The Risks and Benefits of Adding NFTs to Your IP Portfolio – Trademark

It is said that a picture is worth a thousand words, but in the digital age where emojis, GIFs and “likes” have replaced traditional forms of conversation, it can come as no surprise that digital assets are valued at more than a thousand words – Some have price tags in the millions of dollars. Although we find it difficult to find the right words to describe Nyan Cat – the animated flying space cat with a Pop-Tart for a body – the remastered GIF sold for 300 ETH, or around $ 590,000, in February 2021.¹

The total sales volume of non-fungible tokens (NFT) in 2021 exceeded $ 14 billion,² with the sale of Christie’s auction house worth over $ 150 million³ and Sotheby’s sales reach $ 100 million.⁴ But peer-to-peer NFT marketplaces such as Rarible, Nifty Gateway and OpenSea are leading the way in impressive NFT sales. Rarible tokens have raised $ 27 million in sales over the past two years.⁵ Between May 2020 and September 2021, Nifty Gateway recorded approximately $ 409 million in NFT sales.⁶And since its inception in 2017, OpenSea has established itself as one of the largest marketplaces for NFTs, handling more than $ 10 billion in sales and trading volume over the period.⁷

After seeing the enormous potential in the NFT market, both artists, brands and companies have begun to shape NFTs and participate and push the boundaries of the NFT market in various ways. For example, Taco Bell made its NFT debut by selling animated GIFs and taco-themed images.⁸ In December 2021, Nike acquired a virtual shoe company to sell digital kicks and NFTs in the meta version.⁹ Luxury brands have jumped on board as well; in August 2021, to commemorate the brand’s 200th anniversary, Louis Vuitton launched its adventure-based game, Louis gamewhere users venture out into different worlds and search for items to collect.¹⁰ Also built into the game are 30 NFTs designed by the artist Beeple, which are only available through playing the game.

But what drives and dictates the value of NFTs?

As with most goods, value is linked to several factors, such as the exclusivity and rarity of the goods, the fame or notoriety of the issuer or creator, and the ownership history.¹¹ Even more than that, though, the narrative of the NFTs and the community access assigned to buyers often defines their value. For example, by purchasing certain NFTs, owners are given access to an online community and / or club membership that comes with additional benefits. These can include exclusive events or experiences, access to online forums,¹² or other content or items that are only available to NFT owners, such as new music releases or signed jerseys.^{1. 3}

But the value can also be driven by whether the sale gives intellectual property rights (IP) in the underlying work. Some NFTs (including Bored Apes, which are some of the most popular and highly valued NFTs) come with rights to the underlying artwork (including the right to commercialize the artwork through derivative works).¹⁴ Usually, however, these rights are not granted through the sale of an NFT; and the accompanying license and / or the terms and conditions impose restrictions on the commercialization of the underlying IP.¹⁵

This misunderstanding and the general lack of legal framework in the NFT market has resulted in recent IP disputes, with some IP owners experiencing that their works are being used and offered for sale in the form of an NFT without their consent. These disputes, some of which are discussed below, give rise to several NFT-specific IP issues and questions regarding ownership, contract design, trademark registration and even fair use and rights to the first amendment.

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Footnotes

1. See Grace Kay, “Nyan Cat’s Flying Pop-Tart Meme sold for almost $ 600,000 as unique crypto art, Bus. Insider (February 23, 2021),

2. See Madana Prathap, CryptoPunks, Bored Apes, Decentraland and others – These are the most valuable NFT projects in 2021, Bus. Insider India (December 30, 2021),

3. See Carla Mozée, Christie’s sold $ 150 million NFTs in 2021, with the auction house on track for $ 7.1 billion in sales for the year, Mkts. Insider (December 21, 2021),

4. See Tanzeel Akhtar, Sotheby’s NFT sales reach $ 100 million by 2021CoinDesk (December 15, 2021), https://www.coindesk.com/business/2021/12/15/sothebys-nft-sales-reach-100m-in-2021.

5. RaribleNonFungible, (last visited 19 May 2022).

6. Total monthly sales of Non-Fungible Tokens (NFT) on Nifty Gateway Worldwide from May 2020 to September 2021Statista (Sept. 2021),

7. See Sean Dickens, More than $ 10 billion in volume has now been traded on OpenSea in 2021Yahoo (Nov. 8, 2021), Jamie Redman, leading NFT Marketplace Opensea surpasses $ 10 billion in sales over time, Bitcoin (Nov. 8, 2021),

8. See Garett Sloane, Tacos for $ 187,336 and digital basketballs for $ 69,000. . . The crypto bubble is coming to marketAdAge (March 16, 2021),

9. See Richard Lawler, Nike has just acquired a virtual shoe company that makes NFTs and sneakers “for the Metaverse” Verge (December 13, 2021),

10. See Tora Nordmann, Louis Vuitton’s new game is better than “Fortnite” High snobbery (August 11, 2021),

11. See Mitchell Clark, NFTs, explainedVerge (August 18, 2021),

12. See e.g.Kevin Roose, I joined a Penguin NFT club because that’s obviously what we’re doing nowNY Times (August 12, 2021),

1. 3. See Benjamin Pimentel, Stream it. Own it. DJ Justin Blau sees the future of music in CryptoMinutes (October 7, 2021), Holly Hunt, How NFTs make money on sports teams and athletes’ fan basesInsider Sport (June 14, 2021),

14. See e.g., Terms and conditions, Bored Ape Yacht Club, (last visited 19 May 2022). Bored Ape’s terms and conditions specify, with respect to ownership: “When you purchase an NFT, you fully own the underlying Bored Ape, the Art. , freeze or otherwise change the ownership of a Bored Monkey. ” Bored Ape also grants buyers an unlimited, worldwide license to use, copy and display the purchased art for commercial use.

15. See Harrison Jordan, No, NFTs are not copyrightedTechCrunch (June 16, 2021),

Originally published in Landslide, vol. 14, No. 4, June / July 2022, by the American Bar Association.

The content of this article is intended to provide a general guide to the topic. You should seek specialist advice on your specific issues.