NFTs and registered trademarks

Publication date: February 28, 2023

What is Non-Fungible token

Non-fungible token (hereinafter referred to as NFT), it is a unit of data stored in a distributed data register, known as a block chain (blockchain), thanks to which a digital asset is unique and therefore non-tradable. A blockchain NFT file does not itself contain an actual digital artwork, video clip, or music. It should be thought of more as a contract that can be represented like this: “Mr. B owns file Y”. Therefore, NFT can be used successfully as a personal digital event ticket. The story of NFT was born with the publication by Yoni Assia article on “Coloured Coins” (Coloured Coins), which consist of small denomination bitcoins used to represent various assets, i.e. real estate, shares, subscriptions or works of art. It can include both tangible and intangible real estate. The main difference between NFT and cryptocurrencies is that while cryptocurrencies such as Bitcoin are fungible, NFT is as a principle immutable. The primary purpose of NFT is to provide an authentic record of an asset. It can therefore be concluded that free access to such a token may generate little or no value. This theory, however, was disproved by Jack Dorsey, who generated over $2.9 billion after posting his first ever tweet. Therefore, there is some risk associated with NFT, as further development of the token may contribute to the idea of copyright originality being considered useless.

Can NFT be trademarked?

Non-fungible token is starting to play an increasingly important role in the modern world. There are more and more articles raising discussions about the philosophy of the token and its functions. It was inevitable that over time there would also be questions about the form of NFT protection in terms of intellectual property. Entrepreneurs very often ask the question whether NFTs can be protected by a trademark. The answer is yes, trademark protection can be imposed on a non-exchangeable token because it is the best form of protecting your own brand. In order to obtain the best protection of the trademark on NFTs, the brand owner should first of all analyze his currently registered trademarks in terms of the Nice classification and, if necessary, submit a new application for registration of a trademark in a new class. It is worth adding that patent protection can also be imposed on NFTs to protect ideas related to the design of the token, as well as copyright protection to protect against copying creative works and software. Trademark registration offices are increasingly registering NFT-related marks. In the United States in 2020 there were slightly more than 20 companies that applied for protection, and in 2021 there were already over 1,400 of them. In the calendar year 2022, over 1,000 applications for registration of the NFT mark were submitted to EUIPO. Looking at the sharp increase in the number of applications submitted since 2020, it can be concluded that NFTs are becoming a very popular trend.

Why is it worth registering NFT as a trademark and how the registration process looks like

However, we can often encounter the question of why to register a trademark related to NFT? The main advantage of registration is, above all, that the NFT trademark designation guarantees that no one will register the same or similar trademark and will not interfere with existing registrations. The authorities have a system in place to ensure that no one is trying to register your trademark. In addition, the trademark itself can increase the value of NFT, having a trademark significantly increases the authenticity of our brand, which can translate into additional income.

In order to register a trademark for services and goods related to NFTs, you need to apply to the appropriate office, which guarantees a different scope of territorial protection. The process is identical to the registration of conventional marks. However, before we start registering a trademark on NFT, we must first familiarize ourselves with the relevant legal regulations, in which we will find the appropriate division into “classes”, relating to services and goods. During registration, it is necessary to indicate the appropriate class or several classes depending on the areas of activity of our company. This process is very important in the case of registration, therefore you should have a very good understanding of the classifications that may cover our activities. In case of registration with EUIPO NFTs from 2023, there is the class 9 under the name: “Downloadable digital files authenticated with non-fungible NFT tokens”. It is worth noting that EUIPO has issued a statement in which it is stated that it will not accept the term “non-fungible token” itself. EUIPO requires that “a type of digital good” be indicated each time. When registering a trademark in the United States, you will typically specify classes such as: International Class 009 (downloadable content, computer software), International Class 035 (business services), International Class 036 (finance, banking and real estate), International Class 036 (financial, banking and real estate), international class 041 (education and entertainment) and international class 042 (scientific and technical services).

An example of registering a trademark as NFT may be an attempt to register the mark “HOT WHEELS NFT GARAGE”. A company that sells toys for children intends to sell in-game items (cosmetic items, avatars and bonuses). Registering such a mark can help a company increase sales because if a company chooses to authenticate such assets with NFT, customers may be more likely to buy in-game items as a result.

The “World of Women” platform – why was it successful?

From 2021, one of the more recognizable platforms dealing with NFT is the “World of Women” platform. It began as a collectible project consisting of 10,000 “Pictures of Proof” available on OpenSea. This project additionally consisted of 200 visual assets that were hand drawn by the co-founder of Yam Karkai. The main goal of the project was to create a safe community for all and to encourage women to explore the possibilities offered by Web3. The collection went on sale on July 27, 2021 and sold out in 10 hours. In the following month, the platform reached 745ETH in trading volume. Looking at the state as of February 2023, this number is 74,454 ETH. The reason why this platform has become so popular is that in a space heavily dominated by men, a project appeared thanks to which women gained a significant voice in the world of NFT. This is because it is one of the most serious projects that is run by women in this ecosystem. In addition, the services and goods provided by the owners of the platform have a registered trademark, as a result of which customers are more likely to use the services offered by the platform. The next step of the owners of the platform was to enter the next stage with the project and try to consolidate it as a cult global brand. They teamed up with a talented New York design studio to convert the brand to their ambitions and beliefs. They wanted to create a so-called collaboration, which would be characterized by a multi-agent, distributed system, the so-called “collaborative intelligence”. Therefore, they introduced an additional platform called “World of Women Galaxy”, thus increasing the amount of NFT in circulation. However, looking at the statistics of the original platform and the recently introduced one, the results in terms of Ethereum trading on the original platform are much better than those of the newly introduced one, the initial platform is also more popular. As a result of such a decentralized organizational grid, there are many attempts to register the “World of Women” trademark, differing from each other only in the Nice classification. Using a dedicated search engine for registered trademarks, it is possible to determine that only during the calendar year 2022 there were registered as many as seven times a trademark with a different classification.

Problem with NFTs – Unjustified ecological costs

In addition to the currently observed decline in the value of cryptocurrencies, we can also observe an oversaturation of the NFT market as more and more people started creating their own projects and collections. Looking at the OpenSea platform alone, there are over 1,000 different collections on the platform in 2022. In addition, using the website, we can check that in the last 24 hours (statistics from February 16, 2023) the number of NFTs sold is over 120,000. When generating such numbers of NFTs, you have to take into account the consequences. The main problem with NFTs is primarily the impact of the “proof of work” aspect that supports NFT transactions between users. “Proof of work” can be understood as a form of adding new transaction blocks to the cryptocurrency blockchain. This process has been considered wasteful by many artists. In the essay “The Unreasonable ecological Cost of #CryptoArt”, Memo Akten described a website that allowed to estimate the size of the generated carbon footprint as a result of NFTs transactions. Based on information collected on the site, he determined that multiple NFT edits created by one artist are equivalent to 260 megawatts per hour, or boiling a kettle as much as 3.5 million times. The release of such information publicly prompted many artists to withdraw from the NFT community. Looking at the practices of the platforms that support NFT, it can be believed that there should be much more transparency when promoting NFT.