Non-fungible tokens (NFTs) have grown in popularity since first entering public consciousness in 2021. They are digital tokens and may represent unique—virtual or real-world—items including songs, artworks, GIFs, virtual game items, videos, and cartoons. NFTs are created using blockchain technology and primarily operate within Ethereum, a blockchain platform with automated (smart) transactions. NTFs cannot be exchanged or replaced. The NFT is technically not the asset itself but a metadata file that contains a unique combination of a token ID and contact address.
NFTs have many features that make them appealing for content creators and/or brand owners. Functioning as digital certificates through blockchain technologies, they can provide transaction security and allow transactions to be carried out quickly and without any central authority in the digital environment. They can help to prove ownership of the work, authenticate the source of the products or services, and serve as a tool to combat infringement and counterfeiting.
Although the Republic of Türkiye has no intellectual property (IP) regulations dealing with NFTs, the courts and administrative authorities have started to render decisions or publish opinions about NFTs that may help to understand the general approach towards these assets in Türkiye.
NFTs and Copyright Law
Türkiye has no law dealing with the copyright position of NFTs, but various discussions are taking place within the IP community generally, on these topics:
- Whether the purchase of an NFT grants authorship rights to the buyer;
- Which formal requirements are applicable for a valid copyright assignment; and
- Which particular rights associated with copyright would have been infringed due to unauthorized use.
First, one should note that since there is no specific regulation on NFTs, the provisions of the existing copyright code, the Law on Intellectual and Artistic Works (LIAW) no. 5846, apply to copyright-related NFT matters.
One of the most debated points is whether an NFT is a copyright-protected work itself (as opposed to any underlying work) within the terms of LIAW. LIAW Article 1/b defines a copyright-protected work as “[a]ny intellectual or artistic product bearing the characteristic of its author, which is deemed a scientific and literary or musical work or work of fine arts or cinematographic work.” We believe it would be difficult to meet the “bearing the characteristic of its author” criterion in most cases for these metadata files. If this requirement is satisfied, an NFT, where the underlying copyrighted work is considered a scientific and literary or musical work, or work of fine arts or cinematographic work, the courts will assess the dispute and/or any type of rights claim as if the NFT was identical in nature to the underlying copyrighted work.
One should also note that an NFT sale does not include the transfer of copyright in the work converted into the NFT. It only provides the right to use the relevant NFT format. However, if the rights owner who created the NFT wishes, the transfer of rights that arise from the ownership of the work within the scope of the smart contract can be included, provided that the relevant formal conditions—being in written format and specifying the individual rights transferred—are met as per LIAW Article 52.
One also needs to evaluate whether the conversion of an underlying copyright work to an NFT violates the rights arising from authorship. The right to create the NFT should belong to the author of the digital work. However, anyone with sufficient technical knowledge and access can create and sell NFTs. Therefore, a person who does not have any ownership rights in that work can convert the digital work into an NFT and offer it for sale.
In this case, although it is a subject of debate in the doctrine, it is generally considered in the IP community that this violates the reproduction, adaptation, and communication of the author’s public rights. In fact, the disputes seen in the courts worldwide and in the media are generally based on the claim that people who are not the actual rights holders created NFTs and offered them for sale.
This situation indicates that NFT purchasers should question many issues, such as whether:
- The transaction includes the transfer of copyrights;
- The work is original; or
- The actual rights owner sells the work.
As we previously discussed here, a Turkish court issued the country’s first preliminary injunction (PI) decision regarding NFTs in 2022. The case related to the unauthorized exploitation of the portrait of Cem Karaca, a legendary artist, songwriter, and composer in the world of Anatolian rock music, through converting his portrait into an NFT and offering it for sale on the OpenSea NFT marketplace.
At the plaintiff’s request, the presiding Istanbul Third Civil IP Court issued a PI to prevent access to websites showing the infringing content while stopping the sale of the relevant portrait as an NFT on the OpenSea platform. The regional court of appeals upheld the first instance court’s findings, rejecting the defendant’s appeal against the PI decision.
As the first court judgment in Türkiye related to NFTs, this is a significant development, recognizing, as it does, that an NFT can be subject to a PI. While the IP Court did not elaborate on the legal aspects of NFTs, the decision is still noteworthy because it determined NFTs to be a “format” for the purposes of infringement.
On the administrative side, the definition of an NFT as “Nitelikli Fikri Tapu,” which translates as “qualified IP deed” by the Digital Transformation Office of the Presidency of Türkiye, is a noteworthy development as it signals that the public authorities consider NFTs to be digital certificate/registration mechanisms.
NFTs and Trademark Law
As many more businesses have used their trademarks in the metaverse and launched NFT collections in the last few years to satisfy the high demand that the NFT trend is causing, IP authorities started to initiate some principles to shed light on the application process for the marks covering NFTs and other virtual goods/services.
In this regard, virtual goods and services and NFTs have been included under certain goods and services in the 12th edition of the Nice Classification, which was published by the World Intellectual Property Organization (WIPO) and which was entered into force as of January 1, 2024.
Just like in many other countries around the world, Türkiye has seen a significant increase in the number of trademark applications covering NFTs.
At this time, Türkiye has neither legislation nor a published court decision evaluating NFTs from a trademark law perspective. However, in line with global developments, the Turkish Patent and Trademark Office (Office) has received a good number of trademark applications covering NFTs.
We observe that the Office has a positive attitude toward trademark applications covering NFTs and handles such applications like any other trademark application, with no reservation or opposition against the included goods/services list; that is, the Office applies the general trademark registration procedure if such applications meet the legal requirements.
Furthermore, the Office has determined that virtual and physical goods and services are similar/related. The Office follows the European Union Intellectual Property Office’s approach as it relates to the likelihood of confusion, which accepts that consumer perception criteria used for real-world goods can also be applied to virtual goods. For example, in a decision issued on March 31, 2023, which was subsequently finalized, the Office decided that “[d]ownloadable virtual goods in the field of fashion for use in virtual environments and worlds; downloadable virtual goods in the nature of clothing …” in Class 9 are similar to the “clothes” in Class 25.
No Consistency Yet
Although the courts in Türkiye and elsewhere tend to interpret existing rules in their respective systems to determine the applicable rules to disputes arising from NFTs, a consistent legal opinion regarding NFTs has yet to be established. However, future regulations and/or practices of courts and IP offices suggest that certainty in the IP law field looks possible.
To prevent potential conflicts, IP rights owners should indicate NFTs individually as a format and determine the scope of transfer and authorization separately in contracts and other relevant legal transactions. To be on the safe side, trademark holders that operate in the metaverse should also register their marks with NFT-specific coverage for the relevant goods/services.
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.
First published by INTA in Jan 31, 2024.