Intellectual Property in a World of Non-Fungible Tokens: How Copyright and Trademark Protections Apply to NFTs

Non-Fungible Tokens (NFTs) have become popular in recent years. This is in part because they cannot be freely interchanged with other identical commodities. Thus, NFTs are distinguishable from things like cryptocurrency or cash, where a $10 bill can be traded for an identical $10 bill. Instead, the nonfungible nature of an NFT places it in the same ballpark as original art and baseball cards, and like those commodities, it is important to understand and police the intellectual property rights you may have in your NFT-marked assets.

The problem that NFTs seek to address is that it is much easier to copy and distribute digital assets than other unique properties. To distinguish original digital assets from those that are copied using basic CTRL+C and CTRL+V commands, NFTs are coded on blockchain to identify the original digital works. In other words, the NFT functions as a digital proof of purchase for the digital asset you have purchased.

For example, the NBA sells video highlight clips called “Moments” as a sort of digital trading card. NFTs tag and identify each Moment to maintain its worth as a unique digital asset. The value in the Moments comes from the limited number sold, as well as from the brand recognition that comes from being sold under an NBA trademark. The Moments are also protected from unauthorized copying and distribution by copyright.

Thus, NFT-tagged assets are often also protected under copyright and trademark law.

Copyright

Copyright protects any original and creative work of authorship, including digital works that may be identified by an NFT. Copyright protection vests automatically and is long-lasting, typically extending 70 years beyond the life of the author. It is often wise to register your copyright with the U.S. Copyright Office to have a public record should someone copy or distribute your copyrighted work. Even digital assets marked with an NFT can be copied and sold without the copyright owner’s permission. Therefore, it is important that purchasers verify that the NFTs they purchase are authentic and that copyright owners record and police their rights.

Trademark

A trademark provides protection for brands and can cover any word, name, symbol, or device that consumers use to identify and distinguish a source of goods or services. Often, the name or brand behind the NFT-tagged asset is a large factor in that asset’s worth. Think NBA Moments: a short video of a basketball game becomes a lot less valuable if it is not an official NBA product. Consumers buying valuable NFT-labeled assets must be careful that the assets are actually created and sold under the trademark with which the asset is marked. It is also important for owners of a valuable brand to be vigilant in monitoring and protecting it from misappropriation by non-authorized persons.

Whether you are a purchaser, seller, or alleged infringer of NFT-marked digital assets, the intellectual property attorneys at Clark Hill can assist you in navigating the intellectual property protections, exceptions, and defenses that may apply.

The views and opinions expressed in the article represent the view of the authors and not necessarily the official view of Clark Hill PLC. Nothing in this article constitutes professional legal advice nor is it intended to be a substitute for professional legal advice.