Basics: What is NFT and what makes it special?
NFT, or a non-fungible token, is essentially a one-of-a-kind trading card that defines a unique digital item. The uniqueness of the NFT is captured on a blockchain, a distributed peer-to-peer computer network. OpenSea, backed by Ethereum, currently represents the largest NFT marketplace and while NFTs have initially become popular mainly among digital art products, the thrilling aspects of NFTs have gradually captured the attention of a wide spectrum of brands, including Nike, New York Post, National Football League and McDonald’s.
The thrilling new era of NFTs
The global value of NFTs in 2021 has been estimated to surpass $40 billion (Klein, 2022; Jones, 2022). Collen (2022) looked into the registration of NFT-related trademarks in the US, revealing that while there was a total of 0 trademark applications for NFTs in 2020, 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 second half of 2021 that NFT-related items have been added to the USPTO list of accepted goods and services.
Emerging trademark issues concerning NFTs
The rapid growth in the popularity of NFTs and associated trademark applications however goes hand in hand with the emerging trademark issues concerning NFTs. Nike, Quentin Tarantino, Birkin Bags are only a few renown examples of brands currently tied up in trademark disputes concerning NFTs (Klein, 2022).
The fundamental issue concerning trademark protection of NFTs stems from the lack of a general agreement on the very classification of these items. As pointed out by Collen (2022), it is not yet clear whether NFTs should be viewed as products or services. While several observers and IP specialists (e.g. Schoenherr, 2021) viewed NFTs to be best categorised in Class 41, falling under the description of educational or entertainment services, a different approach has been taken by the United States Patent and Trademark Office (USPTO) which introduced NFT-related terms in its goods & services classification in 3 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 on-fungible token stores
USPTO is however one of the very few intellectual property offices across the world that has made this attempt to adapt its classification of goods and services to meet the evolving branding needs in the digital era.
With the growing perception of NFTs as “a new digital frontier to buy, trade and sell goods” (Blair, 2022), we can expect to see more and more brands turning towards NFTs. The rise of the Metaverse is likely to fuel this trend in the use of NFTs even further. Trademark protection can be therefore expected to play an increasingly more important role in this new era. Yet, the current lack of clarity and absence of a general agreement on the fundamental issues surrounding the protection of NFTs from an intellectual property perspective can give rise to trademark disputes. In line with the conclusions drawn by Robertson (2022), we can expect that trademark disputes related to NFTs will continue to emerge in the upcoming months and years.
Blair, E. (2022), “How trademark infringement applies to NFTs”, available from: https://www.npr.org/2022/02/09/1079655055/how-trademark-infringement-applies-to-nfts?t=1644914795759, NPR
Clarke, M. (2021), “NFTs, explained”, available from: https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq, The Verge
Collen, J. (2022), “Have you already missed the NFT trademark bandwagon?”, available from: https://www.forbes.com/sites/jesscollen/2022/01/31/have-you-already-missed-the-nft-trademark-bandwagon/?sh=408c3eb72f04, Forbes
Jones, O. (2022), “The rise in NFT and Metaverse-related trademark applications”, JDSUPRA
Klein, D. (2022), “NFT trademarks: DOs and DON’Ts”, available from: https://kleinmoynihan.com/nft-trademarks-dos-and-donts/?utm_source=Mondaq&utm_medium=syndication&utm_campaign=LinkedIn-integration
Robertson, A. (2022), “Nike is testing NFT trademark law by suing a sneaker reseller”, The Verge
Schoenherr, G, I.-L. (2021), “NFTs and branding - Does trademark protection need to be considered?”, available from: https://iclg.com/briefing/16813-nfts-and-branding-does-trademark-protection-need-to-be-considered-austria, ICLG