Launching an NFT project? Trademark and copyright traps.

The NFT is a smart contract on the blockchain.  That smart contract includes a hyperlink to a digital file – an image, video, audio, or text file – hosted on a server like any other internet file.  The linked digital asset is not on the blockchain.  If the linked digital asset is a unique work of authorship, then it may be subject to copyright ownership. The artists, musicians, videographer, or other author is the owner of the copyright and has certain exclusive rights to preclude others from use. An experienced NFT attorney who also understands copyright law can help you understand the rights in the linked digital asset.  Here are some copyright law resources.

• What is a copyright?  Copyright is a type of intellectual property that protects original works of authorship as soon as an author fixes the work in a tangible form of expression. In copyright law, there are a lot of different types of works, including paintings, photographs, illustrations, musical compositions, sound recordings, computer programs, books, poems, blog posts, movies, architectural works, plays, and other works.  The token contract for an NFT links to a digital asset – image, video, audio file – that is often copyrighted work.
• What is copyright fair use?  Fair Use is an exception that permits limited use of copyrighted material without acquiring permission from the rights holder. Typically, fair use includes categories such as criticism/parody, comment, news reporting, teaching, scholarship, and research. When determining whether fair use exists, courts look to whether the use is transformative by examining four factors.  Fair use will rarely present a defense for an NFT project that is linking to a digital asset that they do not own the copyright to.
• What is a ‘Derivative Use‘ of a copyright-protected work? A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship” (17 U.S.C. § 101) is called a Derivative Work.  The original copyright owner typically has exclusive rights to “prepare derivative works based upon the copyrighted work” (17 U.S.C. § 106(2)).  It is considered copyright infringement to make or sell derivative works without permission from the original owner, which is where licenses typically come into play.
• What is copyright infringement? “Strict Liability” is a term used to describe legal liability in which a Plaintiff does not have to prove a Defendant’s fault, but simply show that their rights were infringed. Copyright infringement is strict liability, which means you remain liable for copyright infringement even though you did not intend or realize you were infringing copyright. Copyright infringement in the NFT market – OpenSea, Rarible, – is rampant.
• What is a DMCA take-down notice and how does it apply to NFTs?  DMCA take-down notices for copyright infringement can close down a store on OpenSea and Rarible.  But the linked digital asset could still be found on a server.  For NFTs, you need to send a DMCA to the hosting server for the digital file.
• How much does it cost in legal fees to sue for copyright infringement? Contact an experienced NFT lawyer who understands copyright law to learn more.

Trademarks protect brands.  The name of your NFT project is likely subject to trademark law. This means your project name, or listing name on OpenSea, must not be confusingly similar to any other NFT project name.  Assuming your project has superior trademark rights, you can preclude other NFT projects from using confusingly similar project names for their NFT drop.

• What is a trademark? A trademark can be any word, phrase, symbol, design, or combination of these things that identifies your goods or services. It’s how customers recognize you in the marketplace and distinguish you from your competitors. Your NFT project name can be registered and protected as a mark.
• How do I know if someone is already using a similar name to my NFT project? In general, trademark availability is a search done by a qualified trademark attorney or staff member under that attorney’s direction to identify other possible uses of the market of your proposed trademark or words which may create customer confusion as related to your proposed trademark in your proposed industry. You should have a trademark search conducted by an experienced NFT trademark attorney to make sure there are no issues as a result of similar NFt projects, or brands outside the NFT space.
• What is trademark infringement?   Because successful NFT projects tend to attract scammers and imitators, it is common for these projects to infringe on your NFT project name or other trademarks.  Trademark infringement occurs when someone makes use of your trademark without your permission, and by doing so, it creates what’s known as a likelihood of confusion with your particular mark and the source of your goods or services. And a court analyzes what constitutes a likelihood of confusion by looking at a whole list of factors. The two most important are the similarity of the marks themselves, so you compare your mark versus what they’re using, and also the similarity of the goods or services associated with that mark.
• How do I register an NFT trademark? You should not only conduct a mark search prior to launching your NFT project but also register your trademark with the USPTO for additional protection. An attorney with experience in both trademark law and NFTs is preferable.  Self-help trademark registration is a high-risk option that should only be employed if there are no funds to pay an attorney to do it right the first time.