To better understand the IP implications regarding NFTs, we need to remember that NFTs can be divided into two components:
- the token – i.e. the digital certificate of ownership as recorded on the blockchain; and
- the underlying content – which may or may not be stored on the blockchain. This could be an asset eligible of IP protection, such as a work of art, a design, a trademark, and so on.
This duality is the basis of the main discussions on the creation, purchase, and resale of NFTs under an IP perspective.
The ownership of the token does not imply also the ownership of the underlying content. This principle is relevant not only for the chain of purchaser(s) of the NFTs, but also for the entity creating the same.
Italian copyright law reserves to the rightowner the exclusive right to commercially exploit a work of art, granting to the same the right to copy, distribute, modify, reproduce, make available to the public such work, and many other rights. Similarly, tokenizing an asset that includes a third-party trademark is forbidden without an authorization by the trademark owner. To tokenize an asset, an agreement therefore needs to be reached with the holder of the rights on the underlying content. A recent decision of the Court of Rome – the first in Italy concerning NFTs – confirmed this. It stated that tokenizing the image of an athlete showing the logo of a famous football club amounts to an infringement, even if the athlete embodied in the same played in such team and granted his authorization for the tokenization of the image.
With regard to the purchase of NFTs, this does not grant any right on the underlying content, unless otherwise agreed by the parties. To refrain from legal liabilities, purchasers should be aware of the conditions or licence terms provided in the smart contract regulating the sale of an NFT. Usually, the owners of the rights on the underlying contents retain all IP rights on the same, while granting to the NFT purchaser a limited, non-exclusive, transferable license on the content, for example for resale or to display it for personal use.
Considering that, under Italian law, the evidence of the transfer has to be given in writing, smart contracts are key.
Finally, brand owners have started to show an increasing interest in the registration of trademarks covering virtual goods, including NFTs. Indeed, by filing trademarks in connection to digital goods, companies would assure trademark protection also in the “meta world”. And this facilitates the enforcing strategies, whose effectiveness cannot be taken for granted without a tailored registration. So far, the Italian trademark office has not given guidance on filing. Yet, most companies are filing applications in classes 9, 41 and 42 to claim protection for NFTs and related services. The judgment of the Court of Rome mentioned above seemed to praise this strategy and, after pointing out the well-known character of the football club’s trademarks, it highlighted that their registration in class 9 (in particular with reference to downloadable electronic publications), could cause confusion on the market, and ground a claim for unfair competition and dilution. Thus, it granted the club an injunction against the company that tokenized and sold the NFTs.