USPTO And US Copyright Office Publish Joint Study On NFTs And Intellectual Property

On March 12, 2024, the United States Patent and Trademark Office (USPTO) and the United States Copyright Office (collectively, the Offices) published the results of a joint study they conducted regarding issues of intellectual property (IP) and policy arising from the use of non-fungible tokens (NFTs).  Ultimately, the Offices concluded that NFT-specific IP laws are not necessary or advisable at this time.

The report, Non-Fungible Tokens and Intellectual Property (the Report), examines current and future applications of NFTs, how IP laws apply to NFTs and assets associated with NFTs, IP-related challenges arising from the use of NFTs, and potential ways to use NFTs to secure and manage IP rights.

Section I of the Report provides an introduction and background on the study and NFT technology.  For the purposes of the Report, the term NFT refers to (i) a unique cryptographic token (in this context, a token refers to a digital representation of value or rights), (ii) the ownership of which is recorded to a blockchain (or another type of digital distributed ledger system), (iii) that provides the owner rights in or access to one or more assets or entitlements.  Some current and potential future uses of NFTs identified in the Report included using NFTs for the sale of digital artwork, as tickets for exclusive events, or as authentication for luxury goods.

Sections II-IV examine the relationship between NFTs and copyrights, trademarks, and patents, respectively.  Though each section raises unique issues regarding NFTs, some common legal issues identified in the Report include the potential for the creation and dissemination of unauthorized copies of NFTs, as well as the difficulties that some features of blockchain technology might pose to IP enforcement (such as the difficulty of correcting fraudulent or inaccurate entries).  As well, the Report notes that the most common concern identified by stakeholders regarding the use of NFTs is the prevalence of consumer confusion regarding the IP rights implicated in their creation or transfer.  For example, while participants in traditional fine art markets may understand purchasing a physical painting does not transfer the copyright in the work to the buyer, the distinction between transferring ownership of an NFT and transferring ownership of the copyright in the work has generated substantial confusion.

Notwithstanding the challenges addressed in the Report, the Offices conclude that changes to IP laws are not currently necessary to address the use of NFTs.  The rapid pace at which NFT technology is changing means that new laws unique to NFT issues would likely be premature.  Further, though NFTs present a new factual context, the legal issues implicated are generally not novel, and some issues (such as consumer confusion) are better addressed through education and consumer protection measures.

Summary By: Claire Bettio