HOW TRADEMARKS APPLY TO NFTS

INTRODUCTION

The digital world is now witnessing day after day the influence of NFTs in every aspect of life possible. The NFTs stand for non-fungible tokens. They are not interchangeable, i.e, they are individually unique and cannot be interchanged with each other as they each carry different values. These NFTs are tokens that represent an underlying asset that can be any digital assets like digital art and physical assets like real estate. The NFTs are minted by a person using digital wallets in blockchain ledgers like Ethereum that are empowered by the smart contracts and placed in the market places like OpenSea for sale. The NFTs have authentic ownership because of their unique ID and metadata that can’t be replicated. The smart contracts have codes in them that assign the owner and manage the transferability of the NFTs. Now here comes the question if the NFTs were so unique then why are we seeing disputes regarding the NFTs. These disputes are related to intellectual property rights infringement. Our focus is on NFT and trademarks. This blog will try to answer how are the NFTs and trademarks related? how are trademarks infringed in NFTs? how can trademarks be protected in NFTs?

Relationship between NFTs and trademarks

According to World Intellectual Property Organization (WIPO)

“A trademark is a sign capable of distinguishing the goods or services of one enterprise from those of other enterprises. Trademarks are protected by intellectual property rights”. Trademarks can be signs, names, words, or designs which differentiates the goods and services of one company from other companies. There are different types of trademarks. They are :

Standard character trademark : These trademarks consist of words, letters, numbers, or a combination of these regardless of how they’re displayed. For e.g Coca-Cola® or Mc Donald’s slogan It’s finger lickin’ good!®

Special form trademark : These trademarks are stylized, have designs, or are in colour.

For e.g., The Nike® logo with the swoosh is a combination of a word and a design that is a registered trademark.

Trademarks with their specific goods or services : Head & Shoulders® in standard characters with no design or stylization is a registered trademark for “hair shampoo” owned by the Procter & Gamble Company. 

There is a rush in filing trademark registrations by many famous brands such as Victoria’s Secret, Nike, etc. Why are they hurrying to claim their goods or services in NFTs and metaverse? This is because they don’t want others to take advantage of their trademarks in metaverse or through NFTs. Therefore these companies are protecting their intellectual property, especially their trademarks rights as the goods and services  can be sold digitally. There are many examples like Nike has filed seven different applications for use on various virtual goods and services for its most famous trademarks like “Nike,” “Just Do It,” “Jordan,” “Air Jordan,” the Nike swoosh logo, the Jordan silhouette logo, and a combination of the Nike name and the swoosh logo. Another example is Crocs the shoe company has filed a trademark application requesting the right to use the Crocs name on NFTs for footwear, clothing, bags, accessories and charms for decorating, as well as the software needed to create and sell the digital items. We can see that the scope of current trademarks law covers real-world goods and services and it can also cover the trademarks rights of virtual goods and services. But one must note that there are no existing laws or case laws for such goods and services. The most important thing is that the intellectual properties rights in the underlying asset in the NFTs when purchased by the owner, he or she does not obtain those rights unless and until there is an agreement or a contract for the same. It means there is no ownership over those rights. But if there is an agreement for those rights then the purchaser should see to what scope and extent he or she could use those rights.

Trademarks infringement in NFTs?

On the 14th of January 2022, a luxury design company Hermes filed a suit against Mason Rothschild in the Southern District Court of New York, for trademark infringement. Why? Mason Rothschild had created “METABIRKINS” NFTs which was the same as the design of the Hermes Birkin handbags. Hermes accuses him of selling and advertising these NFTs without the permission of Hermes and has violated its trademarks rights. Another example is Nike a sportswear company, which is suing StockX, an online resale platform for selling shoes and other goods for trademark infringement. The suit is filed in the Southern District of New York. Nike alleged that the StockX has been selling NFTs of Nike brand which was not originally by Nike. And those NFTs were sold at a higher price than the physical asset that the NFTs represent. Nike says that these NFTs sold buy the StockX’s Vault NFTs will confuse the consumers and infringe the trademarks rights of Nike. This is a clear example where a trademark infringement can come into the picture 

  • when the unauthorized person mints the NFTs linked to those underlying assets that are owned by someone else, who has the intellectual property rights for those assets.
  • And when without the permission of the owner of the assets, selling or advertising those NFTs using the asset owners’ registered trademarks 

Ways to protect trademarks in NFTs

The wisest way to protect trademarks rights is to register their trademarks concerning NFTs and metaverse. Also one should avoid using the trademarks of other companies in their NFTs. Many artists like Kings of Leon have released NFTs branded under their trademarked artist names. In the fashion industry, there is a cooperative blockchain ledger called the AURA blockchain that allows consumers to trace the authenticity of their branded luxury goods through NFTs.

There are ways in which the companies could monitor and enforce their trademarks rights. They are:

  • The companies should have a team or so to watch over the NFT marketplaces and take necessary actions such as takedown notices in the NFT marketplaces if there is an unauthorized minting of NFTs linked to their trademarks.
  • The smart contract of NFTs should contain terms of contracts should contain the extent to which the owners of the NFTs could use the business rights, especially about trademarks. In this way, it will help control their business trademarks rights from being infringed.
  • There should be an awareness campaign done that the unauthorized use of trademarks in NFTs is not permissible.

Conclusion

The trademark disputes are on the rise concerning NFTs and metaverse because these concepts are confusing to a common. These are very new and recent developments that the companies have not registered their trademarks concerning NFTs and metaverse for their virtual goods and services in these platforms.  Many companies like Nike, Crocs, and even musicians like Jay Z have trademarked their brands and names respectively in the United States Patent and Trademarks Organization (USPTO). This is because they don’t want to miss out on the opportunity of monetizing their goods and services branded under their trademarks in NFTs and metaverse. And also don’t want others to infringe their economical and trademarks rights. Therefore its high time for the companies to file trademark applications to prevent infringement of their trademarks rights in NFTs and metaverse. The same rule will apply even if they want to expand their business in NFTs and metaverse.

Author(s) Name: Maya Dhayalan (The Tamil Nadu Dr. Ambedkar Law University)