Relation of IP Problems with growing NFT'S popularity

Introduction

The dominance of cryptocurrencies and blockchain technology in the world of digital currency is nothing new. Yet with the development of Non-Fungible Tokens, the Ethereum blockchain has skyrocketed in popularity in this space of metaverse and blockchain currencies. NFT sales reached $2.47 billion just six months into 2021, demonstrating the extent to which they have changed the realm of digital assets and ownership.

The invention of these tokens has ushered in a new era of transparency and digital security since it is now possible to produce and keep a wide range of works, including tweets, contracts, recordings, images, and music. In a very short amount of time, NFTs have become widely popular because to how simple it is to convert and swap them.

But, owing of their distinctive attraction, both buyers and sellers frequently fail to see the obvious drawbacks of these transactions. These tokens penetrate constraints put in place for the protection of intellectual property in addition to financial rules. This is due to the fact that neither the storage nor the sale of a digital form of a production designates the author in and of itself.

One of the infringement conflicts sparked by the trade of NFTs is the recent lawsuit filed by Nike against StockX. The current legal problems are undoubtedly being concealed by the erratic and unbounded pricing of NFTs. For instance, the $66,000 NFT created by well-known American digital artist Beeple has a $6.6 million market value.

Also, a simple collage of his artwork "Everydays - The First 5000 Days" was auctioned off for $69.3 million.

Tokenisation and Ownership of Digital Assets under NFTs

It is important to track the development of NFTs in order to fully comprehend the transgression brought on by the trading of NFTs. Non-Fungible Tokens are mostly digital files of different physical and digital products and works that may be readily traded and saved as tokens. Every digital file has its own distinct worth and status, which is the major draw of NFTs. There are no restrictions on the kinds of goods or creations that may be kept as an NFT because to the decentralisation of finance, which has made it possible to tokenize almost everything.

These tokens function as digital assets that purchasers may acquire after they are deposited on the blockchain. But, the bundle of rights given to the original author are not included in the aforementioned claim on these assets. Moreover, because the world of digital art is so intricately entwined, imitations of designs and things that are covered by IP rights sometimes go unreported.

Moreover, the proliferation of tokenization has even prompted the creation of patents as NFTs despite the absence of any explicit language addressing the transfer of ownership, royalties, and associated licencing.

This concurrence of NFTs and IP has resulted in numerous issues, some of them are discussed hereunder.

IP Implications under NFTs

As NFTs are the newest big thing in blockchain technology, the origin or legitimacy of the digital asset being exchanged isn't given any thought. The availability of minting tools and the simplicity of storing digital content as tokens have made it easier to violate copyrights, trademarks, design patents, and rights of distribution and reproduction. Due to this, it is important for both consumers and lawyers to compare the potential provided by NFTs with the inherent hazards associated with the protection of intellectual property.

First and foremost, there are a few misunderstandings caused by the idea that ownership of a digital item is equivalent with ownership of the copyright to that object. A creation that is kept on the Ethereum blockchain becomes a digital asset that can be traded. The rights given to the original creator are not, however, transferable by purchase or sale of the aforementioned work. When patented designs, registered trademarks, product designs, artwork, protected content, and even actual things are recreated, the urgent concerns of imitation, trademark infringement, and dilution continue to exist.

This problem was brought to light in the contentious Hermes case, in which the defendant Mason Rothschild marketed NFTs under the brand name "MetaBirkins," which were identical to the bags designed by the upscale fashion house Hermes. Charges of trademark dilution, infringement, false designation of origin, cybersquatting, and harm to company reputation remain against Rothschild in this protracted case. Another eye-catching court case involving Tarantino's Pulp Fiction came to light when the filmmaker was sued by the movie's production company after he attempted to sell screenplay fragments as NFTs.

Conclusion

NFTs are undoubtedly the way that blockchain assets will be moved in the future, but entering this space without carefully considering the ramifications for intellectual property rights (IP) might result in a sticky wave of litigation. It is essential to raise awareness of the drawbacks and hazards involved with NFT trading because to the inadequate rules and restrictions on it that exist in light of copyright and trademark protection.

The proliferation of NFTs has already given rise to several legal challenges regarding the wrongful use of IP rights in its brief existence. In addition to worsening litigation, if this ambiguous legal climate persisted, it would also violate the fundamental tenets of IP protection since artists would have nowhere to turn to safeguard their works.