The blockchain technology that has allowed non-fungible tokens (NFTs) to thrive is relatively new. However, the intellectual property (IP) and trademark laws that govern NFTs have been in place for decades. The challenge comes from applying these existing laws to new forms of technology.
The law in this area remains unsettled—though recent lawsuits have proven instructive. Below, experienced IP litigator Robert McKinley, Attorney discusses some of the impacts of NFT and trademark litigation on today’s crypto-forward society.
NFTs are any form of non-fungible digital media—like a one-of-a-kind trading card. They can include digital art, tweets, characters, songs, and just about anything else that can be reduced to digital form. NFTs are minted and transferred via the blockchain, which keeps an open record of where the NFT was created and to whom it has been transferred.
Recent NFT Lawsuits
With the popularity of NFTs, the question then becomes: how are trademark violations enforced? A few recent cases may give some idea of where this law is headed.
An Italian court recently granted an injunction in favor of the Juventus soccer team. Juventus sued blockchain platform Blockeras for minting and commercializing collectible NFT cards using photos of the players wearing Juventus jerseys, arguing that this was trademark infringement; the Italian court agreed, ordering Blockeras to remove any Juventus-related content from its digital landscape.
This victory raises another question—how are NFTs removed? The answer may not be as clear-cut as the Juventus plaintiffs hoped. Though the plaintiffs can go back to the court for further enforcement measures if the NFTs are not removed, it remains unclear exactly what enforcement authority the courts have—whether ordering the NFTs to be seized from their current owners and deleted, fining the blockchain owners a certain amount for each day the NFT remains visible, or by some other method.
And because the blockchain is designed to be hack-proof—that is, to not allow anything to be deleted or altered by anyone—removing NFTs that violate trademark laws could be the next big challenge.
Another recent case, Hermes International SA v. Rothschild, provided a win for the intellectual property holder—but again, it’s unclear what comes next. In Hermes, luxury brand Hermès sued Rothschild for creating and selling “MetaBirkin” NFTs that were based on the designer’s iconic Birkin Bags.
A Manhattan federal jury determined that the defendant violated trademark laws, rejecting his argument that these NFTs engaged in artistic expression protected by the First Amendment (like Andy Warhol’s famous paintings of Campbell’s Soup cans). Hermès was awarded $133,000 in damages, creating a novel federal precedent that can help companies protect and enforce their trademarks.
But again—what happens to the MetaBirkins already minted and sold? It’s not yet clear.
One thing that is clear from the Hermes case is that, just as traditional First Amendment and libel laws apply equally to digital media as they do to printed newspapers and magazines, traditional IP laws apply equally to NFTs as they do to physical items. Companies concerned about trademark infringement in the NFT sphere may want to consider a trademark watch service, which will help assess the various factors that go into the decision to litigate. These services can also help spot when, where, and how a brand or product is being infringed.
And another question that hasn’t been answered by the current NFT lawsuits is—what happens when an NFT is derived from an artificial intelligence program that itself relies on a variety of trademarked or copyrighted material?
McKinley explains, “Many AI programs are designed to create art or poetry ‘in the style of’ a particular artist. So, if someone uploads a photo and asks the program to create a painting ‘in the style of Cezanne,’ who then—if anyone—owns the copyright for the final product? Is it the AI programmer? The photographer whose photo was used as the source? Or Cezanne, whose paintings were input into the program to help it ‘learn’ his style?” The AI-created painting is a new and unique creation, but its creation is directly informed by already-trademarked works. Where should the line be drawn?
It’s likely we won’t know the answer until more cases are litigated. However, the use of AI-created NFTs is poised to be the next frontier in trademark litigation over the next couple of decades.
About the Author:
Robert McKinley is a practicing attorney, degreed Electrical Engineer, and born leader who serves his clients with integrity and an aggressive pursuit of their best interests. He graduated from Widener University School of Law, receiving his J.D. He was a member of the Moot Court Honor Society, Trial Advocacy Honor Society, and Phi Delta Phi International Legal Fraternity for Scholastic Achievement. He has built a 25-year law career specializing in intellectual property, patent & trademark litigation and local counsel.
No Legal Advice or Attorney-Client Relationship: These materials have been prepared for general informational purposes only and are not legal advice.