The U.S. Patent and Trademark Office (“USPTO”) and the U.S. Copyright Office (“USCO”) submitted a joint study on non-fungible tokens (“NFTs”) to Congress this week, which they based, in large part, on comments they solicited from interested stakeholders and members of the public through a Notice of Inquiry and three public roundtables. The Offices assert that they endeavored to examine “current and future applications of NFTs; how intellectual property laws apply to NFTs and assets associated with NFTs; intellectual property-related challenges arising from the use of NFTs; and potential ways to use NFTs to secure and manage intellectual property rights.”
> The Pros & Cons: In their report, the Offices acknowledged commenters’ views that NFTs “may enable artists to secure remuneration for downstream resales of their works; aid trademark owners in expanding their brand appeal; or play a supportive role in the management, transfer, or licensing of intellectual property rights.” They also recognized “widespread concern that NFT buyers and sellers do not know what IP rights are implicated in the creation, marketing, and transfer of NFTs and that NFTs may be used to facilitate copyright or trademark infringement.”
> Pros from a Patent Perspective: At the same time, the USPTO and USCO stated that stakeholders “generally agreed that NFTs and blockchain technology present new opportunities for patent holders to aggregate and communicate more complete information about patents with lower transaction costs; manage patent rights; track and collect royalties; and commercialize and monetize patents.” Many commenters also noted that “patent protection for NFT-related inventions is important to encourage continued innovation in this space and provided views on how various patent law requirements apply, or should apply, to NFT- related patent claims.”
> The Issue of Infringement: The Offices assert that “many stakeholders raised concerns about copyright and trademark infringement associated with NFTs,” while also expressing concern that “NFT-specific legislation would be premature at this time and could impede the development of new NFT applications, given the evolving nature of the technology.”
The Big Takeaway: The biggest takeaway from the report comes by way of the Offices assertion that they “do not believe that changes to intellectual property laws, or to the Offices’ registration and recordation practices, are necessary or advisable at this time” in light of the rise and adoption (and subsequent drop in popularity/value) of NFTs. The Offices and no shortage of commenters agree that “existing statutory enforcement mechanisms are sufficient to address the infringement concerns” (this will, of course, be of little surprise to TFL readers, as we have been covering this point (i.e., NFTs are not the wild west when it comes to IP rights) for several years now).
At the same time, the Offices stated that “product transparency and consumer education more appropriately address concerns that fall outside the realm of intellectual property laws.”
As for fashion/apparel-specific mentions in the report … Those are somewhat limited. In one instance, the USPTO reflected on trademark registrations, namely, the appropriate identification and classification of NFT-related goods and services, and cited the International Association for the Protection of Intellectual Property as stating that, “[T]here are other opportunities in the service classes—class 35, 36, 41, and 43—to seek protection for such activities as virtual fashion shows, virtual hotels and restaurants, financial exchanges, and marketplaces for digital goods.”
> The study states that the Nice Committee of Experts added an identification for “clothing authenticated by non-fungible tokens [NFTs]” in Class 25, which represents its acknowledgement that physical goods can be associated with NFTs and provides guidance on how such goods should be classified.
> The USPTO stated in the study that “multiple commenters explained that stakeholders currently face significant uncertainty regarding whether the USPTO and federal courts will, when conducting likelihood of confusion analyses, consider physical goods offered outside of NFT markets as similar to digital versions of those goods associated with NFTs.” It noted that “several commenters reported that this uncertainty stymies brand owners and practitioners in their efforts to make decisions about trademark portfolio management and enforcement strategies.”
Specifically, the USPTO pointed to one commenter’s question about “whether a trademark registration for physical clothing would be cited by the USPTO as a prior conflicting mark during examination of an application for the same mark for digital clothing associated with NFTs,” noting that concerns focus on whether “brands have to expand the scope of their IP portfolios to cover NFTs, possibly embarking on expensive global registration projects,” or if the zone of natural expansion covers use of their marks in this new digital medium. (I have some thoughts on this based on the district court-level outcome in the MetaBirkins case and a couple of noteworthy Office actions from the USPTO.)
> Still yet, the USPTO cited a comment from a representative for INTA who asked, “Will a standard fashion application, for example, for [Class] 25 in apparel, be enforceable in a digital format, whether it’s an NFT or other digital format seen in the ‘metaverse’? Those are issues that our practitioners are grappling with on a day-to- day basis that we really feel need to have some clarity.” Again, I think the court in the MetaBirkins case provided some clarity on this, but for a dive into the uncertainty that “real world” trademark holders have demonstrated when it comes to trademark rights in the digital world (vs. the “real world”), we have more on that right here. We also published a status update on the influx of web3-specific trademark applications for registrations that many brands’ counsels have filed in recent years.)