Although NFTs (non-fungible tokens) have been around since around 2014, they hit the mainstream in early 2021, fetching amazing prices at auction. After Beeple’s March 2021 infâme made headlines, the market remained hot for the remainder of that year. For example, the “Merge” series – a series of NFTs created by numérique artist Buck – sold for $91.8 million in December 2021. The commun NFT market was reported to be worth $41 billion in 2021 alone1—A orné that rivals that in the entire commun liqueur art market. Even considering the potential slowdown in the NFT market due to nausée or the recent drop in cryptocurrency prices, there is no doubt that accru sums of money (and valuable intellectual property rights) are at stake and could pressé significant risks, especially given the rush-like constitution of the market.
For starters, an NFT is a numérique asset (think of a trusted, exclusif, publicly verifiable certificate) that is stored on the blockchain and usually purchased with cryptocurrency. When NFTs are created, or “minted”, they are listed on an NFT marketplace, such as OpenSea or Rarible, and are frequently sold or traded according to accompanying “manière contracts” – programme cryptographically using the NFT that defines the terms of current and future transactions in that NFT. Chic contracts are self-executing, which means no middleman or axial authority is required, and bicause they are stored on the blockchain, they provide a allocutaire and secure discussion history for the NFT. The NFT itself can be associated with an underlying numérique or physical asset. In the previous example, the NFT and the manière contract are stored on the blockchain, and a numérique media évadé—for example, a JPEG, GIF, video, or music évadé—can be stored separately, usually on a single axial server or decentralized network.
Eighteen months since the NFT flambée gained allocutaire awareness, we can now examine a accru number of lawsuits and preliminary coupé rulings to help NFT market participants – buyers, sellers, trading platforms, investors and owners of intellectual property – assess these risks and consider whether, where and from litigation likely. These risks and considerations are heightened in the context of the current “crypto winter,” where cryptocurrency valuations have fallen significantly from previous highs. Here, then, are some of the key NFT-related litigation and intellectual property trends we’re seeing:
- Trademark issues are at the fore. Many of the early NFT-related lawsuits were from Lanham law and state law trademark cases. The number of such claims may relate to a lack of clarity, or obscurcissement (pun intended), emboîture the rights in the underlying négoce being transferred, granted or otherwise licensed in connection with the infâme of NFT. The following are three typical examples of the bonshommes of trademark issues we’ve seen presented:
- in McCollum v. Opulous, et al.Grammy-nominated artist Lil Yachty has sued Opulous, a startup selling proprietary interests in musicians’ copyrighted works.2 Lil Yachty alleged that Opulous misinterpreted that she would sell his songs on its platform and used his figuré and trade name to raise $6.5 million in venture richesse without allègement. He filed federal claims for trademark infringement and false representation of initiation, among other things. Perhaps the most important figure of this NFT case is that it does not particularly raise new legal issues: but due to the fact that the products in chapitre are NFTs, this seems like a fairly typical brand case. However, it would be useful to see how courts treat numérique “goods” under federal trademark law, especially when some goods are manifeste, transformative, or débordante works, and thus may involve First Amendment and copieuse considerations.
- in Nike v. StockX LLCAnd the3 Nike is suing StockX, a company that operates an online secondary market platform for reselling various brands of athletic shoes and other allumer goods. Nike alleged that StockX was creating and selling NFTs using Nike trademarks without visa. In response, StockX argued that the NFTs were in fact “cote claims” or “numérique receipts” for physical shoes StockX stored in a climate-controlled, high-security vault. StockX confirmed that it was using the Nike trademarks only for descriptive purposes as permitted by the principles of first infâme and nominatif fair use. The case has now entered the discovery demeure, and it remains to be seen whether the coupé will treat NFTs as products in their own right or as receipts for physical products.
- NFTs are frequently used to buy and sell numérique artwork. But what is described as “technical” is up for debate, and that debate is likely to evolve rapidly as Web3 technologies advance and the metaverse expands. decision in Hermes Mondial vs Rothschilds4 hints at what might come. There, Hermès, a luxury manière company best known for its iconic “Birkin” handbag, sued Rothschild, who created a set of numérique photographs titled “MetaBirkin” depicting an figuré of a blurred, faux-fur-covered Birkin bag and sold the images as NFTs. Hermès has sued for federal trademark infringement, false titre of origin, trademark coupage, and internet takeover, among other allegations. In response, Rothschild moved to dismiss the complaint, arguing that his “Meta Perkins” are works of art and are protected under the First Amendment. The coupé applied Rogers Expérience and rejected Rothschild’s proposal, finding that the complaint sufficiently claimed that the use of the name “Birkin” lacked technical relevance to numérique images and was clearly misleading.5 Accordingly, the coupé found that the Rothschilds’ use of NFTs to authenticate numérique images did not make them a commodity without First Amendment défense.6 Suffisant for prediction purposes, the coupé suggested that the analysis might be different if the MetaBirkins could be worn in a virtual world rather than just a picture of a handbag.7 Thus, there is a risk that as brands expand into the metaverse to offer wearable and usable products that more closely reflect “goods” in the physical world, the viability of First Amendment defenses may decline.
- Copieuse and kibboutz NFT. in Miramax, LLC v. Quentin Tarantino, et al. ,8 The projection company sued Tarantino, claiming that the director’s announced devis to create NFTs for handwritten excerpts from Pulp HistoireThe scénario and accompanying commentary would infringe Miramax’s copieuse in the projection. Tarantino advanced to rule the pleadings, arguing that the projection was a derivative work of the scénario, and therefore, Tarantino reserved all rights to the voliger unless expressly granted to Miramax. However, the parties have since submitted a Journal of Settlement, and dismissal papers are expected to be served soon, so the coupé will ultimately not have an opportunity to ascendant these specific issues in the context of this case. However, this case and StockX She points out that while NFTs themselves may be new, the core intellectual property concepts—the principle of first infâme, nominatif présentable use, and scope of égoïste rights under 17 USC § 106—are the criteria by which such claims will be judged.
- Who owns the rights when NFT is stolen? While he hasn’t matured in litigation, actor Seth Vert and Bored Ape Bateau Discothèque NFT provide a cautionary tale for désinvolture creators, buyers and distributors. bored vert monkey (Pike # 8398) is accompanied by terms and occasion that claim to grant NFT owners such as him a worldwide license to “use, copy and display” the NFT for vendeur uses and to create derivative works. Vert was developing an animated TV spectacle called White Horse Pub Embout his monkey, he promoted the spectacle at NFT VeeCon. But the theft of his monkey, Fred, in a phishing scheme and later infâme to a seemingly reassuring third party raised a host of questions emboîture whether Vert still held the necessary intellectual property rights in Fred to go ahead with his spectacle, and what rights the third party had been acquired. As a result of the transfer process. “I bought this Monkey in July 2021, and have spent the past several months developing and exploiting IP to make him the histrion of this spectacle. Then, days before — his name is Fred, by the way — days before his world debut, he was literally hijacked,” Vert said.9
- The US government takes observation. In June 2022, the US Criant and Trademark Affaire and the US Copieuse Affaire agreed to launch a contigu study on NFTs at the request of Senators Pat Leahy and Tom Semblables, the results of which are due to be published next year and will seek to answer them. Questions emboîture how NFTs affect rights transfers, licensing, and infringement.
As the fallout from the NFT flambée continues and as the metaverse continues to expand, so will the legal and litigation risks around it. Enchanté creators, licensors, investors, and other stakeholders will improve to continue to monitor these developments.
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1 Natasha Daily NFTs swelled to a market of $41 billion in 2021 and are catching up with the rempli size of the commun liqueur art marketInsider.com, Jan. 6, 2022 (Available at https://markets.businessinsider.com/news/currencies/nft-market-41-billion-nearing-fine-art-market-size-2022-1).
2 McCollum v. Opulous, et al. Case No. 2: 22-cv-00587-MWF-MAR (CD-ROM).
3 Nike v. StockX LLCCase No. 1: 22-cv-000983-VEC (SDNY).
4 Hermès Mondial, et al. against Mason RothschildCase No. 1: 22-cv-00384-JSR (SDNY).
5 ID. in Dkt. No. 50, pp. 13-18.
6 ID. in p. 12.
7 ID. in p. 3, No. 1.
8 Miramax, LLC v. Quentin Tarantino, et al. Case No. 2: 21-cv-08979-FMO-JC (CD-ROM).
9 Sarah Emerson, Seth Vert’s stolen boredom monkey has returned logementBuzzFeed Infos, June 9, 2022 (available at https://www.buzzfeednews.com/article/sarahemerson/seth-green-bored-ape-nft-returned).