Changes to IP laws ‘not necessary’ to deal with NFTs, says report

Study by USPTO and US Copyright Office finds current laws are “adequate” and new legislation could impede evolving technology’s development
The United States Patent and Trademark Office is the federal agency for granting U.S. patents and registering trademarks.

Shutterstock; Mark Van Scyoc

IP laws do not currently need to change to address infringement concerns relating to the use of non-fungible tokens (NFTs).

So said the USPTO and US Copyright Office in a joint study published 13 March examining the IP law and policy implications of NFTs. 

NFTs are part of an emerging technology that leverages blockchain technology for a variety of uses such as representing ownership of digital art or authenticity of products and services, implicating IP rights.

The USPTO and US Copyright Office conducted their research for the study through inviting public comment, holding public roundtables and analysis of case law and literature. They recognised concerns that buyers and sellers do not know what IP rights are implicated in the creation, marketing and transfer of NFTs, and that NFTs may be used to facilitate copyright or trademark infringement. 

But the offices concluded that existing statutory enforcement mechanisms are “currently sufficient” to address infringement concerns related to NFTs.

Changes to IP laws, or to the offices’ registration and recordation practices, “are not necessary or advisable at this time” the report said. Rather, public education initiatives and product transparency play an important role in ensuring greater awareness and understanding about NFTs.

The report also said that while many stakeholders raised concerns about copyright and trademark infringement associated with NFTs, most believed that current IP laws are “adequate to deal with infringement”. Moreover, many expressed concern that NFT-specific legislation would be “premature at this time and could impede the development of new NFT applications, given the evolving nature of the technology”.

Kathi Vidal, director of the USPTO, said: “We continue to work side-by-side with industry and government collaborators such as the Copyright Office to better understand the IP implications of these evolving technologies.”

The two federal offices received input from stakeholders including creators, brand owners, innovators, entrepreneurs, technologists, academics, industry associations and IP practitioners.

The most common concern raised about NFTs during public consultation was the prevalence of consumer confusion about the IP rights implicated in their creation or transfer. “Unsophisticated consumers” may conflate the purchase of an NFT associated with a digital good with ownership of IP rights in that good.

Commenting on the study, BCLP partner Jeff Wakolbinger said he was “not surprised” the report had not recommended any immediate changes to IP laws to address NFTs. “Our IP laws are intended to be broad and forward looking,” he said.

He noted that sometimes the laws are insufficient to address issues specific to a technology or industry that comes into existence after those laws were written, “for example, digital performance of sound recordings. But NFTs have not thus far exposed any gaping holes in US IP laws”.

He added that NFTs “have not thus far generated the sustained buzz that some predicted. The technology and the utility of NFTs is still developing. Shortcomings or conflicts with current laws could be exposed in the future, but for now, if it isn’t broke, don’t fix it”.

The study was started in 2022 after senator Patrick Leahy and Senator Thom Tillis of the US Senate Judiciary Committee’s Subcommittee on Intellectual Property requested that the offices undertake joint research on the various IP law and policy issues associated with NFTs.

NFTs have been the subject of some high-profile cases in recent times. Luxury fashion house Hermès prevailed over digital artist Mason Rothschild last April when he was found guilty of trademark infringement after selling NFTs of furry digital handbags called MetaBirkins, a nod to the famous Hermès bag.

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