As the NFT ("non-fungible token") industry continues to flourish (passing $40 billion in value in 2021) an increasing variety of individuals and companies are looking for ways to profit off the excitement. Some seek to benefit from the success of existing NFTs by minting imitations or parodies of such NFTs. Others have decided to mint NFTs as an additional way to earn revenue from their existing intellectual property (e.g., trademarks). To protect their NFTs and brands from exploitation, it is a good idea for minters to register their NFT trademarks with the United States Patent and Trademark Office ("USPTO"). New minters need to become familiar with federal trademark law and associated trademark rights in order to protect themselves from accusations of trademark infringement.
DO Register Your NFT Trademark
Minters have the ability to protect the intellectual property rights associated with their NFTs by filing for trademark registration with the USPTO. A trademark can be "any word, phrase, symbol, design, or a combination of these things" that identifies and distinguishes the source (here, an "NFT minter") of goods (here, "NFTs") from competitors in the marketplace. Federal trademark law provides many protections for trademark owners, including the ability to sue for infringement where third-parties use their trademarks in ways that will likely confuse consumers about the source of goods/services. NFT trademark owners who successfully prove trademark infringement can recover: (1) actual damages; (2) the infringer's profits; and (3) in rare cases, attorney's fees and costs.
BAYC's NFT Trademarks
To protect their NFTs and brands, many minters (including the minters of Bored Ape Yacht Club ("BAYC") and Axie Infinity) have registered their NFT trademarks and logos with the USPTO. BAYC's registration of the "Bored Ape Yacht Club," "BAYC," and "Mutant Ape Yacht Club" trademarks (and the pending registration of the "MAYC" mark) should play an essential role in protecting its brand from recently released third-party NFT collections that imitate and attempt to ride on the success of BAYC NFTs.
In December 2021, two NFT collections, PHAYC and Phunky Ape Yacht Club ("PAYC"), were released by third-party minters. Soon thereafter, both projects were banned from OpenSea, the largest NFT marketplace, for violating its rules against copyright infringement. If BAYC wishes to separately pursue the matter (i.e., stop the sale of such NFTs), trademark law could also be a strong weapon in BAYC's legal arsenal. For example, if the matter were to proceed to litigation, a court may find that PHAYC and PAYC infringed on BAYC's trademarks because the marks are so similar that consumers may be confused as to the source of PHAYC and PAYC NFTs. Were a court to arrive at such a finding, the third-party minters would be prohibited from using the confusingly similar marks in connection with future NFT minting and sale to the consuming public, among other remedies.
DON'T Use Another's Trademark(s) in Connection with Your NFT Project
Considering the protections granted to trademark owners, minters need to be cautious when using third-party trademarks in the minting and sale of NFTs. If minters want to use a third-party's brand name, logo, and/or product in connection with creating their NFTs, they should first obtain written permission to do so.
NFTs are so hot now that large, traditional entities, including McDonald's, the New York Post, and the National Football League, have minted or are planning to mint NFTs that incorporate and feature their respective trademarks. It is reasonable for consumers to assume that NFTs containing third-party trademarks are produced by such companies. If minters produce NFTs that include third-party trademarks without proper permission, the relevant parties might sue them for trademark infringement. Where courts find that consumers would likely be confused as to the source of NFTs, minters may be held liable for trademark infringement and will be ordered to pay substantial damages to the trademark owner(s).
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.