Intersection of NFT and IP – Developments to Watch

As digital collectibles such as NFTs (non-fungible tokens) become more popular in the age of Web 4.0, more intellectual property issues are inevitably created. For those new to this field, intellectual property generally refers to patents, copyrights, trademarks and trade secrets, but in the world of NFTs, copyright and trademark issues usually attract attention. public.

In China, an April 2022 first-print case was made in Hangzhou, Zhejiang province, involving a “chubby tiger” cartoon. In this case, BigVerse, an NFT minting and trading platform, was sued and found liable for copyright infringement on the basis that it created an NFT using the plaintiff’s work without permission.

BigVerse has received an order from its user to mint and distribute an NFT based on a cartoon illustration titled “A Chubby Tiger Taking Vaccination”. However, the platform did not verify whether the user was an authorized user of the work, even though the creator’s copyright mark was visible on the design.

The Hangzhou court agreed with the plaintiff, who was an exclusive licensee of the creator artist, on the grounds that due to the immutable nature of NFTs: once struck, they cannot be easily removed. As such, the platform has to shoulder a heavier burden to verify user ownership or legitimacy before minting and broadcasting an NFT. The court held that the platform actually operated as a network service instead of just a content provider and should have implemented an intellectual property review mechanism before creating the NFT at issue.

In the United States, there have been several notable NFT-related lawsuits in recent months:

Nike vs. StockX

In early 2022, Nike sued an online retailer StockX for selling NFTs of Nike-branded shoes, after StockX launched its Vault collection of NFTs. StockX told potential buyers that they could exchange the tokens for physical shoes “in the near future.” After filing a lawsuit, Nike managed to purchase physical shoes on StockX’s platform, which allegedly turned out to be counterfeits. Nike has now taken the case to a new level regarding counterfeiting, since Nike considered these physical shoes to be counterfeits.

It would seem that if StockX only sold its NFT Vault as a “claim ticket” that customers could later exchange for real shoes, they might be able to get away with this practice. After all, NFTs are popular now and if it’s a way for StockX to generate more business, all the more power for them. Moreover, their use of NFTs will definitely lead to more sales for Nike. However, if their sale of the NFT Vault generates much more revenue than a simple claim ticket, one could argue that their NFTs pass on the goodwill of the famous Nike brand. Worse still, if the physical shoes that Nike or other customers buy turn out to be counterfeits, it wouldn’t be surprising if StockX lost credibility, and all bets are off.

Hermes versus Rothschild

Circa December 2021, artist Mason Rothschild created digital images of fur-covered versions of Hermès’ luxury Birkin handbags. The artist called the images “MetaBirkins” and sold them as NFTs.

Hermès is a well-known luxury designer of many fashion products, including its unique Birkin handbag. Hermès owns the trademark rights to the Hermès and Birkin brands, as well as the trade dress rights to the Birkin design. Hermès has accused Rothschild of ripping off the design of the French luxury brand’s iconic Birkin bag. Consumers posting to the artist’s MetaBirkins Instagram page had expressed genuine confusion with the MetaBirkins collection. Similar confusion over the source of the MetaBirkins had been reported in the media.

Unsurprisingly, Hermès sued Rothschild in January 2022, alleging that the artists’ MetaBirkins NFT collection violated its trademarks of the famous Birkin bags. Hermès called the artist a “digital speculator looking to get rich quick.” Hermès sued for trademark infringement, trademark dilution and cybersquatting.

A main question is whether “MetaBirkins” is used as a trademark to indicate its source, or as an artistic expression. Hermès alleged that the artist used the MetaBirkins trademark in commerce to mark its products and generate publicity. The artist claimed that the digital version of the fur-covered Birkin bags was an artistic creation. Also, the title of the artwork, “MetaBirkins”, was not used as a trademark for its products. As such, its use of the Hermès trademark should be entitled to protection under the First Amendment, which must be weighed against its trademark rights in this Second Circuit. This case is currently pending in the Federal District Court of New York.

As an intellectual property practitioner, recent cases from China and the United States seem to suggest an inevitable intersection, or collision, between intellectual property rights and free speech rights as NFTs begin to be in the foreground. While free speech rights are fundamentally important to a society, the rights of intellectual property owners must also be considered, as always. Preferably, any rights created by the adaptation of NFTs should always be analyzed in accordance with the existing legal framework for intellectual property. In other words, what is not permitted under existing intellectual property laws should not become permitted simply because of new NFT technology – at least not without consideration and balancing. In any event, there is unlikely to be a clear test for this collision, and it is expected to be a test of balance on both sides. Stay tuned!

PS On June 9, 2022, two prominent members of the U.S. Senate Intellectual Property Subcommittee requested that the U.S. Patent and Trademark Office and the U.S. Copyright Office partner and study TLS and their impact on intellectual property rights.2

In a letter, the senators asked the two executive agencies to review NFTs in light of their rapid global growth “since their relatively recent introduction.” As mentioned above, NFTs are unique digital assets that are stored on a blockchain and represent ownership of an item.

The senators’ letter asks several questions, including whether there would be any intellectual property issues with future applications of NFTs, how the transfer of an NFT affects the rights associated with that asset, how licensing and infringement rights work. and what intellectual property protections are granted to an NFT creator. Again, it’s an exciting time for IP and NFTs. Stick around!

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