Intellectual Property (IP) legal and policy problems linked with non-fungible tokens were recently investigated in research done by the United States Patent and Trademark Office (USPTO) and the United States Copyright Office (USCO) (NFTs). The purpose of this research was to investigate the potential effects of this new technology on intellectual property rights, as requested by the U.S. Senate Subcommittee on Intellectual Property.
The two departments collaborated on this initiative by holding public roundtable discussions on the topics of trademarks and NFTs, patents and NFTs, and copyright and NFTs. There were trademark owners and practitioners and industry representatives on the panels for this series’ trademark-specific installment. IP officer of Greensfelder, Angela Kalsi, spoke on the opportunities that NFTs present for the IP industry and how the USPTO can better protect and enforce IP in this new landscape.
When do NFTs occur?
New Financial Tokens (NFTs) are a type of digital asset that uses blockchain. NFTs are one-of-a-kind and cannot be substituted with anything else. As an alternative, they are made up of cryptographically unique software code that represents a claim on underlying assets. The code may contain a “smart contract” that describes the specifics of the NFT in question and may even specify who owns any related intellectual property.
NFTs are frequently employed in the authentication of digital asset ownership. To put it another way, they serve as official stamps of approval. Using a purchase of digital art as an example, the NFT would verify the buyer’s right to the work and the work’s validity. It is essential to clarify that NFTs are not the same as the underlying work they reflect; this is a common misunderstanding. So, unless the seller expressly grants ownership of the underlying IP to the work, the buyer will only possess a representation of the “tokenized” work in the form of an NFT.
The Importance of NFTs
In 1975, patents, trademarks, and copyrights accounted for 17% of the value of the S&P 500. Ninety percent as we reach the Web3 era. Experts in the field concur that in today’s economy that rewards innovation, improved speed, lower costs, and more simplicity in the protection of intellectual property are all necessities.
With an NFT, you may claim ownership of an item that can be copied easily. For example, it’s simple to make several copies of digital artwork by just downloading a copy. Digitally signed documents may be verified as having been created at a specific time and date thanks to time-stamping smart contracts. To prevent fraudsters from staking bogus claims to intellectual property, NFTs make ownership transparent and easy to trace. Several firms are currently employing NFTs to monitor commodities in a supply chain to assure quality and provenance from manufacture to point of sale, proving the technology’s viability for use with real-world assets. At a recent panel on trademarks, participants expressed optimism that distributed ledger technology would streamline asset transactions while reducing the potential for fraud. This would allow businesses to more easily transfer assets and data between decentralized platforms and provide new opportunities for creatives to expand their markets. In the field of intellectual property, this technology may potentially pave the way for NFTs to replace more established forms of IP ownership proof, such as trademark registration certificates.
Perils of NFTs
Not everyone on the panel shared this upbeat outlook. A lot of people were curious about difficulties that have left firms doubtful of their abilities to safeguard their brands in the NFT sphere. Trademark attorneys have questioned whether Class 9 is the right place for a digital token and have urged the USPTO to collaborate with foreign communities to standardize registration categories. In addition, it was mentioned that the USPTO should provide guidance on how trademark holders submitting applications to secure their rights in this technology should deal with specimens of usage. Others inquired concerning safeguards for IP holders who have no interest in entering the digital sphere but are concerned about brand infringement there. For instance, will the USPTO raise red flags during its 2(d) examination of an ordinary fashion application filed in Class 25 against a junior mark filed in Class 9? The recent decision in Hermès International, et al. v. Mason Rothschild made it obvious that digital representations of real-life items might infringe their real-life equivalents, thus the USPTO must keep up with the times in terms of its inspection processes.
Metaverse trade dress was also identified as a developing concern. For instance, is it possible to secure the setup of a fully virtual product? The phenomenon wherein some NFT developers relinquish all economic rights to utilize the IP in NFTs sold was also investigated. Wouldn’t it lead to dilution of the underlying brand and the danger of trademark confusion if the owners of comparable NFTs decided to sell the artworks they’d licensed in order to brand their own businesses?
While the promise of NFT technology is exciting, it also presents some novel difficulties. It’s encouraging to see the USPTO and USCO take the initiative to investigate these problems.