Office (EUIPO) has put out a press release this week regarding Virtual goods, non-fungible tokens and the metaverse.

In the report, it says it has seen an increase in applications for such virtual goods.  It says:

Let’s take a further dive in to the world of NFT’s and whether it might be wise for you to register certain NFTs (and other virtual goods) as a trademark, or perhaps more relevantly register trademarks for use as NFTs.

What is an NFT?

A Non-Fungible Token (NFT) is a digital asset based on blockchain technology – the same technology that underpins crypto currency such as Bitcoin and Ethereum.

The ownership of an NFT is recorded in the blockchain as a publicly viewable matter – meaning that owning an NFT is seen as proof of ownership of a digital asset. Each NFT is unique, non-replaceable and not interchangeable.

An NFT is compromised of separate units, or “tokens” each with unique code linking them to specific underlying assets.

The NFT market is still in its infancy and so right now, NFTs are typically seen as “proof of ownership” of the underlying digital asset. However that’s not strictly true. As Wikipedia states:

One way to understand NFTs is to look at them as being certificates of authenticity for digital goods – certificates which cannot be subsequently altered by anyone. For example, if someone purchases a piece of digital art, the NFT is basically verifying and validating the authenticity of the artwork.  The closest analogy in the real world is perhaps an autographed original painting that is authenticated by the artist’s signature or a certificate of authenticity issued by a reputable source.

NFTs and Intellectual Property Law in the UK

Copyright

Many people buying an NFT in the UK might assume that the “proof of ownership” means that they own the copyright – but typically that is not the case. Buying an NFT is a certificate of authenticity, but that isn’t the same as being the copyright owner.

The devil is in the detail, and one needs to look at what the NFT comprises. But to use the example of the painting, if you brought the painting, you buy the right to use it, display it, sell it – but the original copyright lies with the painter still.

The artist retains the copyright – meaning it is s/he who retains the right to further exploit that intellectual property – so the artist could still use the image on prints, t-shirts, merch and so on.

If you want the copyright, then you’ll need a copyright assignment or extended licence agreement.

Trademarks

Where copyright protects original literary works, trade marks protect brands and logos – words, names, logos etc.

When registering a trade mark in the UK, one needs to specify the classification of goods or services in which the mark will be used.

Nike might register its clothing in class 25 and the sale of physical items (whether online or in store) will be covered by that. What the EUIPO is saying is that if products are being solely sold in virtual worlds (aka the metaverse) or via NFT, then it would be wise to register them as virtual goods too.

For example, the fashion label Saint Laurent has this week (22nd July 2022) reapplied for its existing trademarks in Nice Class 9 for “downloadable and recorded virtual goods”, in Class 35 for “online retail store services featuring virtual goods”, as well as further services in Classes 36 and 41, which are clearly focused on use in the metaverse. Their application includes:

One recent example of how trademark and intellectual property law is overlapping with NFTs is the recent Hermès action against Mason Rothschild in New York. This relates to “MetaBirkins” NFTs, which feature images of Hermès’ iconic Birkin bag. Hermès are relying upon their existing trademark to stop the unauthorised use of their brands on someone else’s NFT, and I think that approach would work here in the UK too.

In the UK, trademark enforcement is based on:

1. Identical mark on identical goods – absolute
2. Identical mark on similar goods
3. Similar mark on identical goods
4. Similar mark on similar goods

It is important for a brand-holder to ensure that they are looking to re-register core trademarks in Class 35 (and others) to give the best possible chance of opposing a rogue use of the mark in the NFT world.

25-30 years ago, we saw the first cases of so-called Domain Squatting, where people started registering brands as domain names in what the Court’s called an instrument of deception, and cases were successful in the tort of passing off, showing the bad faith registration of the domain. That line of thought could be used with NFTs.

However, it would be much better if a brand had their trade mark registered for use as NFTs – that would ensure there was an absolute ground for the Court in granting an injunction to stop misuse.

That said, even if a brand hasn’t re-registered to cover off virtual goods and NFTs, if they had an existing trade mark, it is likely that they would still be successful in prosecuting civil claims for trademark infringement.

NFTs and Legal Claims

With the growth of the NFT market, and the more robust protection of global brands, legal claims are bound to follow. Some have happened already in the US. In an ongoing lawsuit, Nike, Inc. sued a company called StockX LLC, claiming the online trainer retailer has infringed on its trademarks by minting NFTs that utilise Nike’s trademarks without its permission. Nike claims that StockX is selling the assets at inflated prices to naïve consumers who believe, or are likely to believe, that the digital asset is authorized by Nike.

In response, StockX has asserted that its NFTs are not “virtual products” or “digital sneakers.” According to StockX, each NFT is “effectively a claim ticket, or a ‘key’ to access the underlying Stored Item,” i.e., a specific physical good authenticated by StockX that purchasers can either leave in StockX’s climate-controlled high-security vault or take possession of, at which time the NFT is removed from the customer’s digital portfolio and permanently removed from circulation.

Interestingly, in the UK, the High Court recently granted permission for a Claim Form to be served by an NFT. The judge granted the Claimant permission to serve the proceedings on persons unknown via an NFT, which was described as ‘a form of airdrop into the wallets’ in respect of which the Claimant first made his transfer to those operating the websites.

NFTs have had a couple of appearances in English Courts, but not much has been tested yet.

In Osbourne v Persons Unknown (10th March 2022), the Court considered an application for an order restraining the dissipation of non-fungible assets alleged to have been stolen by persons unknown from a crypto asset account maintained by the claimant. Although most of the Judgement was about other process and procedural matters, the High Court Judge did comment:

In Wirex Ltd v Cryptocarbon Global Limited (16th March 2021), the UK trade mark CRYPTOBACK registered for financial and software services, in particular a credit card reward scheme under which users were issued with rewards in bitcoin, was valid and infringed by three companies which offered a cryptocurrency cashback service under the same name.

So, Can I register an NFT as a Trademark?

The answer depends on what it is, but probably no! As a brand owner, you should be considering registering your mark again under certain classes to protect mis-use in the NFT world. But buying an NFT does not mean you’re a copyright holder or trademark holder, or that you can use the NFT contrary to intellectual property law.

If you’re a brand owner and are concerned about the virtual world, the meta verse, NFTs and beyond and how your brand interacts with that then get in touch.

For everyone else, we offer a low cost trademark registration service.