What to Know About NFTs

Intellectual property owners need to add a metaverse where they monitor potential infringement, specifically trademark or piracy in the form of NFTs or non-fungible tokens.This will be highlighted in case of Hermes International v.Mason Rothschild, Currently pending in the Federal District Court in New York.In this case, Hermes has an NFT METABIRKINS— Alluding to Hermès’ iconic (and trademarked) Birkin^® Handbags — Infringe and dilute the Hermès trademark.

NFTs are unique tokens based on blockchain technology and are used as digital assets. Unlike cryptocurrency tokens such as Bitcoin, which are substitutable, NFTs are digitally unique. The two NFTs are not the same. NFTs can be based on 3D items and artwork, or they can be purely digital works. For example, collectable digital sneakers and tokens used in video games. Most NFTs may be protected as creative works under US copyright law or may be derivatives based on existing copyrighted works. NFTs may also embody or use trademarks. For a brief background on NFTs, see. Your NFT playbookPosted by colleagues Kyle Fath, Alan Friel, Carlton Daniel The world of consumer privacy..

As artists, commentators and parodys flock to this new media, the headaches of intellectual property owners have doubled. This is demonstrated by the case of Hermes, including NFTs, created by digital artist Mason Rothschild. NFT dubbed by Rothschild METABIRKINS, Based on Hermes Birkin^® Handbag — However, it has a furry surface rather than polished leather.Rothschild started selling him METABIRKINS NFT in December 2021. His NFT sales are reported to have exceeded $ 1.1 million, the highest. METABIRKINS NFTs sell for $ 45,100.

On January 14, 2022, Hermès under federal Lanham Act and New York infringed trademarks and trade dresses, diluted trademarks, misdesignated origins, cybersquatting, business reputation deterioration, and fraud. He filed a complaint with the Southern District of New York, claiming diversion. State Law. Hermès claims METABIRKINS as a domain name, handle for Twitter and other social media platforms, and a brand name, in addition to claiming trademark infringement by Rothschild for using BIRKIN as the name of the NFT collection in Metabilkins. He complained that he had infringed by using it. As a hashtag on the NFT sales platform. Hermès also claimed infringement based on Rothschild’s post, an ad declaring “Not Your Mother’s Birkin”, and the hashtag #notyourmothersbirkin.

On February 9, 2022, Rothschild filed a motion to dismiss Hermes’ complaint. METABIRKINS The NFT is an artistic expression and commentary protected by the First Amendment, and no one is confused or thought that Hermès sponsored or endorsed his image of hypertrichosis. According to his brief description, the NFT is “painted to be furry, so Hermès handbags and trademarks are not infringed …[which] Commenting on the animal cruelty inherent in the manufacture of Hermès ultra-expensive leather handbags. The briefs also have that term METABIRKINS “It refers to both the context in which he makes art available (that is, the online virtual environment commonly referred to as the” Metaverse “) and the” meta “commentary of his artwork on the Birkin bag and fashion industry. “

Hermès chose to correct the complaint rather than oppose the motion to dismiss. The amended complaint filed on March 2, 2022 provides additional background and background for Hermès’ allegations. The corrected complaints have 51 exhibits, many of which prove the fame and fame of the BIRKINS mark and trade dress. The amended complaints also undoubtedly add details about Rothschild’s marketing plans and commercial efforts to undermine Rothschild’s advocacy of artistic commentary. The amended complaint highlights the growing importance of NFTs in the fashion and brand markets and accuses Rothschild of depriving brand owner Hermès of a legitimate opportunity to belong.

The Hermès proceedings are in their infancy, but highlight some important points. First of all, NFTs are very important in the IP world. NFTs have existed since 2014, but the widespread, multi-layered legal implications of NFTs are now being recognized.As proved by METABIRKINS Now that digital currencies, blockchains, and NFTs are becoming more mainstream, imbroglio, businesses, and brand owners need to pay attention to the use of intellectual property. Again, technology goes beyond normal legal limits and lawyers need to catch up.

Brand owners are already starting to catch up. As of March 12, 2022, the USPTO TESS database contained 2551 trademark applications or registrations that used NFTs to describe goods / services. Only a handful of them are registered, but more than 1400 applications have been submitted since January 1, 2022. These statistics are gaining recognition in the NFT market and are brand owners.

One thing is clear: NFTs are a hot item in the branding world, and they are very likely to be infringed (or commentary) as well as branded. The news is full of reports that brand owners such as McDonald’s, Crocs, and CVS have launched promotional NFT drops and filed trademark applications for NFTs.

Other brand owners have fought infringers, commentators, and / or parodys, as in the story of METABIRKINS. For example, the owner of the OLIVE GARDEN brand, Darden Restaurants, is reported to have been fighting a “non-alternative olive garden” (an NFT that used a digital token called a breadstick to depict a real olive garden restaurant).

And in February 2022, Nike, Inc. filed a proceeding in federal court in New York against online retailer StockX. The complaint alleges trademark infringement, misrepresentation, and unfair competition due to StockX’s creation of a sneaker-related NFT that uses the NIKE trademark without Nike’s permission. StockX replied that NFT is an acceptable trademark “fair use” as part of retail sales and advertising of genuine NIKE sneakers. These challenges show that brand owners are facing new multifaceted legal issues at the Metaverse Frontier.

For now, here are some ideas for dealing with these IP issues in the ever-expanding Metaverse.

• Consider whether the Metaverse should be on the horizon of your company. Yes, if the plan is in progress, consider filing a US trademark application based on the intended use, betting your claim and avoiding surprises.

• The USPTO trademark review process currently takes one to three years after the application is submitted, so companies need to have enough time to finalize their launch plans. If the examination is successful, a notice of permission will be issued to the trademark application based on the purpose of use (rather than actual use). At that point, US trademark applicants have an additional three years to begin using the trademark in US commerce.

• Also consider the international market. NFT-related marks are clearly protected by US law, but the laws of other countries may differ. Therefore, plan the potential markets of companies around the world and create protection plans for other markets.

• Before entering the Metaverse, do a due diligence on the Metaverse. Determine the rights that the buyer / licensee has in the NFT and compare the marketplace platform with basic contracts and rights, including “smart contracts” that provide resale royalties to artists and other NFT creators. ..

• Before releasing the NFT to the Metaverse, make sure that all intellectual property rights are protected.

• Market leaders cannot protect themselves from all knockoffs and commentary. However, in addition to taking safeguards and planning new markets, enforcement programs also benefit brand owners and help prevent trademark hijacking when new markets develop.

The Metaverse stays here and brand owners need to pay attention to this new frontier. Therefore, from our point of view, NFT stands for “new frontier of trademark” as well as “non-fungible token”.