IP Law Clerk Charlotte Godart contributed to this blog post.

In March of this year, the U.S. Patent and Trademark Office and the U.S. Copyright Office submitted a report to Congress with findings on the intellectual property issues raised by non-fungible tokens (NFTs). The congressional report concluded that no new laws specific to NFTs are needed at this time given how frequently the technology is changing. However, the report raised concern with unique intellectual property issues created by the buying and selling of NFTs such as issues relating to trademarks.

The trademark issues raised can be divided into three categories:

1. Registering a trademark for an NFT;
2. overlap of protection between a trademark for a physical good and a digital good; and
3. enforcement.

With respect to registering a trademark for an NFT, the report highlighted issues related to classifying NFT-related goods and services and uncertainty regarding “specimens of use” for applications including NFTs. For both of these issues, the report’s consensus is that more guidance and documentation is needed from the USPTO.

For owners of a trademark for a physical good, the report indicated uncertainty with whether any protection would extend to NFTs of that physical good, or in other words “digital goods.” One specific question raised was whether physical goods will be considered against digital goods in a likelihood of confusion analysis. The report mentions a recent case, Hermès Int’l v. Rothschild, No. 1:22-cv-00384 JSR (S.D.N.Y. Feb. 8, 2023), in which the defendant created digital art of the infamous Hermès Birkin bag and was selling them as NFTs through defendant’s site, metabirkin.com. Hermès brought claims against the defendant for trademark infringement, trademark dilution, and cybersquatting. A jury found defendant liable on all claims and awarded Hermès $133,000 in damages. The court held that the Hermès trademarks for “BIRKIN” with respect to physical goods extended into the digital NFT space. Interestingly, Hermès indicated at trial that they are intending to eventually create NFTs themselves and that the defendant’s infringing sales prevented them from doing so. Perhaps this influenced the outcome, but it still remains unclear whether this precedent will hold, especially as it relates to works of artistic expression, which are typically excluded from trademark infringement through the First Amendment.

Finally, the report discussed issues with trademark enforcement, particularly because trademark infringement appears to be the most prevalent form of IP infringement on NFT platforms. Trademark infringement commonly occurs when someone uses a trademark with respect to an NFT asset or within an account, domain, or digital wallet. Enforcement of trademark rights is challenging in this new digital space given a lack of centralized procedures or a controlling authority for these Web3 domains and platforms. However, the report concludes that current IP protective measures should be enough to combat infringement, even in the context of this uncertainty.

There remains much legal uncertainty when it comes to NFTs, particularly with respect to trademark registration and enforcement. As cases continue to be decided and the law takes a clearer shape, hopefully many of these questions will be answered. In the meantime, the USPTO is continuing to offer NFT-specific training and guidance. Trademark owners should remain vigilant of potential infringement in these digital spaces.