How intellectual property is relevant to NFTs
NFTs have exploded in recent years and many questions are emerging around how trademarks can be used as a strategy to protect NFT brands. We’ve completed this guide to help NFT users navigate through the trademark waters.
What is a trademark?
Federally registered trademark protection is always important when it comes to protecting a brand name, logo or slogan. NFTs are subject to the same rules and regulations as trademarks in the real world.
A trademark can be a name, word, phrase, design, or other clearly defined item that establishes your company’s identity in the customer’s eyes.
Trademark registration protects a name from infringement, but it also:
- Creates public, legally documented ownership of the name as part of your business. This can prove to be a tangible, valuable asset, especially as business opportunities grow in the Web3 world.
- Provides a powerful legal tool to challenge or prevent anyone from purposely or inadvertently damaging the integrity of a name.
- Allows you to legally defend against any party who tries to register a trademark using a name or brand similar to yours.
Can you trademark an NFT?
You can protect the name of an NFT brand. For example, Gary Vaynerchuck has filed a trademark application to protect his NFT project VeeFriends. Protecting your NFT brand with a trademark filing will ensure that you can continue to build on your brand and keep others from using names that are close or similar to yours.
So what are NFTs? Non-fungible tokens (NFTs) are drawing attention to Web3 technology. For example, digital art sold as NFTs was all the rage in 2021. Going forward, it is very likely that NFTs will serve as collectables and by businesses of all types.
Creating or “minting” NFTs can be a useful and creative way for businesses and individuals to grow their brand, customer base, and revenue. That’s why an NFT trademark is an essential part of protecting your brand, goods, or services in the metaverse.
A recent poll reports that only 1 in 4 adults understand what an NFT is. With that in mind, here is a guide to NFTs, the role they play in the metaverse economy, and how they can benefit from trademark protection.
What is an NFT?
An NFT is a unique digital asset (usually representing goods and services such as art, music, images, in-game assets, or videos) whose data is verifiable on blockchain technology. The blockchain serves as a permanent, time-stamped, and secure record of transactions, with unique identification codes and other data that authenticate and track ownership. This makes it a valuable tool for tracking the status of an NFT’s trademark.
No two NFTs are exactly alike, and they can have only one owner at any given time. Much as with collectible items in the real world, an NFT’s value is generally determined not only by being one of a kind, but also its popularity or scarcity. That’s why counterfeiting can have a tremendous negative impact on an NFT’s value.
Here are some key terms that make it easier to understand NFTs:
- Fungible: A fungible asset can be exchanged with a similar item of equal value, whether it’s in the real world or the metaverse. A $100 bill can be exchanged for another $100 bill, or five $20 bills. One bitcoin can be exchanged for another bitcoin. Your customers can exchange real-world currency for the equivalent value in cryptocurrency (similar to an exchange rate).
- Non-fungible: By contrast, NFTs are non-fungible. They are unique, irreplaceable, and have an individual value that can fluctuate over time. One NFT does not equal another NFT.
- Token: Also known as a “coin,” it’s a unit of cryptocurrency used for digital transactions. A token can be fungible or non-fungible.
- Cryptocurrency: Cryptocurrency is a fungible payment method that can be used to buy goods or services, to participate in specific software programs such as games and financial products, or to invest in speculative assets (including NFTs or other cryptocurrencies).
- Blockchain: It is the foundation for the metaverse economy. It acts as a digital ledger in which transactions can be recorded but not changed or altered. This is why it is valuable for proving authenticity and exclusive ownership of an NFT, which is especially important for trademarking.
Common examples of NFTs
NFTs have been in existence since 2014. But their popularity skyrocketed in 2021 as they became an increasingly popular way to buy and sell exclusive digital artwork and other collectibles. According to the research firm DappRadar, NFT sales grew to $24.9 billion in 2021, a massive increase from $94.9 million in 2020.
NFT examples include:
Digital artwork. Collectors (and speculators) of virtual art account for much of the publicity surrounding NFTs. For example, Doodles, an art collection of 10,000 original NFTs, sold for the cryptocurrency equivalent of $306 each in October 2021. In June 2022, the value of each has risen to an average of more than $27,000.
Fashion and accessories. In particular, luxury and athletic brands are creating NFTs that build their brand and generate revenue among existing and potential customers who often gravitate toward collectibles. Nike is a prominent example, with its customized Cryptokicks line of virtual sneakers.
Avatar customization. Users are fully immersed in the metaverse by using an avatar as a personalized, interchangeable digital persona. As in the real world, avatars can be customized with NFTs for fashion, accessories and other assets that fit their mood, style, occasion, or current trends.
Music. Web3 technology opens a valuable new revenue channel for musicians and DJs. For example, they can release new music as multiple limited-edition NFTs, offer digital collectibles that will grow their brand, or create special experiences that will help them connect with fans. Blockchain transactions can also eliminate the need for labels and streaming platforms, allowing musicians to sell directly to fans.
Sports highlights and memorabilia. These can include virtual sports cards, statues, photos, or video clips of famous moments such as a famous LeBron James dunk. Like other NFTs, their value comes from rarity and demand.
Special events and ticketing. Companies are connecting with their customer base – and increasing their branding – by sponsoring or offering sports and entertainment events, VIP fan experiences, exclusive access or ticket seating, or creating interactive events to build their fan base. For example, the Coachella music and arts festival went virtual this year with its trademarked Coachellaverse.
Memes, influencers, and social media. Memes have evolved into valuable and entertaining NFTs that can enhance your branding. Social media channels like TikTok and Twitter are releasing content as NFTs, while Facebook – renamed as Meta – has staked its future on immersive interaction in the metaverse. Social media’s participation in the metaverse should provide a new communication avenue for influencers.
How can NFTs provide value to companies?
In addition to generating sales and growing your customer base, NFTs can add additional value to your business.
Smart contracts. Since the blockchain contains data pertaining to a specific NFT, it can include aspects of a transaction (such as automatic payments) that would be executed automatically when certain conditions are met. This increases efficiency by eliminating involvement of other parties – such as banks, agencies, or brokers – as well as commissions, fees, and other expenses.
Royalties. A potentially lucrative example of the value of a smart contract is through secondary sales of NFTs. Since it is common for NFT owners to resell collectibles like artwork, virtual sneakers, fashion accessories, or even tickets to special events, NFT creators can earn royalties for each transaction.
For example, the band Kings of Leon sold NFTs for 18 unique “golden tickets,” providing four lifetime front-row seats to a real-world concert during each of their tours, as well as a VIP experience including transportation, a concierge, exclusive access to the band, and branded merchandise.
Every time a golden ticket is resold, the smart contract automatically pays a percentage to the band (which is donating the money to charity). Royalty payments are made automatically as specified by the smart contract.
Innovative marketing opportunities. The easiest way is through minting NFT collectibles that are connected with your brand. A limited edition NFT could be used as an incentive during a product launch or special promotions. But branded NFTs could also be used for:
- Exchange for unique or rare real-world branded products.
- Collaboration with musicians, influencers, athletes, and cause-related purposes.
- Exclusive gaming experiences.
- Creating interactive user communities or loyalty programs built around your brand.
Charitable causes and social awareness. Connect with your customers and build credibility through cause-based fundraising collaborations.
Using Trademarks to Protect Your NFT
Trademarking your NFT name
You should trademark your NFT name to benefit from the same protections as the real world. Our experienced attorneys understand the relationships between NFT trademarks and the metaverse, and can guide you through a complex, rapidly evolving area of the law.
What benefits come with trademarking an NFT name?
In addition to protecting your new or existing trademarks against infringement, counterfeiting, or fraud in the metaverse, a federally registered NFT trademark also allows you to:
- Build your brand identity and grow your customer base in the new virtual economy, potentially at a lower cost than traditional methods.
- Create new goods or services tailored specifically to the metaverse and virtual worlds.
- License and control your brand in the metaverse.
A federally registered NFT trademark provides you with protection not just now, but as Web3 technology continues to evolve.
What kind of NFT trademark applications have been filed?
If the huge increase in NFT trademark filings is any indication, businesses and individuals are moving at full speed to get a foothold.
NFT trademark applications have come from companies in virtually every sector, as well as notable individuals. Here is a brief cross-section of categories and applicants:
Finance and banking: MasterCard, Visa, American Express, New York Stock Exchange.
Food and beverage: Pringles, Red Bull, Monster, Kraft Foods, Anheuser-Busch, Coca-Cola, Pepsi, Campbell’s, Hennessy, Bacardi.
Restaurants and dining: Taco Bell, Chipotle, McDonalds, Pizza Hut, Panini, Wendy’s, Panera, Burger King, Arby’s, Panda Express, Applebee’s, Starbucks.
Arts, music, and entertainment: Marvel, The Texas Chainsaw Massacre, Disney, UFC, WWE, Live Nation, Entertainment Weekly.
Music, sports, and events: Coachella, Formula One, NFL, NHL, NBA, Brooklyn Nets, Death Row Records, English Premier League, Draft Kings, NASCAR, KISS.
Miscellaneous goods and services: Charmin, Mattel, L’Oreal, UPS, Gibson, Alfa Romeo, Fender, Ticketmaster, Hyundai, Chevron, GameStop, Johnson & Johnson, Apple, New York Times.
Clothing and accessories: Nike, Puma, Adidas, New Balance, Salvatore Ferragamo, Hermes, Crocs, Victoria’s Secret, Ralph Lauren, DKNY, Abercrombie and Fitch, Skechers, Converse, Versace, Levi’s, Burberry, Bulgari, Lululemon, Prada, Lacoste, Coach, Dolce & Gabbana, Ray-Ban, Gap, Vans.
Retail: Walmart, Target, Amazon, eBay, CVS, Saks, Macy’s, Brookstone, Selfridge’s, Amazon, Williams-Sonoma, Pottery Barn.
Individuals: Kanye West, Bill Murray, Cristiano Ronaldo, Billie Eilish, Kings of Leon, Snoop Dogg, LeBron James, Luka Doncic, Paris Hilton, Shaquille O’Neal, Kobe Bryant, Jay-Z, Lindsay Lohan, Ellen DeGeneres, Tony Hawk, Eminem, Kate Moss, Keith Richards, Quentin Tarantino, David Beckham, Chuck Norris, Logan Paul, Tom Brady, Tiger Woods.
NFT Trademark Application Process
What kind of protections are offered from trademarking your NFT?
The blockchain builds in a number of intellectual property safeguards when using NFTs for your brand in the metaverse. However, it does not provide the same protection as a legally registered NFT trademark.
A federally registered trademark:
- Distinguishes your brand, goods and services from other sources, helping you to identify your NFTs in your customers’ eyes.
- Establishes the ownership, exclusivity, and purpose of your NFTs, drastically reducing the chance for confusion or infringement.
- Makes your NFT rights easier to sell, transfer or license to another party.
- Helps you react quickly to any potential infringement.
You’ll have a powerful legal tool to challenge or prevent anyone from damaging the integrity of your NFT – not just through infringement or counterfeit digital goods, but for other types of infringement that may be difficult to predict at this point in the metaverse’s evolution.
One high-profile case involves French designer and retailer Hermès, which specializes in luxury clothing and accessories, including the iconic Birkin handbag. They have sued a digital artist for selling “Metabirkins” NFTs, alleging trademark infringement. Hermès contends that Metabirkins are similar to selling a counterfeit bag in the real world.
How to trademark an NFT
The process of applying for an NFT trademark is the same as the traditional marketplace. It starts by filing a trademark application with the United States Patent and Trademark Office (USPTO).
Be sure to perform a trademark search on your NFT project name using the USPTO database and make sure that your NFT trademark isn’t infringing on someone else’s.
Even if you already have a trademark registration for an existing product or service in the real world, you may need to file another application to cover your brand in the NFT space. Whether you’re planning to mint an NFT or simply do business in the metaverse, you’ll need to file a new application to extend your protection to the virtual marketplace.
When to trademark an NFT?
We always advise filing any trademark application as soon as possible, whether it’s in the physical or virtual world. The same advice applies to NFT trademarks, since the approval process can take a year or more.
One of the questions on a federal trademark application regards your filing basis. The most relevant choices are “intent to use,” which means that the mark is not currently in use, but it will be soon. Likewise, “in use” means that the mark is currently being used.
Simply announcing an NFT drop is not enough to file an “in use” trademark application, but you can reserve your rights through an “intent to use” trademark filing. This filing basis will backdate your rights to your application date, even if your NFT isn’t going to drop for several months.
What classes should you include in your NFT trademark application?
Specifying the “class of goods and/or services” under which NFT trademark protection exists can make a huge impact on your ability to protect it in the metaverse.
The USPTO has 45 classifications that apply in the real world and the metaverse. Each classification is broadly defined, so the wording of your NFT trademark application should be as specific as possible.
Let’s use the New York Stock Exchange as an example. It chose three common metaverse-based classifications – Class 9, Class 35, and Class 36 – with wording that fits its services. In this case, the application places a heavy emphasis on NFTs, including:
- Downloadable virtual goods, namely, non-fungible tokens (NFTs); blockchain-based non-fungible tokens (NFTs) and NFT collectible series; digital media, namely, digital collectibles, digital tokens, non-fungible tokens (NFTs), cryptocurrencies and digital art…
- Provision of an online marketplace for buyers, sellers and traders of downloadable digital goods authenticated by non-fungible tokens…
- Financial exchange of virtual currency in the field of digital currency, virtual currency, cryptocurrency, digital tokens, crypto-tokens, utility tokens, and non-fungible tokens (NFTs), cryptocurrency trading services…
This is in contrast to a clothing brand like Ralph Lauren, whose Polo trademark application applies specifically to its intended use.
- Class 9: Downloadable multimedia files containing artwork relating to fashion, lifestyle, clothing, footwear, accessories, fragrances, home goods and collectibles, all authenticated by non-fungible tokens; downloadable virtual goods, namely computer programs featuring clothing, footwear, accessories, fragrances, and home goods.
- Class 41: Organizing, arranging and conducting virtual fashion shows.
- Class 43: Providing virtual hotel rooms; operating a virtual restaurant featuring actual and virtual goods.
Specifying the class of goods and/or services under which trademark protection exists can make a huge impact on its approval, as well as your ability to protect it in the metaverse. An experienced trademark attorney can help you craft an application with suitable language and classifications.
Ensuring trademark protection of your NFT project is just like protecting any other non-virtual brand. You should act now to develop your strategy regarding NFT trademarks and the metaverse in general. The sooner you file a trademark application, the sooner federal priority will attach to your brand.