I recently decided to search the U.S. trademark register for applications mentioning (NFT or “non-fungible tokens”). I expected a few dozen hits, maybe low hundreds. To my surprise, my search (as of February 8, 2022) returned 2,682 results. Even more striking, these results included only 11 live registrations and 11 abandoned applications, leaving a whopping 2,660 pending applications currently under examination at the U.S. Patent and Trademark Office!
NF What Now?
If you want to understand the technology or philosophy behind NFTs, the Internet is full of people eager to explain it to you. Briefly, however, here is my understanding: An NFT is created (“minted” as NFT enthusiasts like to say) when someone appends metadata to a cryptographic hash (a “token”) and adds that token to a blockchain, usually a cryptocurrency network such as Ethereum. Often, that metadata is related in some way to a creative work, such as a digital graphic.
When I think about NFTs, I sometimes picture someone doodling on a dollar bill. The bill was fungible with other dollars; now it’s not. However, an NFT skeptic might say this overstates the functionality of most NFTs. Due to size constraints, graphics themselves are not generally encoded in the data placed on a blockchain. Instead, NFT metadata often simply points to a location where a file is stored. Perhaps a better analogy, then, is someone who uploads their doodle to a website, then writes the website URL on a dollar bill.
NFTs and Copyright
Let’s get this out of the way. The first thing that comes to mind when people think about NFTs and intellectual property is copyright. That makes sense. After all, copyright is the intellectual property right that protects works of creative expression, including those graphics referenced in NFT metadata (if you’re still using the terms copyright/trademark/patent interchangeably, check out our primer on IP terminology).
So what does copyright have to do with NFTs? The answer is basically nothing. The NFT Wikipedia entry observes, in its preface, that NFTs “do not necessarily convey the copyright of the digital files.” This is a misleading understatement. Under the Copyright Act, a valid copyright transfer must be in writing, signed by the copyright owner. It is thus legally impossible for the transfer of an NFT in itself to effect the transfer of the copyright to any work.
Conceivably, it might be possible to embed a valid copyright license in NFT metadata, in the same sense that the author of our Dollar Bill Doodle could scrawl, beneath the Masonic symbols, “I hereby grant to whoever owns this bill permission to use my doodle however they see fit.” However, I haven’t seen any indication that this is common practice in the NFT community.
Of course, if a minter doesn’t own the copyright to a work referenced in an NFT, the minting itself might be copyright infringement, but even this isn’t necessarily so. If the NFT contains nothing more than a link or other reference to the location of a digital file (lawfully maintained by the copyright owner), that alone does not involve copying the work or otherwise implicate any of the exclusive rights encompassed by copyright. Let’s say our Dollar Bill Doodler decides to write, across George Washington’s forehead, the GPS coordinates of a really cool statue; no one would claim that the statue’s copyright has been infringed.
NFTs and Trademark
For my cryptomoney, the more interesting legal issue raised by NFTs involves trademark. That brings us to those 2,600+ U.S. trademark applications, nearly all of them stuck in USPTO limbo for the moment.
Why the comparatively tiny number of NFT registrations issued, as of February 2022? Much of the explanation is simply the short history of NFTs relative to the slow trademark application process, a process that has recently been protracted even further by an unprecedented backlog currently confronting the Trademark Office.
The first NFT-related application appears to have been filed by OpenSea—still the dominant NFT marketplace—in August, 2018. However, it was not until 2021 that the NFT trademark goldrush began in earnest, skyrocketing towards the end of the year. Most of these applications have not even been assigned to an examiner, something that now routinely takes 5-7 months from filing.
Still, I suspect that examination of these marks may prove complicated.
A trademark is, by definition, something that indicates the source of particular goods or services, usually a word or symbol used in commerce exclusively by that source. Of the 11 NFT-related trademarks that have actually been registered, most are used for third-party services provided to NFT minters and traders, such as OPENSEA (U.S. Reg. No. 5797816).
But what about the minters? Can a name or symbol be protected as a trademark if it’s used purely in connection with an NFT per se? It certainly seems like it should be. With Christie’s selling a $69 million NFT artwork at auction and thousands of Bored Ape Yacht Club NFTs regularly changing hands at prices comparable to a decent house, it’s hard to argue that NFT transactions aren’t “commerce.”
Yet, how does one describe the goods embodied in an NFT or—alternatively—the services rendered when an NFT is sold? The USPTO requires trademark applicants to specifically identify the goods or services for which they wish to register their mark, and, to this end, sorts the entire economy into 45 “classes” established by the international Nice Agreement. Where do NFTs fit in this framework?
NFT minters often style themselves as art dealers, but, as noted above, purchase of an NFT doesn’t typically entitle the purchaser to possession of any artwork or—at least in any traditional sense—ownership of the artwork purportedly embodied in the NFT. NFTs are arguably more like snippets of computer software which function like self-referential certificates of authentication, proving that whoever purchased the NFT owns the NFT that shows they purchased the NFT. On the other hand, whatever authentication functionality an NFT provides seems attributable more to the software on which the blockchain network operates, software not generally provided by the NFT minter, rather than the code comprising the NFT itself. This ambiguity is problematic within the Trademark Office’s goods/services framework, which draws a hard distinction between software as downloadable goods (Class 9) and Software as a Service (SaasS), i.e. services delivered over the Internet by means of software (classified according to the nature of the service). Even if an NFT buyer were able and inclined to download their token, it would have no functionality adrift from its blockchain. Yet, if NFT minters are providing a service, what is it exactly?
Currently, the sole registration for a trademark used directly for an NFT appears to be DOGEPUNKS, registered by the minters of a collection of NFTs related to pixelated images of the famed Shibu inu wearing a variety of accessories. In addition to being registered for the service of providing an informational website (Class 41), DOGEPUNKS is registered in Class 16 for “Art pictures in the nature of drawings; Art prints comprised of digital illustrations originating from photographs; Graphic art prints.” This is almost certainly a misclassification. Class 16 encompasses physical paper goods, not digital artwork, let alone NFTs. While the Examiner seems to have accepted a screenshot from the Dogepunks website as proof that “art prints” could be purchased there, this was presumably a misunderstanding.
Meanwhile, an impressive 38 trademark applications have been filed by Yuga Labs, proprietor of perhaps the most notorious NFT brand: BORED APE YACHT CLUB. The applications cover sundry variations on the mark—BAYC, MUTANT APE YACHT CLUB, various related logos, etc.—as well as different classes of goods and services. Several multi-class applications appear to contemplate licensing the mark for all manner of unrelated merchandise and business ventures, from skateboards to wine to night clubs. Even when it comes to their core NFT activities, however, BAYC’s trademark applications seem to spread their bets. Like Dogepunks, many Bored Ape applications include Class 16, identifying their goods as “digital collectibles,” a description the USPTO will likely reject as too vague and which definitely doesn’t belong in Class 16. However, they also claim to use the mark to “maintain and record ownership of digital illustrations” as a business service in Class 35, a description that strikes me as more plausible, though, again, it’s not clear to me that this is actually a Bored Ape service, as opposed to a service provided by the proprietors of the Ethereum blockchain.
NFTs and Trade Dress
Finally, NFTs may also pose some interesting trade dress issues. Trade dress is essentially a subcategory of trademark, protecting more abstract features of goods or services—such as packaging or product design—that may nevertheless function as designations of commercial origin.
Many NFTs—your Bored Apes, your Dogepunks, and innumerable imitators—take the form of a series of graphic works, all consisting of a base image with several variable attributes. Perhaps even more so than the BAYC name and logo, the apes themselves are instantly recognizable, and counterfeits would surely cause a likelihood of confusion.
And, indeed, several businesses have filed trademark applications that appear to claim NFT design as a form of trade dress. For example, Gibson has filed several trademark applications for the outline of various guitar bodies in Class 9 for “Downloadable multimedia file … authenticated by non-fungible tokens.” Presumably, the intent is to offer a series of guitar NFTs, all united by a common shape.
This sort of trade dress claim raises some novel questions. For one thing, product design is treated differently for purposes of trade dress than tangential elements like packaging. For NFTs, that once again forces the question: what exactly is the nature of the goods or services rendered when someone mints a non-fungible token? Is the ape itself the product, in which case proof of secondary meaning would be required to protect the design as a trademark? Or, instead, is the buyer paying for the experience of owning the NFT, a service for which the ape acts as more of a spokesperson, like a gecko selling insurance or hamburgers sponsored by a clown?