UNITED STATES: USPTO and USCO Issue Joint Report on the Opportunities and Challenges of NFTs

The U.S. Copyright Office and the U.S. Patent and Trademark Office (the Offices) have issued a new joint report entitled Non-Fungible Tokens and Intellectual Property in response to Congress’s June 2022 request to assess the sufficiency of existing laws to address potential intellectual property (IP) challenges posed by NFTs (non-fungible tokens). INTA was among the parties that submitted comments to the Offices.

While the findings of the joint report largely aligned with the conclusions of INTA’s own April 2023 white paper, INTA’s position diverged when it advocated for amendments to existing laws to account for the unique aspects of NFTs.

NFTs are a technology that blurs traditional boundaries between physical and digital assets. Even the definition of the term NFT is subject to debate and uncertainty. The flexibility of NFTs can be an asset, opening up a range of possible uses. The joint report noted one commenter who hailed “the potential [for NFTs] to democratize IP creation and ownership” by allowing creators to engage directly with consumers. However, as both the joint report and INTA observed, the “rights” an NFT purchaser acquires do not necessarily align with legal rights to the underlying IP assets to which that NFT is associated. The legal uncertainties as to the rights and obligations of each party involved may compromise the promise of NFTs.

In the realm of copyrights, INTA advocated for a legislative solution “to facilitate the effective and sustainable commercialization of intellectual rights through NFTs.” Despite, for example, the potential disconnect between contracting parties’ expectations and the law pertaining to the sale and transport of NFTs and the assignment of copyrights under U.S. law, the joint report concluded that the underlying issues are not novel or specific to NFTs. Rather than focusing on possible shortcomings in existing IP laws, the joint report concluded that the issue centered on “consumer confusion and contracts,” both of which had non-legislative solutions.

In the realm of trademarks, respondents expressed concern about ambiguity in likelihood of confusion analyses involving digital goods. Trademark owners whose marks claim physical goods but not their digital equivalents are confused about whether their marks will receive protection in the metaverse. In addition, the study considered NFT-specific laws to address trademark infringement on NFT platforms. Generally, respondents were against the passage of legislation specifically tailored to such activities. The study found that pending U.S. federal court cases are likely to provide guidance on this question.

While the joint report and INTA’s white paper depart at times as to recommendations, they provide valuable exploration of the opportunities and challenges raised by NFTs. INTA continues to encourage the study of NFTs by lawmakers and legislative bodies around the world and to consider all available means to fulfill the potential of NFTs in the marketplace.

Although every effort has been made to verify the accuracy of this article, readers are urged to check independently on matters of specific concern or interest. Law & Practice updates are published without comment from INTA except where it has taken an official position.

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