Senators call for joint study of NFTs and IP issues

With a market value forecast of over $ 35 billion for 2022, there is no doubt that non-fungible tokens (NFTs) are hugely popular. Despite this, the category of intellectual property on which these NFT offers are based is inconsistent, confusing and in many cases in conflict with applicable law. These issues were apparently brought to the attention of Senator Thom Tillis of North Carolina and Senator Patrick Leahy of Vermont, who in a letter dated June 9, 2022 (according to their roles as ranks and chair of the Judiciary Subcommittee on Intellectual Property), requested that the USPTO and the Copyright Office are conducting a joint study that addresses a number of IP legal issues surrounding NFTs. Referring to these roles and their broader interest in “continued development and use of new technologies,” senators called for the study to address the following non-exclusive list of questions:

• What are the current applications of NFTs and their respective IP and IP related challenges?

• What potential future applications of NFTs do you envisage, and what are their respective potential IP challenges?

• For current and potential future applications of NFTs:

  • How does the transfer of rights apply? How does the transfer of an NFT affect the IP rights in the associated asset?

  • How do license rights apply? Can and how can IP rights in the associated asset be licensed in an NFT context?

  • In what way does the violation apply? What is the potential infringement analysis where an NFT is linked to an asset covered by a third party IP? Or where the underlying asset associated with one NFT is owned by the NFT creator and infringed by another?

  • What intellectual property protection can be granted? What IP protection can the NFT creator provide? What if the NFT creator is a different person or entity than the creator of the associated resource?

  • How else does 17 USC § 106 apply?

• What are the current and potential future uses, internally and externally of your agencies, to use NFTs to secure and manage IP rights?

• How does the current statutory copyright protection, such as the DMCA, apply to NFT marketplaces, and are these protections sufficient to deal with current infringement issues?

We have considered many of these issues for our customers. We have also shared some concrete examples of these intellectual property related issues on this blog. For example, our post about StockX litigation explored how and whether the trademark doctrines of first sale and nominative fair use apply to NFTs that display physical goods protected by trademarks. In the same post, we outlined many unanswered IP-related questions central to the case that necessarily reflect the core of the proposed questions for the study, such as the extent to which ownership of NFT provides benefits or costs beyond or separate from those associated. with ownership of the physical good?

In another recent post discussing the applicability of the DMCA to the NFT market, we noted that the Copyright Office released a report in 2020 calling the DMCA’s alert and removal system “unbalanced” and suggesting ways Congress could change the existing regime. . Our post discussed in detail the nuances of a DMCA removal of an NFT stored on the server-based Internet versus stored using an alternative to traditional location addressing (ie linking) called “content addressing.” An additional post on this blog addressed several issues regarding NFTs and DMCAs, including, among other things, the extent to which an NFT miner who owns the copyright to content related to NFT may issue a valid DMCA removal notice to an NFT marketplace operator requests that NFT be removed, if NFT was distributed without an express content license to the recipient. In any study published by the Copyright Office that addresses the adequacy of the DMCA removal regime to deal with the presence of infringing content on NFT marketplaces, it may well address these issues.

The senators asked the USPTO and the US Copyright Office to respond to this request by July 9, 2022. If the agencies choose to conduct the study, the senators asked that it be completed by July 2023. litigation regarding IP questions and NFTs, there may be market-driven answers to many of these questions, even before the study is published. And of course, as technology, creativity and business models continue to evolve at an incredibly rapid pace, there are likely to be new issues to consider.

Caroline Rimmer, Proskauer Rose Summer Associate, wrote this post.