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Litigation of NFTs and Intellectual Property

Litigation of NFTs and Intellectual Property

If you’re in the business of making products, you likely know what intellectual property is. It’s been a concept for a long time, and it’s been a driving factor behind litigation regarding patents, trademarks, and various other things since before anyone reading this was born. 


However, it has become more complicated over the last couple of decades.


With the advancement of technology, and the advent of the digital age, intellectual property, and how that IP is protected, are a much bigger concern in the modern era.


As such, while you likely understand the very basic principles of intellectual property and how it works, it’s just as likely that you’re missing some key concepts and an in-depth understanding of how litigation surrounding intellectual property works.


Here’s a comprehensive introduction to intellectual property, some recent technological concepts that have complicated it, and some key points that you should know to protect your property or know what you can and can’t do when making your own products.


What is Intellectual Property?

In the simplest terms, intellectual property is something you have created with your mind. Typically, this is an idea that has been translated into a product.


Some easy-to-understand examples of intellectual property are in your everyday life even if you wouldn’t think to consider them IP.


A painting or drawing that someone has made is something that they specifically made from their own mind, and while there is a physical product available, it is still considered purely intellectual. Other people can paint their own images, but they can’t copy someone else’s and sell it as an original.


Practically every non-food item you buy is also intellectual property. For example, if you bought a new filet knife for your next fishing trip, the specific features of that knife would be someone’s IP. Things such as logos, special features such as unique handle shapes, and more can all be trademarked or patented to protect them as IP.


The music industry is another great example. There are cases all the time regarding artists sampling another artist’s piece, with or without permission, and in many cases, litigation is used to resolve issues that pop up with that. While the product isn’t a tangible thing, it is still protected.


In the modern day, this has gotten more complicated, though. It’s not just regarding things that are patented, and there aren’t always tangible products attached to IPs anymore, but they’re still protected.


NFTs are a great example of this.


What is an NFT?

NFTs are one of the best examples of intellectual property evolving into something far different than what it initially covered. It’s a product of the digital age, and it has led to some unique changes to the litigation process.


Before we get into that, you should probably understand what it is, though. This is still a concept that many individuals have trouble understanding.


An NFT, or non-fungible token, is a new product on the blockchain. It’s similar to the cryptocurrency that has taken the world by storm in recent years.


To many, this is just a simple image that is often similar to the clipart you find in word-processor programs. They’re very simple images that people pay a lot of money for.


However, they’re more complex than that.


NFTs are made in limited numbers, and they’re tracked via the blockchain. This adds to the scarcity that provides value to any normal product. NFTs fluctuate in price based on availability, and since they’re trackable, one can reasonably expect to treat an NFT like an investment.


NFTs can also be a digital representation of a physical, tangible, object. NFTs are frequently used to exchange various high-value pieces of property via the blockchain.


Another new use for NFTs is to represent digital items and facilitate their trade. A big market for this is the gaming industry. A trending usage is to offer gamers an NFT that represents an in-game item they can purchase or earn, and then unlike in the past, they actually own that item. If a sequel comes out, and they want to use that item, features are being developed to allow for the importance of the item in the new game. Players who own high-value items in a game also gain the ability to sell their NFT-attached game items to other players; allowing gamers to earn a bit of income from their hobby.


Intellectual property laws cover NFTs. Even though NFTs rarely attach to a physical asset, they are still the products of someone’s mental ability to create. As such, they are protected by law, and if someone copies, steals, or distributes them without permission from the owner of that intellectual property, they can find themselves in a legal case.


The Ins and Outs of Intellectual Property

On the surface, not infringing on someone’s intellectual property seems as simple as not blatantly copying their ideas or what they’re putting out.


However, it’s not that simple. There are various ways that IPs are protected, and there are some situations when your ability to protect your IP is considered null and void. Like all things in the legal field, there are numerous situations for you to understand.


First, let’s talk about how intellectual property is protected.


1: Copyright


This is typically used to protect the IP that is generated in the creative field. For example, books, songs, videos, and similar forms of media are protected by copyrighting them.


Actually filing to copyright creative material is commonplace, and generators of such content often pay to have the copyright put on file.


However, just because something isn’t officially copyrighted does not mean that you can blatantly copy it and use it as your own. We’ll talk more about that later.


2: Patents


Patents are typically used for new inventions, industrial designs, and similar products. These include in-depth visual and text-based descriptions of the design being patented, the inventor applying for the patent, and if it is accepted as an original design, the patent is processed and put in the books to ensure that the new design is protected as intellectual property. As such, other manufacturers, business professionals, etc… cannot copy the design for their own products without the possibility of a legal response.


3: Trademarks


Trademarks are typically used to protect logos, fonts, slogans, and other pieces of brand imagery. A trademark can be officially filed for, and if you do trademark the material, the visual design (when applicable) and overall logo are protected.


For example, McDonald’s golden arches are trademarked. Another fast-food restaurant, or any company, cannot use giant golden arches to brand their company.


4: Innate IP Laws


Just because a piece of intellectual property isn’t officially protected against one of the previously mentioned legal means does not mean you are free to see an idea, take it as your own, and use it as-is in any capacity.


Intellectual property is protected from the moment of its inception. For example, if an indie author writes a book and self-publishes, they might not file for copyright. However, that does not mean a well-known author can come along, like the book, and copy/paste it into their own manuscript before publishing it themselves.


The indie author would still have legal grounds to take the more well-known author to court.

This is true for most things. However, there are plenty of cases where intellectual property laws will not protect a design or other product from being used.

Litigation surrounding intellectual property.

When Intellectual Property Laws Don’t Protect an IP

In the vast majority of cases, your creation is either automatically protected to some degree, or you can file to have it formally protected. However, there are situations in which, even if someone is directly using your IP, there isn’t much you can do.


We’re going to go over these situations and some common examples so you know the limits of your IP’s protection, and also so you can use the information to potentially circumvent restrictive IP laws in a legal and ethical way.


1: Fair Use

One of the most critical parts of intellectual property litigation you need to understand is Fair Use. Fair Use laws allow almost everything to be used in part, or even in full, for a variety of purposes. Parody, criticism, review, and similar situations all fall under fair use.


YouTube is a great example of this. You might have seen a song reaction video before. This is someone reviewing a song, providing commentary on it, and of course, playing it either in full or in part throughout the video.


While the same person couldn’t just post the song on its own without violating your copyright, they could play it while providing commentary on it.


People can also make parodies of popular pieces of media. For example, no one can upload a Star Wars movie to the internet for free, but they can make their own parody movie that is clearly based on it without legal recourse.


2: Patent, Copyright, and Trademark Limits

For other types of intellectual property that are officially protected via filing for a patent or similar form of protection, a lesser-known fact is that those protections eventually run out. Some of them need to be reapplied for frequently or used frequently enough to maintain their protections, and some simply have lifespans.


You probably just saw this with Disney’s ownership of the Winnie license. For decades, Disney was the only company that could legally produce Winnie the Pooh content and merchandise. When the copyright expired, a small indie company made a horror movie featuring Winnie, and Disney couldn’t do anything about it.


The Leatherman Wave is another recent example. It’s a famous multi-tool design made by Leatherman, and it’s one of the company’s top sellers. However, they let the patent fall through. Now, many companies are copying the design exactly, or otherwise copying it enough that they could have been sued in previous years.


Make sure you understand the requirements to keep your protections. If you fail to meet those requirements, the protections that you rely on to protect your products from being copied might suddenly disappear and become a damaging blow. However, you might also be able to use such circumstances to your own benefit.


NFTs and Protections

This is where copyright and intellectual property laws get a little messy. NFTs are brand new, and they don’t fit into the same category as practically any other sort of IP. Yes, they are typically art, but they also have no market value on their own. The value comes solely from their scarcity in a digital market.


In short, the answer is no. NFTs are not protected by traditional copyright laws, and applying for a copyright on your NFT design is an awkward process right now.


Fortunately, if you’re into NFTs, there is a lot of work being done to change that and create clearer guidelines for protecting NFTs effectively.


There is also another major question regarding NFTs that is a major concern to both buyers and sellers.


NFTs are meant to be traded as tangible objects despite not being tangible objects. The question is whether or not the copyright is associated with an NFT transfer to the new owner. For the NFT to meet its purpose, the transfer of copyright protections is crucial. Without that, the person doesn’t truly own the NFT or the ability to do whatever they want with it. This still isn’t 100% clear with the current copyright laws that were made with much more tangible end products in mind.


Getting Help with Intellectual Property and NFT Protections


Whether you’re trying to protect your intellectual property, understand your capability to use someone else, or defend yourself in an intellectual property litigation case due to a problem that has occurred, you need help. This is especially true with NFT issues you’re dealing with because the current laws simply aren’t developed enough. Many cases revolving around NFTs are still untreated ground with very little in the way of previous examples to help guide litigation.


At Litigation Legal Insight, we’re prepared to help guide you through all of your intellectual property needs and ensure that you understand your rights.