NFTs: The Harbinger of Property Rights in the Metaverse?

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Non-fungible tokens (“NFTs”) continue to dominate the crypto-zeitgeist. It is beyond dispute that they are currently a major economic and cultural force. In 2021, sales surged to approximately $25 billion. They have been featured in high profile television commercials during the Olympics and the Super Bowl. And Nike recently purchased the NFT developer RTFKT Studios, signaling its intention to be a dominant provider of digital fashion in the metaverse.

Despite all this, it remains unclear what legal rights are conveyed with the purchase of an NFT. The academic consensus is that, absent a “smart contract” that expressly includes intellectual property (“IP”) rights, purchasing an NFT does not convey any copyrights or trademark rights. Yet, the creation of an NFT (called “minting”) is almost certainly limited by recognized IP and other legal principles. These issues have begun to percolate up through the courts.

This article explores lingering, undefined NFT questions through the lens of several pending lawsuits. While many articles just describe the facts of each case, this article focuses on the most interesting legal arguments that each makes. It also identifies how decisions by these courts may form the basis of property rights within the metaverse. And ultimately, it questions whether the emergence of such lawsuits undermines blockchain as a decentralized institution.

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NFT Infringement: No Free Taking or New Fair Transformations?

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Earlier this month sports apparel giant Nike sued StockX LLC, a Michigan-based sneaker and streetwear resale marketplace, for offering to its customers non-fungible tokens (NFTs) depicting Nike’s sneakers.  The claims asserted in the February 3 complaint filed in federal court in the Southern District of New York include trademark infringement, trademark dilution and unfair competition, all stemming from inclusion of Nike’s trademarks (e.g. Nike, Air Jordan, Jumpman, the “Swoosh” Design) in the shoe images depicted in the NFTs provided by StockX.

This is not the first case of its kind.  In January, Hermes sued a digital artist for unauthorized reproductions of its well-known Birkin bag in a line of NFTs released by the artist called “Metabirkins.”  And before that, in November 2021, Miramax – the studio that produced the 1994 cult movie classic Pulp Fiction filed suit to enjoin Quentin Tarantino from releasing NFTs based off of his original handwritten script of the movie, including scenes from an early script that were cut from the final version.

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2021 Year in Review: OPDP Enforcement Actions Involving Prescription and Biological Products

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The Food and Drug Administration’s Office of Prescription Drug Promotion (OPDP) issued a total of six letters in 2021 — four Untitled Letters and two Warning Letters — to pharmaceutical or biologics companies for promotional materials that allegedly misbranded prescription drug or biologics products. The two Warning Letters issued in 2021 addressed prescription drug promotion. Two of the Untitled Letters also addressed prescription drug promotion, while the other two letters addressed biologic product promotion.

OPDP also sent six letters in 2020; however, the majority that year (four) were Warning Letters, with only two being Untitled Letters. Both Warning and Untitled letters are made public on FDA’s website. Warning Letters are issued for violations of regulatory significance that may lead to enforcement action if not promptly and adequately corrected, whereas Untitled Letters cite violations that do not rise to the threshold of regulatory significance warranting a Warning Letter. Untitled Letters serve as the initial notification that FDA has taken notice of a violation and allow the company to come into compliance without further FDA regulatory action. Historically, OPDP has relied more heavily on Untitled Letters. 2020 was an outlier year with four Warning Letters versus two Untitled Letters, but 2021 signified a return to normalcy, as the agency issued twice as many Untitled Letters as Warning Letters.

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Help! Our Intellectual Property is Being Infringed – An Investigatory Checklist

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I don’t love surprises. Well, if you want to send me a surprise red velvet birthday cake, please feel free. Otherwise, I like being prepared – and infringement of intellectual property is one type of surprise that you can prepare yourself to handle. To assist in that effort, here’s a non-exhaustive list of questions you can ask yourself and your team members, to help determine next steps if you suspect infringement of your trademarks or copyrights. These questions may also come in handy if you find yourself on the receiving end of an allegation of infringement.

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Californiafying New Jersey’s Consumer Protection Laws

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Starting now, national advertisers and retailers may want to pay the same attention to legislative and judicial developments in New Jersey that they long have paid in California.

New Jersey’s Governor, Phil Murphy, came into office in 2018 explicitly promising to remake New Jersey into “the California of the East Coast.”  Recently reelected and holding leadership posts in both the National Governors Association and Democratic Governors Association, Governor Murphy is building a national profile.

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Launching a Sweepstakes or Contest on Social Media – What You Should Know

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As discussed on our blog previously, here and here, a promotion sponsor must finalize Official Rules before a promotion begins. But using a third-party social media platform to administer your promotion or accept entries raises additional issues that must be considered, particularly when the promotion involves the submission of user-generated content (“UGC”).

Using a social media platform to administer your promotion raises two additional issues: (1) ensuring compliance with the platform’s specific promotion requirements; and (2) ensuring that the sponsor is protected from liability if the promotion involves UGC. This blog provides a high-level overview of issues to consider before administering your promotion on a third-party social media platform, and in particular when your promotion involves submission of UGC.

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Trademark Modernization Act: Final Rules

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The USPTO recently issued its final rules to implement the Trademark Modernization Act, whose goal is to clear away unused registered marks and make the trademark registration process more efficient. Below, we highlight public comments regarding the implementation of the Act, as well as the final details regarding the implementation of the Act.

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Ho, Ho, Ho … Hold On … Did Legal Approve That?

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The holidays are upon us — and so too are holiday advertising campaigns. With an unusual holiday season last year, many retailers are gearing up for what they hope to be a robust holiday season. Even with concerns over supply chain issues, retailers and brands are doubling down on holiday advertising campaigns this year and pushing out festive, eye-catching content to lure customers. To stop the Legal Grinch from stealing the gifts from these campaigns, here’s a quick refresher on a few important legal considerations:

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Beyond whack-a-mole1: Maximizing the impact of your internet monitoring program

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E-commerce was already booming when the pandemic struck, and now it feels ubiquitous. Consumers spent $861.12 billion online with U.S. retailers in 2020, up 44.0% from $598.02 billion in 2019, representing 21.3% of total retail sales last year compared with 15.8% the year prior.2 The statistics only underscore what we’re all witnessing — technology stocks appreciating rapidly, a steady drumbeat of brick-and-mortar retailer bankruptcies, shopping mall closings, conversion of massive properties to logistics centers, catch-up efforts by traditional retailers to offer online sales and curbside pickup, and our own increasingly online shopping habits. Even when the sale of goods and services are not executed online, brick-and-mortar sellers are nonetheless utilizing the internet like never before to reach potential customers, educate them about their products, and coax them into stores. Whatever the world looks like after the pandemic ends, these e-commerce gains are likely here to stay.

It has never been more important therefore for brand owners to monitor and protect their brands online. E-commerce is a counterfeiter’s paradise, as explained succinctly by the OECD, “E-commerce platforms represent ideal storefronts for counterfeits and provide powerful platform[s] for counterfeiters and pirates to engage large numbers of potential consumers.”3 Why is this? E-commerce enables counterfeiters to send cheap knockoffs, which garner high margins, to unwary purchasers across the globe with little risk of legal repercussions.4 The first obstacle to legal enforcement is the anonymity afforded by both the internet generally and e-commerce platforms specifically. ICANN’s interpretation of Europe’s GDPR privacy legislation has generated a blackout of Whois information, making it more difficult to identify the perpetrators behind many illicit webshops.5 Moreover, e-commerce platforms do not operate by the same “know your seller” obligations burdening brick-and-mortar retailers. Whereas a brick-and-mortar retailer could be found liable for selling a counterfeit product in its store, and therefore presumably conducts diligence on and obtains contractual protections from each of its sellers, e-commerce platforms are considered mere intermediaries connecting sellers with buyers, ignorant of and without liability for the nature or quality of the products transacted. As summarized by the U.S. Department of Homeland Security, “While the U.S. brick-and-mortar retail store economy has a well-developed regime for licensing, monitoring, and otherwise ensuring the protections of intellectual property rights (IPR), a comparable regime is largely non-existent for international e-commerce sellers.”6

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SCOTUS to Decide 17 U.S.C. § 411 Referral Questions

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In 2016, Unicolors, Inc., sued H&M for selling clothing that infringed a Unicolor design. The group registration that Unicolors relied on included designs that had not been published as of the publication date set forth on the registrations. A copyright registration certificate is invalid if the registrant obtained it via the submission of false information that, if known to be false, would have resulted in a refusal to register. 17 U.S.C. §411(b)(2) requires that “the court shall request the Register of Copyrights to advise the court whether the inaccurate information, if known, would have caused the Register of Copyrights to refuse the registration.”

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