NFT, Metaverse: a new challenge for intellectual property

NFT, metaverse, blockchain are new technologies that open up new virtual universes for both companies and individuals, but raise questions for lawyers, especially in the field of intellectual property law, in the absence of an established legal framework. This dematerialized world generates new legal problems.

General presentation

NFTs have already invested heavily in online games like CryptoKitties, which allow you to buy virtual cats in exchange for the ‘Ether’ cryptocurrency. Companies are interested in this Web3 revolution to strengthen their brand and captivate an often younger audience.

The NFT (non-fungible token) works via a “smart contract” written on a blockchain that creates a token with a unique identifier. The “smart contract” is a computer code that allows programming the creation of the NFT, formalizing an original creation, or reproducing a brand.

Unlike digital images, NFTs contain metadata that cannot be changed and guarantee that the asset is the original NFT, in a tamper-proof way thanks to their registration on a blockchain. The buyer of the NFT does not become the owner of the work itself, nor of the medium, but of a digital certificate of authenticity.

Copyright protection

The Society of Authors in the Graphic and Plastic Arts ruled in a manifesto dated June 7, 2022 that the creation of an NFT and its sale on the Web3 platform are acts of reproduction and representation that require the consent of the beneficiary in these terms: Marketing a work associated with an NFT is no exception to this rule: no one is authorized to publish a digital work on a sales platform, nor to inject it into a metaverse, without the consent of the artist or his successors in title (heirs, foundations, etc.) The usurpation of an artist’s identity can also give rise to severe penalties for other reasons”.

When buying an NFT, which to date can only be done by cryptocurrency, the buyer becomes the owner of the metadata and not the copyright of the creation. A buyer of an NFT must verify that the author of the original work has consented to its transformation into an NFT.

The lawyer must commit to the computer developer by including contractual clauses, such as the resale right, the remuneration from which the authors of original graphic and plastic works benefit during the resale of their works in the “smart code” and in the metadata.

The drafting of copyright transfer agreements should anticipate future uses of the work, such as its display in the metaverse or the possibility of performing NFTs upon creation, as the intellectual property code in French law does not allow if the destination as provided in the order.

In order to preserve copyright, contracts between authors and operators must be strictly regulated: for example, the clause “for all future products” may not be sufficient to establish creator’s compensation in return for a new mode of exploitation

It is recommended to provide the terms of use circulating with the NFT and in the general terms and conditions of sale with reference to the selling platform.

Trademark protection

The metaverse is an opportunity for companies that want to position themselves in this new market to make their virtual products more attractive. Over the past two years, we have witnessed an increase in requests for comprehensive international trademark filings.

The question that arises is whether it is appropriate to re-register a trademark designating classic products in other classes designating the virtual product or not. Is a brand sufficiently protected from use in the metaverse, even if it only designates “classic” products such as glasses filed in class 9, would this class protect augmented reality glasses?

And this, while Article L. 713-3 of the Intellectual Property Code states that: “The registration of the mark confers on its proprietor a right of ownership over the mark for the goods or services that he has designated”.

To date, there is legal uncertainty and no case law. It will be necessary to examine the future positions of the various trademark filings.

The challenge is to identify the content and scope of the property right when offering virtual branded products for sale in order to position themselves in this virtual world and protect against counterfeiting.

Some companies such as Nike have anticipated this by reapplying their trademark in the United States in Classes 9, 35 and 41 on October 27, 2021. In France, the company Carrefour has filed an application in Classes 9, 35 on April 5, 2022. , 36, 41 and 42, especially for “retail and online retail services related to virtual goods, digital collectibles and non-replaceable tokens” (class 35) or even “entertainment services, namely, online games in which players can win virtual goods, digital collectibles, non-replaceable tokens, digital tokens or other application tokens” (class 41). This brand is still under review.

Care should also be taken when re-registering the trademark to modify the wording by targeting the products and services associated with the metaverse, as the absence of registration provides a means of defense for the adversary in the context of a lawsuit.

Another problem is the territoriality of brand protection, because a virtual good does not correspond to a physical good: in which territory should it be protected? Will it be possible to transpose the rules applicable to the counterfeiting of trademarks on the Internet if a series of indications indicate that the French public is being targeted (use of the French language, delivery in France, accessibility of the site for Internet users from France…)? Again, it seems desirable to re-register the trademark for all countries where it will be used.

Measures against counterfeiting

Due to the lack of authorship verification of works on exchange platforms such as Open Sea, an NFT can be issued on a protected work without the author’s consent.

The legal arsenal for the fight against counterfeiting for the Web3 may include actions that are already known to the internet, such as action in the notification for the removal of illegal content by the platform. An infringement claim may be brought against the issuer; however, sometimes it will be difficult to identify it and most of the time the players in the virtual world are located abroad.

In the United States, an artist has created NFTs that represent Hermès’ iconic “Birkin” bags, protected by copyright and trademarks, called “MetaBirkin”, without asking the permission of the Hermès company for the commercialization of NFT that contains the bag. represents. The Hermès company has launched an infringement procedure against the artist, the case is still pending. In particular, it opposes the freedom of creation and expression via the metaverse and intellectual property rights against reputational damage and deception about the origin of the product.

In conclusion, in addition to the existing and/or future legal reference, regulation requires innovative technological tools, even guides to good practice. More than ever, companies will need to involve lawyers in their digital marketing project.

by Me Nathalie Bastid, lawyer at the Grenoble Bar.

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