What is the Metaverse? In the simplest of terms, it is a virtual space in which users can interact and connect in a variety of ways without leaving the comfort of their homes.
Just as in the real world, collectors are willing to pay huge sums of money for unique items like paintings, baseball cards, and vintage cars. But in the metaverse, collectibles are digital and stored in the form of Non-Fungible Tokens (NFTs).
NFTs are unique records stored on a database known as a blockchain, and in the metaverse, NFTs are a way to trade unique virtual assets, such as artwork, real estate, and video game skins. And pioneering enterprises are exploring ways to capitalize on this new frontier’s growing popularity
As might be expected, the use of company trademarks and brands is becoming an ever-increasing legal issue for business owners to watch.
For example, Nike recently filed a lawsuit against online resale platform StockX for selling NFTs containing Nike’s famous trademarks.
In January 2022, StockX launched its Vault NFT collection, whereby each NFT in the vault is tied to a physical item that StockX sells – in this case, Nike’s Jordan 1 sneaker.
In its lawsuit, Nike asserts that StockX is minting and selling NFTs that infringe on Nike’s intellectual property by using Nike’s famous trademarks.
StockX counters that the at-issue NFTs are inextricably linked to and intended to certify ownership of actual physical Nike sneakers and, as such, the NFTs are not infringing under the fair use and a lawful exercise of the first sale doctrine.
Under the fair use and first sale doctrine, StockX can resell tangible assets (i.e., authentic Nike shoes) using Nike’s trademarks without violating Nike’s intellectual property rights if the use of Nike’s trademarks was in a manner and to the extent necessary to describe or refer to Nike’s product without a likelihood of consumer confusion.
Nike’s ongoing lawsuit against StockX, known as “Sneaker Wars” is one of the first documented challenges against NFTs that are used to certify ownership of physical goods, this case raises issues of first impression and may provide greater clarity on the dividing line between infringement and fair use when NFTs are tied to physical products.
Given the unique set of circumstances at hand, Nike’s case against StockX is expected to shed light on key intellectual property issues surrounding NFTs, particularly when and if NFTs are tied to physical goods.
This case and others will help lay the groundwork for how intellectual property rights – trademark rights, in particular – will be treated in connection with the creation, purchase, and sale of NFTs moving forward.
In July of this year, the U.S. Patent and Trademark Office and the U.S. Copyright Office jointly examined issues related to NFTs amid an increase in questions and disputes such as those raised in the Nike case.
The questions focused on, among other things, the ownership rights of NFTs and the transfer of those rights, licensing in the NFT context, and what intellectual property protection can be afforded to NFTs and their creators.
If you have questions about your intellectual property rights and how those rights may apply in the newly developing virtual world contact intellectual property rights attorney Greg Schreiber at [email protected].