NFTs: Copyright and Trade Mark Disputes
NFTs (Non-Fungible Tokens) are now the must-have crypto asset, and the size of the NFT marketplace is quickly approaching that of the global art market.
As a specialist litigation firm, with lawyers renowned for their experience acting in Intellectual Property (IP) disputes, we have already seen some of the same IP Rights issues that traditionally have arisen in the commercial market, now affecting NFTs.
NFTs now pose a risk to the rights of copyright and trade mark owners.
Whilst being an asset itself, an NFT also represents, or points to, another digital or physical asset, commonly a digital or physical work: a meme, a sports clip, or a digital artwork; you may be familiar for example, with the now ubiquitous ‘Bored Ape Yacht Club’ digital characters who have come to typify NFTs.
Despite a greater awareness of NFTs in mainstream culture, they are still misunderstood, leading to confusion, uncertainty, and (in an increasing number of cases) an infringement of copyright and trade mark rights.
There have already been some noted IP- NFT disputes:
Copyright - a successful copyright claim was made in respect of an NFT featuring, and purporting to assign rights in, the artist Jean-Michel Basquiat’s 1986 mixed media work on paper, ‘Free Comb with Pagoda’. The NFT was created without the permission of the copyright owner (the late artist’s estate) and was removed from its hosting forum.
Trade Mark Rights - the Premier League’s enforcement of its trade mark rights in respect of NFTs created by former footballer, John Terry, which featured (without permission) protected trade marks, such as images of the Premier League’s trophy.
Copyright Infringement
As you may be aware, copyright protects works, including illustrations, photographs, musical compositions, and movies; it is often the most valuable asset an individual or organisation can hold.
In the UK, copyright does not require registration; it arises upon creation of a work. For example, copyright will arise in the writing of a book, the taking of a photograph, the recording of a film, or (which is perhaps most common with NFTs) the creation of a digital artwork. The creator of a work is therefore usually the first owner of Copyright in a work (the artist, for example).
A Copyright owner has the right to protect their work by stopping others from using it (copying, displaying, exploiting it) without permission.
Copyright infringement occurs when someone uses the whole, or a substantial part, of a work without the copyright owner’s permission.
It is increasingly common to see a copyright protected work taken without permission and used in the creation of an NFT. An initial step is to report copyright infringement to the platform hosting the relevant NFTs, and the NFT may be taken down following a complaint. However, if a loss has been suffered by the copyright owner as a result of the infringement, and/or if there is a risk that the same work will be infringed again through further use, it will be necessary to engage with the owner of the NFT, and its original creator (if they are different), in order to make a claim.
There are a variety of legal remedies available to a copyright owner, including:
- Damages - representing either the loss suffered (lost royalties or other revenue), or in the alternative, an ‘account of profits’ (divesting the infringer of the profits generated from their infringement).
- An injunction - to prevent further infringement and/or the seizure and delivery-up of the infringing work to the copyright owner.
- A Declaration - from the Court that a specific work infringes copyright.
However, care should be taken when approaching a potential copyright infringer, and we would recommend that legal advice is sought before any contact is made.
Contact us without delay if you wish to discuss this further.
Trade Mark Infringement
Trade marks often form an essential part of a brand, assisting commercial growth and protecting goodwill. The use (without permission) of a trade mark with an NFT can cause considerable damage to that goodwill and reputation in the mark.
The registration of a trade mark gives the owner a so called ‘monopoly right’, being the exclusive use of a particular mark in connection with a specific class (or classes) of goods and/or services. The owner can enforce its rights to prevent third parties from using the same or a similar mark in connection with the same or similar classes of goods and/or services.
In the absence of a registered trade mark or design, it may still be possible to protect the appearance of a brand from copying by bringing a claim for ‘Passing Off’. Passing Off protects the unique identifiers of a business, including: a colour scheme; website appearance and graphics; a name and logo.
If a trade mark is suspected to have been infringed, a complaint can be made to the platform hosting the offending NFT, and a request made for it to be taken down.
However, invariably it will also be necessary to engage with the creator and/or owner of the NFT. The remedies available for trade mark rights owners against infringers include obtaining: an injunction to prevent further infringement; an order that the infringing goods/materials are delivered up or destroyed; an order for damages (financial compensation) and the payment of legal costs.
With trade marks in particular, great care should be taken when approaching a potential infringer due to, amongst other things, the ‘Groundless Threats’ provisions in trade mark law (where you as the claimant, can be sued). We would therefore recommend that legal advice is sought as a matter of urgency (particularly when an injunction may be required) from lawyers specialising in IP law, with a knowledge and experience of NFTs before any contact is made with an infringer.
Contact us without delay if you wish to discuss this further.
Conclusion
It has never been more vital to protect copyright and trade mark rights that risk being infringed by this new form of crypto asset.
IP law is complex, with many traps to snare the unwary and inexperienced; the nature of NFTs are not necessarily straightforward. It is important therefore that the facts are analysed by specialists in IP at the earliest opportunity, so that the best case, whether prosecuting or defending, is presented at the outset, to maximise the chances of a favourable outcome.
If you wish to discuss this further, please call us on 020 7315 4812 or make an enquiry online.