A non-fungible token (NFT) is a digital asset, a unique digital identifier that represents and guarantees ownership or proof of authenticity of a unique item or piece of content using blockchain technology. An easy way to understand NFTs is to think of them as unalterable certificates of authenticity for digital goods.
In Spain (and elsewhere), NFTs have many possible applications, especially for determining ownership and IP rights over a determined creation.
How are NFTs being used and how do they interact with copyrights, trademarks and patents?
One of the main challenges surrounding NFTs is their interaction with copyrights, trademarks and patents.
Typically, physical art’s value is based on the exclusivity of the purchased work (which lies in what makes it unique) and the ownership of the work itself. However, this presents a challenge in the digital world as digital assets may be easily duplicable.
NFTs provide in those cases a certificate of ownership of the physical or digital work; in other words, it certifies its authenticity. The implementation of blockchain technology and NFTs offers a great opportunity for right holders to unequivocally identify their creations in order to fight unconsented uses. This because these technologies create an authentication system for consumers to distinguish original products from non-genuine products, associating an NFT to a particular original product.
Concerning copyrights, disputes are often associated with the rights transferred to users when purchasing an NFT associated to a particular work. On one hand, artists and creators want to ensure that their rights are protected when their digital works are tokenised as NFTs, while on the other hand buyers want to ensure that they are acquiring all the economic rights associated to the work associated to the NFT purchased.
When users acquire an NFT, they do not necessarily acquire all the copyrights (ie, economic rights) associated to the asset or artwork identified by the NFT. In most cases, users do not acquire the commercial or exclusive rights of the work and thus the ownership remains in the author’s property. For this reason, users should always review the smart contract associated with the NFT purchased, where details of the copyrights acquired are contained.
Regarding trademarks, there is an increasing number of applications for trademark registrations to identify virtual goods and NFTs. As a result, the European Union Intellectual Property Office (the EUIPO) considered it necessary to issue an official communication to clarify how NFT products should be classified. This was solved by incorporating in the 12th Edition of the Nice Classification the term “downloadable digital files authenticated by non-fungible tokens [NFTs]” in Class 9. In this respect, the EUIPO specifically warns that the term “NFT” on its own is not acceptable, but the type of digital item authenticated by the NFT must be specified in the description of the class applied for.
The same goes for patent applications related to blockchain technologies and NFTs, which are also increasing in number due to the emergence of these new technologies and digital assets. For example, new patents incorporating NFTs for use in video games or in virtual worlds have started to appear, used for creating unique assets in NFT format that can be exchanged by users in virtual environments.
Besides that, blockchain and NFT technology can also be applicable in many other uses related with patents. When multiple inventors or contributors are involved in a patent, NFTs can be used to represent the ownership and determine contributions of each party in the protected invention, having each inventor a corresponding NFT that represents their share or rights in the patent. This can be essential to document and manage the ownership structure and provenance of patents, especially in collaborative research and development projects.
Litigation concerning NFTs in Spain
Although there is no specific regulation or clear case law on the protection of NFTs in Spain yet, the outcome of ongoing litigation proceedings will undoubtedly set a legal precedent addressing unresolved questions and highlight how IP laws will need to adapt to the changing landscape of NFTs.
It is worth highlighting the ongoing case before Commercial Court No. 9 of Barcelona between VISUAL ENTIDAD DE GESTIÓN DE ARTISTAS PLÁSTICOS (VEGAP), which is a Spanish collective copyright management entity representing visual authors like painters, sculptors, photographers or illustrators, and PUNTO FA, SL.
PUNTO FA, SL, as the owner of some physical artworks of Joan Miró, Antoni Tàpies and Miquel Barcelós, digitalised these artworks into an NFT collection. It promoted and published these new artworks on different platforms (as Metaverse, Decentraland or the Marketplace Opensea) and social networks. It also exhibited them in its physical store in New York.
VEGAP (on behalf of the authors) filed a complaint stating that the defendant was using the works in an unauthorised manner, infringing the economic (reproduction, transformation and public communication) and moral (integrity and disclosure) rights of the authors. In the claim, VEGAP also applied for the adoption of interim injunctions for the defendant to cease in the use of the aforesaid mentioned works.
By a 21 October 2022 decision, the Court ruled in favour of VEGAP on the interim injunctions proceedings, ordering Ozone Networks Inc (responsible of Opensea’s platform) to deposit the NFTs created in a wallet appointed by the plaintiff until the main proceedings were resolved.
As the Court stated, the main controversy of the case (in copyright matters) was determining whether transforming a work of art into an NFT entails a modification of the work or whether the ownership of a physical work is sufficient to transform it into an NFT.
Although the case is ongoing, it will be relevant to see how the Court decides on these as yet unresolved issues. This judgment will be relevant for future cases in the emerging world of NFTs in Spain.
For further information on this topic please contact Paula Gutiérrez at Grau & Angulo by telephone (+34 93 202 34 56) or email ([email protected]). The Grau & Angulo website can be accessed at www.ga-ip.com.