IP and NFT: where are we? – Trademark
Acclaimed director Quentin Tarantino and production company Miramax have settled their non-fungible token (“NFT”) infringement suit before the U.S. District Court for the Central District of California could weigh in on the merits of the claims, leaving us with many more questions than answers about the evolution of intellectual property law around this hot new technology.
Indeed, the directors of the US Patent and Trademark Office and the US Copyright Office are in the process of conducting a joint study to disentangle the various interests at stake, after having promised the senses. Thom Tillis and Patrick Leahy that they would issue their findings by June 2023. Meanwhile, several other federal district courts are struggling to apportion value in the context of digital market transfers.
Here’s what you need to know about the situation:
The problem is that NFTs have not found their way into the 232-year-old (albeit evolving) framework of the US copyright law. It’s also unclear if — or how — NFTs could trigger liability under federal law 76. Lanham Lawwhich governs trademark infringement and unfair competition.
NFTs are units of data stored on a blockchain that signify ownership of (so-called) unique digital media items. They are sold and/or exchanged under “smart contracts” which govern the terms of transfer. But NFTs are separate and distinct from the digital assets they are meant to authenticate, making it extremely difficult to assign title to the various intellectual property rights arising from the sale of each NFT.
Against this backdrop, the joint federal agency study aims to address a number of key questions, including:
- Vesting: Who owns what if the creator of the NFT is a different person or entity than the creator of the underlying asset?
- Transfers of rights: what is the impact of the transfer of an NFT on the intellectual property rights of the associated asset?
- Licensing of rights: how should intellectual property rights in the associated asset be licensed in an NFT context?
- Infringement: What is the appropriate infringement analysis when an NFT is associated with an asset covered by the intellectual property of a third party? Or when the NFT creator also owns the intellectual property of the underlying asset and the asset is infringed by a third party?
- Remedies: Are the current legal protections sufficient to protect rights holders on NFT marketplaces?
Several lawsuits involving various copyright, trademark, unfair competition and breach of contract issues relating to NFTs have been filed in New York and Los Angeles over the past year and a half, but are either settled or are still in their infancy, leaving us with a lack of case law on the issues:
May 2021: French luxury brand Hermès is suing artist Mason Rothschild for trademark infringement based on Rothschild’s sale of NFTs linked to digital images he created of handbags he dubbed “MetaBirkins”. Rothschild lost its motion to dismiss and seeks certification of an interlocutory appeal.
Hermes Int’l et al. against RothschildCase No. 1:22-cv-00384, United States District Court for the Southern District of New York.
June 2021: Roc-A-Fella Records is suing co-founder Damon Dash, alleging that Dash’s attempt to mint Jay-Z’s “Reasonable Doubt” album as NFT constituted an illegal copyright conversion on the album owned by Roc-A-Fella. The Court granted a temporary restraining order against Dash, and the parties later settled. Roc-A-Fella Records, Inc. vs. DashCase No. 1:21-cv-05411, US District Court for the Southern District of New York.
November 2021: Miramax sues Tarantino based on Tarantino’s sale of NFT for a collection of digital images of portions of the original handwritten version of the screenplay for pulp Fiction, involving both copyright and trademark law. In this case, beyond pure intellectual property issues, the parties disagree on the interpretation of Tarantino’s initial contract with Miramax, in which he reserved all rights to the printed publication of the script (including in digital form). ). On September 8, 2022, the parties filed a notice of settlement. Miramax, LLC vs. TarantinoCase No. 2:21-cv-08979, US District Court for the Central District of California.
January 2022: Rapper Lil Yachty (real name: Miles Parks McCollum) sues NFT seller Opulous for trademark infringement based on Opulous’s use of his name and likeness in ad access.” Lil Yachty NFT Collection” to his new music. The defendants failed to challenge personal jurisdiction and recently filed their response to the complaint. Miles Parks McCollum v. Opulous et al.Case No. 2:22-cv-00587, United States District Court for the Central District of California.
February 2022: Nike sues online retailer StockX for trademark infringement based on StockX’s sale of NFT for limited-edition Nike sneakers that include images of the sneaker. The case is in the discovery phase. Nike, Inc. v. StockX LLCCase No. 1:22-cv-00983, United States District Court for the Southern District of New York.
June 2022: Yuga Labs, the company behind the famous NFT collection known as the “Bored Ape Yacht Club”, is suing artist Ryder Ripps for trademark infringement. According to Yuga Labs, Ripps used Yuga Labs’ trademarks to trick consumers into buying its own copycat NFTs. Ripps recently filed a motion to strike or, in the alternative, to dismiss, which itself was struck down by the Court. Yuga Labs, Inc. vs. RippsCase No. 2:22-cv-04355, United States District Court for the Central District of California.
So far, the only solid legal opinion to come out of any of the above cases has been Judge Jed. by S.Rakoff Order of May 18, 2022 dismissing Mason Rothschild’s motion to dismiss the Hermès trademark claims. While the order does not resolve any of Hermès’ claims on the merits, it does offer a first look at how courts may deal with trademark claims involving NFTs in the future.
In its petition, Rothschild argued that it used “MetaBirkins” as the title of an artistic work as opposed to a source identification mark. Therefore, it constituted the protected freedom of speech under the First Amendment pursuant to the founding case of the Second Circuit Rogers vs. Grimaldi875 F.2d 994 (2d Cir. 1989). roger held that use of a mark in connection with a work of art does not constitute infringement if the mark is “minimally artistically relevant” to the product and the use of the mark does not “explicitly error” regarding content, authorship, sponsorship or endorsement. 875 F.2d to 1005.
Key to Rothschild’s argument was the fact that although he sold each image with a unique NFT identifier, the NFTs were separated from the underlying work and digitally labeled instead of using the name “MetaBirkins” . Thus, although it was the NFTs themselves that fetched prices comparable to actual luxury handbags, Hermès’ infringement complaint necessarily had to focus on the unauthorized use of the mark for the work of underlying art. For Hermès, the artwork and the NFT “merchandise” were intertwined, given Rothschild’s use of “MetaBirkins” to sell other products and the operation of digital storefronts and marketing campaigns using the name.
Judge Rakoff dismissed Rothschild’s motion on the basis that Hermès had correctly alleged that the “MetaBirkin” label was explicitly misleading under the Ninth Circuit’s risk factors for confusion, and therefore could potentially survive a roger challenge. He refused to weigh in on the second roger factor, though: whether “MetaBirkin” qualified as artistically relevant. Hermès’ allegation that Rothschild “entirely intended to associate the ‘MetaBirkins’ brand with the popularity and goodwill of the Birkin brand of Hermès, rather than intending a artistic association” was sufficient to defeat a motion to dismiss.
Judge Rakoff observed that the use of NFTs in connection with the underlying work should not automatically deprive the work of its artistic significance. He agreed with Rothschild that the status of NFT as a market commodity per se should not necessarily be wrapped up in the value of the artwork it authenticates: “because NFTs are simply a code pointing to the location of a digital image and authenticating the image, the use of NFTs to authenticate an image and enable traceable subsequent resale and transfer does not make the image a commodity without the protection of the first amendment, nor is the sale of numbered copies of physical paintings for the purposes of roger.”
Other courts, and perhaps even the USPTO and the Copyright Office, will likely look to Judge Rakoff’s initial advice as a basis for the future of this new area of intellectual property law. Meanwhile, the lines are still blurred between creative freedom, artistic merit, fair use, ownership, market competition and commercialism in the digital age, at least as far as NFTs are concerned.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.