Non-Fungible Tokens (NFTs) and Trademarks

Non-Fungible Token (NFT), which we have heard more often since the beginning of 2021, is a digital asset that uses blockchain technology and mostly operates within Ethereum. NFT is a digital token that cannot be exchanged or replaced and may represent many tangible objects in the real world, such as songs, artworks, GIFs, virtual game items, videos, cartoons. NFT is technically not the asset itself, whereas it is a metadata file that contains the unique combination of Token ID and contract address.

NFT is highly preferred, especially in the art community, because it functions as a digital certificate/registry through blockchain technology, thus providing transaction security, and it allows transactions to be carried out quickly and without any central authority in the digital environment.

NFT purchasers mostly want to have a unique digital asset with a collector’s mind and use it as an investment tool.

NFT has started to gain a seat in the trademark field and every other field. In fact, we have recently seen that applicants have started to add NFTs to the scope of the goods and services on which they want to register their trademarks. For example, McDonald’s has added “downloadable multimedia files containing artwork, text, audio and video files and non-fungible tokens.” to the scope of its new trademark application.[1]

In addition, many companies have started to sell their virtual products bearing their trademark as NFT to meet the rising demands for NFT and operate in the digital market and virtual universes (metaverse). For example, Gucci branded bags were created as NFT[2], and NFTs representing virtual game items featuring the Burberry[3] brand were sold.

Trademark owners think that NFT will also play a crucial role in combating counterfeiting as it is a metadata file that authenticates physical products and ensures transaction security because it is recorded on the blockchain.

Therefore, NFT has begun to be seen as a new market for trademark owners and a powerful tool to combat counterfeiting.

On the other hand, it is seen that various disputes have started to arise in terms of NFTs created by people that are not real right holders and without the permission of the trademark owners.

The conflict between Hermes and Mason Rothschild is one of the recent disputes. In the dispute, Mason Rothschild converted the well-known Birkin bags of Hermes into NFT, although he did not have the authorisation and permission in this regard, and offered them for sale on the OpenSea platform under the name “MetaBirkins”.[4] Hermes did not remain silent against the relevant uses and filed a lawsuit against Mason Rothschild on the grounds of trademark infringement and dilution of the trademark based on the well-known Birkin trademarks.[5] The relevant case is still pending before the New York Federal Court.

In another similar dispute, Nike filed a lawsuit against a marketplace platform called StockX because the NFTs that StockX offered for sale were associated with the names and images of the Nike products, claiming that its trademark rights were violated.[6] Nike stated that they did not make an agreement with StockX regarding the conversion of its products to NFT, and these NFTs can be understood as a collaboration between Nike and StockX. Therefore, Nike claims that this may be misleading as to the origin of the products, causing an unfair exercise of Nike’s trademark rights and unfairly damaging its reputation.[7]

The developments in these pending lawsuits will guide us in the coming days about the relationship between trademark law and NFTs, the issue of how to handle NFTs in terms of intellectual property rights, and how the current intellectual property regulations will find application in terms of these rapidly developing technologies that are not regulated yet.

A dispute based on NFT and trademark law has not been encountered yet in Turkey, nor has any legislation specific to such digital assets yet been established. However, as in the rest of the world, trademark owners in Turkey need more certainty about how they will form their strategies in terms of this developing technology.In this context, including NFTs in the scope of the goods/services list while filing trademark applications can eliminate the uncertainties experienced in this direction and make the trademark protection clearly applicable on such assets.In addition, in the current situation where legal regulations have not been made for such digital assets, it may be beneficial to consider these digital assets in transfer, license and other transactions and to include them explicitly in the scope, at least in terms of contracts and legal transactions that will subject the trademark rights.

[1] https://hypebeast.com/2022/2/mcdonalds-trademark-applications-enter-the-metaverse-nft-announcement
[2] https://www.artnews.com/art-news/market/gucci-nft-auction-christies-1234594632/
[3] https://www.coindesk.com/markets/2021/08/04/british-fashion-brand-burberry-releases-first-nfts/
[4]  https://www.thefashionlaw.com/hermes-names-metabirkins-creator-in-trademark-lawsuit/
[5] https://www.jdsupra.com/legalnews/outcome-of-hermes-claim-against-5484924/
[6] https://www.theverge.com/2022/2/10/22925252/nike-stockx-shoe-lawsuit-vault-nft-trademark-infringement
[7] https://www.retail-insight-network.com/news/nike-stockx-lawsuit/

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