NFTs: The New Wild West?

In some cases, emerging technologies create entirely new goods and services, presenting even more difficult challenges.

One example is the non-fungible token (NFT), an asset that has emerged from blockchain technology—a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network.

NFTs are a new digital property right in existing innovations and creations, allowing creators and authors to exploit digital commercialization of existing goods.

Caleb L. Green, associate attorney, Dickinson Wright PLLC (US), underscored the legal ramifications posed by the increased use of this technology.

When it comes to enforcing rights around this new technology, brands and their IP counsel are wading in uncertain territory akin to the lawless terrain of the “Wild West,” he warned.

“Emerging technologies such as NFTs are novel, especially in the legal and IP context. As new technologies emerge, lawmakers, courts, and tribunals will likely lag behind new developments,” Mr. Green added.

One of the most disturbing issues presented by NFTs is the question of enforcement and which party to pursue in the event of fraudulent activity.

Imagine a scenario in which a bad faith actor takes a screenshot of a creator’s work, mints it, and then sells the resultant NFT on the market.

“The question is: Who can we go after? Do we go after the person who minted the work, the marketplace that is selling it, or the NFT itself? That is a major issue—how do you go after a fraudulently minted NFT?” queried Mr. Green.

The emergence of NFTs presents substantial jurisdictional dilemmas as well. A fraudster who mints a screenshot of someone else’s artwork may be in a different country than the creator and may then sell the NFT in yet another country. Such complex situations raise questions around which jurisdictional law should apply to the case.

Challenging Traditions

With new technology, brand practitioners face increasing challenges around identifying the relevant trademark classes and drafting correct specifications. This means that brand guardians need to be more creative and proactive than before in considering the nature of the “new” goods and services.

As technologies emerge, clearance, prosecution, and brand enforcement become increasingly difficult, noted Jayne Durden, vice president, Law Firm Strategy, Anaqua Inc. (US). She concurred that IP practitioners need to become ever more resourceful and strategic in this new era.

“As we become more tech-based, it becomes harder to distinguish the category a product might fall in. Anyone working in brand management needs to think defensively, analyzing where else something might turn up in the future. They also need to think laterally about where infringing or blocking marks might exist,” she said.

In this scenario, brands need to get ahead of examiners and work with them to help understand the technology, according to Ms. Durden. She said the best strategy is to call and set up a dialogue with examiners, as well as file in several classes to do a test case and “get it right.”

In addition, Ms. Durden said, “Find similar parallel examples in the industry to reference, be sure to file and communicate very clearly, and make the technology and emerging area understandable.”

However, she believes that as emerging technology becomes more mainstream, the existing trademark system, while “not perfect,” will be able to adapt and meet the necessary requirements.

Goods and services are classified under the International Classification of Goods and Services (NCL), set up under the Nice Agreement (1957). The Nice Agreement provides for a Committee of Experts, which represents all countries party to the Agreement.

The committee must keep pace with rapid changes in order to accurately classify a product, noted Rena Lee, chief executive of the Intellectual Property Office of Singapore (IPOS). In her experience, emerging technologies are changing the way goods and services are created and delivered, which is affecting the way IP is registered and managed.

“Registered designs traditionally protect physical products. For example, with the emergence of augmented reality, the scope of protection has been extended to non-physical products—for example, virtual keyboards,” she explained.

“Goods and services previously offered in more traditional, physical formats may now also be digitized and offered in different forms—for example, non-physical forms. This has some implications for trademark registration. Business owners may need to file IP applications for goods and services in both traditional and digital forms.”

To keep pace with technological advances, IPOS in 2017 broadened the scope of designs that can be registered to cover non-physical products. It also recently updated its Copyright Bill to allow big data to be used in computational data analysis, such as sentiment analysis, text and data mining, or training machine learning, without the need to seek permission from each copyright owner.

Ms. Lee believes that IP offices can play a crucial role in helping brands secure adequate protection by ensuring that their own policies and services keep pace with technological changes.

For its part, IPOS regularly reviews its policies, processes, and programs to ensure that they reflect the latest technological advances. It also proposes revisions to the NICE Classification to keep it up to date, and the Office regularly updates and expands its online classification search tool and trademark application form comprising some 100,000 terms.

To better support brand owners, IPOS is studying how its online IP registration and management portal can go beyond essential services to offer analytical insights for better business decision-making. In addition, it is monitoring big data and AI developments to ensure that its IP regime supports the development and use of AI technologies, Ms. Lee said.

Despite the challenges and unknowns, Gudrun Irsa-Klingspiegl, head of Trademark Management, Schönherr Rechtsanwälte GmbH (Austria), believes emerging technology should not keep brand owners and their counsel awake at night.

“I am not scared of emerging technologies, and they won’t alter the way we classify goods and services,” she said.

Instead, Ms. Irsa-Klingspiegl encouraged practitioners to become more diligent when choosing the terms and wordings they use in applications, and to ensure that they are covered by traditional classifications systems, such as the NCL.

“The problem is that the classification of goods and services is one of the most neglected areas of trademark protection,” she suggested. “Many practitioners use bad specifications, and it would help immensely if they carefully drafted lists of goods and services that mainly protect what needs to be protected.”

Ms. Irsa-Klingspiegl predicted that if practitioners devoted more attention to wording a specification in an application properly, then emerging technologies should not create any potential conundrums for brands.

“There are so many trademark registrations that are useless; they just block up the register. I hope we can find terms that easily describe these products based on new technologies that can work within the NCL,” she said.

Beyond Trademark Protection

As fresh challenges emerge, IP practitioners working with emerging products and services may find they have to look beyond protection of trademarks.

For example, companies are using copyright more as a protection mechanism, noted Ms. Durden.

“Brand practitioners will increasingly realize the best way to protect the product or service is with another form of IP,” she said, suggesting that they collaborate with colleagues in patents and other areas to put together protection mechanisms for emerging technology, “to ensure that innovations are protected by patents, copyrights, and trademarks in a holistic strategy.”

Mr. Shores agreed that brand practitioners need to widen their net. “There is often no one-size-fits-all solution, and teams need to take a multidisciplinary approach to legal issues,” he said.

He concluded: “For lawyers, emerging technologies mean taking on the challenge of always staying ahead of the trends and ensuring that clients’ businesses are prepared for what comes next.”

For more on this pivotal issue facing brand guardians, attend Emerging Technology Is Changing the Nature of Goods and Services—How Do We Provide the Right IP Counseling? (today, November 18, 12:15 pm–1:15 pm EST).

Moderator: Robert Daniel Shores, partner, Daniel Law (Brazil)

Speakers:

• Caleb L. Green, associate attorney, Dickinson Wright PLLC (US)
• Christina Monteiro, vice president, Brands & Content Intellectual Property, NBCUniversal Media, LLC (US)
• Derek Tang, senior counsel, Litigation and IP, Spotify (US)

Video courtesy of Envato Elements / 2ragon