Protecting your brand in the age of NFT and metaverse

By taking every element of this new virtual eldorado, we can consider that the existing law makes it possible to resolve the conflicts that are specific to trademarks and copyrights (ownership, protection), and thus to organize their protection in this new environment .

What legal arsenal to protect brands in the metaverse?

The use of blockchain to create NFTs does not change issues regarding ownership of the virtual or physical works or products to which the NFTs relate. Nor do those relating to the ownership of trademarks and copyrights, other than those relating to copyrights or the use of a trademark by a third party, sell authentic products.

Of course, if the protection of trademarks in Web3 can create difficulties in identifying and locating the actors, and therefore even the territorial jurisdiction of the courts, these have become classic in the age of the internet. Practitioners and courts are aware of these difficulties, and trademark and copyright laws, as well as civil litigation, offer useful legal tools to owners to protect their rights and trade them in the metaverse.

For example, director Quentin Tarantino offered to sell NFTs for digital copies of his famous screenplay written for “Pulp Fiction.” The Miramax studio has appointed the instructor. In the light of the application, the case concerns whether the rights reserved by Tarantino in the allocation of rights to the 1993 manuscript, namely the editing rights and the publication of the manuscript, allow him to sell NFTs relating to handwritten elements in the scenario.

Nike, for its part, is suing StockX, which offers NFTs for sale in conjunction with real Nike shoes, which they claim to have in a high-security air-conditioning cabinet. Buyers of NFTs can resell them or exchange them for the corresponding pair of real shoes. Nike sues StockX for trademark infringement and unfair competition. StockX defends itself by invoking the exhaustion of trademark rights after the first sale of the actual shoes by the licensee, and the lawful use of the mark by a dealer of genuine products.

NFT, blockchain: the myth of authenticity?

As a reminder, an NFT and blockchain technology only offers a guarantee of ownership or authenticity to the buyer to the extent that the contract associated with the NFT (i) relates to a virtual or real product or work that the seller of the NFT actually is owner, and (ii) organizes in an appropriate and sustainable manner the buyer’s access to the product or work.

When NFTs are offered for sale to trademark and / or copyright holders of a work, they offer a strong guarantee of the authenticity of the product or work. However, if the product or work authenticated by an NFT infringes the copyrights or trademarks of third parties, the seller and / or the buyer are subject to infringement acts such as those mentioned above.

In such a scenario, the highly praised security of blockchain and NFT would be of no help.

Similarly, neither the NFT nor the blockchain grant exploitation rights to the product or work unless the contract associated with the NFT expressly provides otherwise and the seller of the NFT actually has the exploitation rights. Thus, the purchase of an NFT for a virtual dress from a fashion designer or virtual sports shoes does not allow the buyer to reproduce the virtual product (of course not a real product either).

What values ​​do virtual branded products have in the meta-verse?

In addition to the specific features of NFTs and the limits associated with the guarantees promised by blockchain, we must now look at the virtual universe in which these new products evolve. The metaverset is not yet an overall plan for commercial or social interactions: one could even say that at the moment … the metaverset does not exist.

In fact, the transfer of avatars and / or their accessories from one virtual world to another is a key issue in the metaverse, but is not yet a reality.

The buyer of a virtual designer dress can therefore not yet freely transfer it from World of Warcraft to Sims, from League of Legends to Fortnite or other open multiplayer video games, or between these games and various open universes called metaverse such as The Sand Box or Decentraland. As for virtual sports shoes, the acquisition of RTFKT by Nike for their development and the virtual places where they can be worn have not yet been discovered.

Prior to the fad, virtual products sold by brands or individuals will have as much more or less interest and value as the buyer can use them in one, several or all virtual environments.

NFT, blockchain …: a contract like any other

The sustainability and availability of virtual products raises technical and legal issues that are not addressed by NFTs and blockchain.

The solution for brands is to make their virtual products more attractive beyond the fashion phenomenon with the incipient metavers. The challenge must be as accurate an identification as possible of the content and scope of ownership, and possibly the intellectual property rights offered to buyers when virtual branded goods are put up for sale.

It is only in this approach that NFTs can fully play a role as a guarantor of authenticity when implemented by the legitimate owners of trademarks and other intellectual property rights with appropriate contractual provisions.

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* Stefan Naumann Leads the Intellectual Property Law of Hughes Hubbard and Reed LLP to Paris. He is registered with the Paris Bars and from California, and is on the list from judges of I‘World Intellectual Property Organization, especially for domain names.