Ask the Expert – NFTs and Intellectual Property

Non-fungible tokens (NFTs) are a hot topic at the moment and when new technology such as this meets existing laws, things can get interesting.
What are NFTs?
Non-fungible tokens (NFTs) are digital tokens stored on blockchain and represent real-world items, once an NFT is formed, it is unique and cannot be replicated. They also cannot be deleted but simply ‘burned’ rendering them non-transferrable. Think of them akin to art works or trading cards in digital form. NFTs find their value in virtual worlds in the metaverse, such as OpenSea, Roblox, Cyrptoboxes and Decentraland. At the moment, there are a number of different platforms for these virtual worlds and there is no one central metaverse. Maybe this is something that will come in time.
So what does an NFT have to do with retail?
It is worth noting that NFTs can exist both in the ‘real’ world as digital artworks which are openly traded on the various peer to peer platforms, but we are also now seeing them within the metaverse. This means that NFTs are crossing the border from the real world to the virtual world. Retailers are starting to purchase ‘land’ in the metaverse to sell virtual goods, which includes those in the form of NFTs.
For example, a user can purchase fashion items as NFTs which only exist within the metaverse. So their virtual avatar has the latest designer outfit, but it is all virtual and importantly, there appears to be a market for it. There have been reports of some NFTs selling for incredible sums of money, the NFT of the first Tweet by Jack Dorsey sold in March 2021 for $2.9million! Such a purchase does seem questionable when the tweet is simply some text and readily readable online but as the saying goes, ‘one man’s trash is another man’s treasure’. 
Interaction with Intellectual Property law and what retailers should consider
Brand owners are now starting to file trade mark applications for their core brands which have entered into this digital age of NFTs and the metaverse. Given how new and evolving both NFTs and the metaverse are, in terms of their popularity and uses, brand owners are now realising there are gaps in their trade mark protection.
For example, a fashion house would normally have clothing, bags and accessories covered under their trade mark registrations but now they are having to think about digital versions of these, which would fall under the computer software heading. Retailers specifically will need to consider whether their trade mark registrations cover the retail services of virtual goods. We are even seeing trade mark applications covering entertainment services which is a little outside the box for most retailers, but this would then cover their services which fall within the virtual metaverse (think akin to gaming).
There are other considerations to take into account such as enforcement. As a brand owner you would need to have the appropriate rights in place in order to be able to enforce against a third party. So far, we haven’t seen much in the way of take down policies on these metaverse platforms, but this is something which will hopefully be introduced soon.
Again, in terms of infringement actions we haven’t got much to go on as yet. There is a big case ongoing in the US between Hermès and Mason Rothschild. For background, Rothschild created a series of 100 works titled MetaBirkins. These were created as NFTs which were the same shape and design as a Hermès Birkin bag and sold on platforms such as OpenSea. Hermès are claiming trade mark infringement, Rothschild claiming they are works of art and thus entitled to his freedom of expression and interpretation. He is however, benefitting finically from the sales of the NFTs and the publicity of the Court action. This is a US case and the outcome awaits to be seen, but it could be a good indication of how such matters would be handled in the UK courts also.
Conclusion
To sum up, there are a number of considerations for retailers to consider as to their IP protection for this new digital age and what approach is taken may depend on factors such as budget, future expansion plans and whether to have a proactive or reactive approach to trade mark protection and enforcement.
About author
Rachel is a member of the Chartered Institute of Trade Mark Attorneys and works with companies and individuals ranging from large multinationals to small business start-ups advising on trade mark, design and domain matters.
Rachel provides pre-filing advice relating to brand development, protection and enforcement. She also undertakes pre-filing clearance searches and handles the filing and prosecution of new trade mark and design applications. Rachel also advises on portfolio management and  brand enforcement strategies including e-commerce monitoring on online platforms such as Alibaba and Taobao. Further, Rachel advises on trade mark opposition, invalidity and revocation proceedings at the UK Intellectual Property Office.
Name: Rachel Platts
Title: Trade Mark Attorney
Company: HGF
Website profile: https://www.hgf.com/our-people/rachel-platts/
Telephone: 0161 247 4900
Email: rplatts@hgf.com
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