• by Colin Kirkland , March 12, 2024

The government found that while current copyright infringement laws are thorough enough to deal with related issues surrounding NFTs, buyers and sellers are widely uncertain when it comes to the implications of IP rights.

Non-fungible tokens are a form of crypto asset used to certify ownership and authenticity of a digital file, such as an image, video or text.

Although NFTs have diminished in popularity over the past three years, they are still utilized by brands and artists to provide digital ownership over art, music, products and services.

The Offices responsible for conducting the report are concerned with the legality of representing ownership via an NFT and how doing so may implicate IP rights in relation to the sale of digital artwork, tickets to exclusive events or authentication for luxury goods.

The report acknowledges that NFTs embody positive aspects surrounding the enablement of artists to secure payment for resales of their works, help in aiding trademark owners in expanding their brand appeal and support in management, transfer or licensing of IP rights.

However, based on findings from commenters included in the study, the Offices report that the most common concern raised about NFTs is the “prevalence of consumer confusion about the IP rights implicated in their creator or transfer,” finding that a wide variety of consumers struggle to understand what rights accompany a particular NFT due to the lack of marketplace standards related to clear disclosure by NFT sellers.

Due to the decentralized existence of NFTs and blockchains, the study suggests that enforcing trademarks around the technology is exceedingly difficult.

“While some individual NFT platforms have developed protocols to help trademark owners enforce their rights, there is no centralized authority that requires all platforms to do so,” the report states. “There are also no cross-platform mechanisms to allow trademark owners to identify and take down infringing content, settle trademark-related disputes involving blockchain-based domain names, or confirm that sellers own the trademark rights associated with the assets they offer.”

Still, amid the uncertainty about enforcing and understanding IP rights with the creation and trading of NFTs, the Offices conclude that “existing statutory enforcement mechanisms are currently sufficient to address infringement concerns related to NFT applications.” Changes to IP laws, they found, are “not necessary or advisable at this time.”

To address the uncertainty and unruliness of the industry, the government instead believes that providing a greater awareness about the issue through public education initiatives and product transparency will be sufficient.