Recently, non-fungible tokens (“NFTs”) have become the subject of significant public attention, primarily due to the high amounts of money allocated for their purchase. For example, it is estimated that the worth of the global NFT market in 2021 was about 41 billion dollars, which is more than the value of the market of classical works of art. For the sake of comparison, that is approximately twice the amount of the budget of the Republic of Serbia for 2022. Bearing in mind the nature and manner of functioning of NFTs, the nature of things raises the question of their relationship with intellectual property law, and above all, the relationship with trademark law.
What is Indeed NFT?
NFT stands for “non-fungible token.” An NFT is a digital asset that can be used to represent unique, one-of-a-kind assets – usually crypto-properties. An NFT can technically contain anything digital, including drawings, animated GIFs, songs, or video game items. NFTs can also represent a wide range of property assets that exist in the real world, such as a piece of art, a song, videos, collectables, and even real estate.
What’s the Purpose of NFTs?
NFTs allow the purchase and sale of ownership of unique digital and physical items, as well as keeping track of who owns them using the blockchain technology. Blockchain records cannot be manipulated because they are maintained by thousands of computers worldwide.
NFTs can have only one owner at a time, and blockchain technology secures their ownership information. This prevents easy copying of digital assets, and also ensures the authenticity of unique properties.
Increased Interest in Trademark Applications Related to NFTs
Trademark is a right that protects a sign which is used in trade for the distinguishing of goods and services of one natural or legal person from the goods or services of another natural or legal person.
Trademarks prevent consumer confusion by ensuring that competitors cannot use the same or similar name or symbol. This exclusivity is particularly valuable when it comes to NFTs because their value is based on authenticity and trust. Bearing this in mind, not surprisingly, there is great interest in applying for trademarks in connection with products related to NFTs and NFTs individually.
For reference, there was a total of 0 trademark applications for NFTs in the US in 2020. However, this number has exponentially grown to 20 in 2021 and 2,023 in the first month of 2022. There is an obvious explanation for this rapid growth which can be found in the fact that it was not until the second half of 2021 that NFT-related items were added to the USPTO list of accepted goods and services. Even though there are few different views on the matter of categorization of NFTs, USPTO took a stand that NFT-related marks should be classified into three different classes:
- Class 9: Downloadable music files authenticated by non-fungible tokens (NFTs)
- Class 35: Provision of an online marketplace for buyers and sellers of downloadable digital art images authenticated by non-fungible tokens (NFTs)
- Class 42: Creation of online retail stores for others in the nature of web-based service that allows users to create hosted crypto collectible and blockchain-based non-fungible token stores.
The Uncertain Outcome of Ongoing Cases Regarding NFTs and Trademark Infringement
One of the trademark infringement ongoing cases before the District Court in New York may become the basis for further action in NFT-related cases. In early 2022, one of the largest sports equipment companies filed a lawsuit in the United States against a platform used to resell and buy sneakers, claiming that their trademarks were infringed. Namely, as stated in the lawsuit, the trademarks are used without approval and with the provision of NFT mining services (the service of placing NFT on the blockchain network) and to be further sold to customers who are misled that these NFTs are related to the sports producer equipment. The lawsuit was further expanded with claims related to counterfeiting and false advertising.
This whole case indicates the existence of uncertainty regarding the connection between NFT and physical products, i.e. the metaverse and the real world. The decision in this case will be very interesting and of great importance for further similar disputes in the future, which number will certainly be increasing.
This text is for informational purposes only and should not be considered legal advice. Should you require any additional information, feel free to contact us.
By Milan Samardzic, Partner, and Nikola Dragic, Junior Associate, Samardzic, Oreski & Grbovic