In the virtual world, metaverse and trading NFTs have witnessed a significant surge for the past few years. While the pandemic has created a rise of multitude of opportunities to leverage new brands and businesses, so have legal challenges related to intellectual properties such as virtual copyright rights, virtual trademarks and trade dress, metaverse patented technology etc.
“…The two means are the most popular within the creative arts, FinTech, gaming and entertainment industry for exchange or trade by minting. Considering, the heavy capex within these industries, one such expenditure is that upon the Intellectual Property Rights…”
Metaverse and Intellectual Property Rights:
Metaverse is a virtual reality that enables individuals to socialize and collaborate for work and non-fungible tokens (NFT’s) are encrypted units of data that harness the power of blockchain and distributed ledger systems for trading metadata. The two means are the most popular within the creative arts, FinTech, gaming and entertainment industry for exchange or trade by minting. Considering, the heavy capex within these industries, one such expenditure is that upon the Intellectual Property Rights.
IPR Infringements and Kinds:
1.NFT Ownership and Copyright of the Underlying Asset:
Ownership of NFT and Copyright assets in virtual world have different interpretations. If you purchase an NFT, the buyer only gets ownership of copy of the NFT in the form of a cryptographically signed receipt. Often enterprises misunderstand the concept leading to difference in interpretations such as,
- The purchaser upon buying the NFT will or will not get any IP proprietary rights.
- Purchaser only gets ownership of the work but not the original copyright of the NFT which is owned by the creator. Hence understanding these fine prints is important to understand
“…To prevent trademark infringements on the metaverse & NFT, trademarking and digital trademark registrations is key….”
To prevent such errors or deliberate attempts at IPR grabbing ; licensing and smart contracts help.
2. Trademarks counterfeiting in NFT’s
When a creator of the NFT tries to mint their NFT or virtual assets the objective is to be unique and competitive. However, many unauthorized parties try to mint, sell, or re-sell the same IP asset counterfeiting owner’s registered trademarks. This act is virtual trademark infringement. For example, luxury fashion brands like Hennessy, LVMH, Cartier etc. use blockchain services to help customers trace the authenticity of their branded products. To prevent trademark infringements on the metaverse & NFT, trademarking and digital trademark registrations is key. This way new brands can incorporate NFTs into their own brands and leverage it. Moreover, many new brands can also opt to create metaverse links with their specific style or trade dresses. Such steps are essential for retaining revenue profit and increase sales; significantly.
“…Section 79 of the Information Technology Act of 2000 outlines rules that are applicable for the NFT marketplaces…”
3. Patents and NFTs
Patents allow inventors to license their technology or invention. Whereas, a patent in NFT or metaverse allows the buyers to own limited or new edition technology for their virtual projects or wallets. While many new start-ups are familiar with the need for IP protection measures. There still is a lack of knowledge in managing IPR assets in the metaverse and NFT space. According to section 3(k) of the Indian Patent act a Computer Program/ Software are not patentable however, AI or ICT related hardware solutions are patentable. Therefore, in matters of patent infringements on metaverse, would still fall under the parasol of Indian Copyright’s Act for acquiring patent protection.
Present Legal Frameworks:
There is a huge emerging legal landscape in Asian countries enroute to address the virtual IPRs requirements. For example, presently, the Berne Convention for the Protection of Literary and Artistic Works, has ratified 181 member countries of which India is also a member. The treaty establishes that exclusive rights on digital assets be granted to original authors and creators for their works irrespective of type or form. Moreover, copyright owners have civil or criminal remedies available to them under Section 55 or Section 63 of the copyright laws, respectively. For due diligence and infringements of rights Section 52 and Section 51 of the Copyright Act outlines the eligibility standards required to meet the parameters of breach.
“…the Berne Convention for the Protection of Literary and Artistic Works, has ratified 181 member countries of which India is also a member…”
Additionally, Section 79 of the Information Technology Act of 2000 outlines rules that are applicable for the NFT marketplaces. These guidelines are also imposed on intermediary platforms to exercise due diligence and identify IPR infringements or illegal activities.
Steps to Prevent:
The digital industry has proven to be supremely dynamic and with new changes building up at a rapid pace, it is critical to think about legal issues surrounding IP rights on platforms such as metaverse and NFTs and how to shield your intellectual property rights . The following suggestions should be considered, before launching your brands on the platforms:
- Terms & Conditions: Before any enterprise decides on going the NFT way, it is important that the terms and conditions of sale and virtual crypto contract defining the permissible activities be encoded in the NFT artwork. This helps in better control and greater monetization of the IP rights.
- Take Legal Assistance: To manage your risk and digital brand architecture taking legal assistance and adequate due diligence is recommended.
- Listing Awareness for Marketplaces: While copyrights and licensing can verify origins of NFTs however, if there’s error of fraudulent ledger entry of data and transactions that would fall under the category of money laundering. Therefore, it is essential for intermediaries to have IPR due diligence and safety measures in place; both for buyers and creators.
- Collaborative Works and Copyright: Often due to social media, artists collaborate and work together with other artists or brands. If the artists seek to mint their art NFTs or host branded events on metaverse it is important to consider copyright and how due credits and permissions are sought or expressed.