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Senators delve into the world of NFTs, asking US patent and copyright offices to review questions regarding related intellectual property rights

In a June 9, 2022 letter to the Directors of the United States Patent and Trademark Office (USPTO) and the United States Copyright Office, Senators Thom Tillis (R-NC) and Patrick Leahy (D-VT ) requested that the agencies jointly undertake a study of intellectual property (IP) rights considerations regarding non-fungible tokens (NFTs or NFTs).

NFTs are digital objects – each NFT has a unique digital fingerprint that is immutable – recorded and stored on a blockchain. NFTs represent the property of single elements. Ownership and attribution of NFTs are also recorded on a blockchain, enabling secure and transparent record keeping, and the blockchain ensures that only one NFT can be created for each item. (This is different from, for examplestreaming music files or digital photographs, which may be copied, pasted, and widely distributed.)

The creation and sale of NFTs has generated a large volume of activity worldwide and, with high profile purchases reaching tens of millions of dollars, significant media attention. So far, NFT adoption has been greatest in the artwork and collectibles space (for examplewith respect to designs, music, images and videos), but NFTs can denote ownership of any unique asset (digital or physical) and their acceptance is likely to grow.

The senses. Tillis and Leahy, filing member and chair of the Senate Judiciary Subcommittee on Intellectual Property, respectively, took note. Citing their committee’s obligation to review intellectual property rights for emerging technologies and the impact those technologies could have on intellectual property rights, the letter asks the USPTO and the Copyright Office to study the next questions 1 regarding NFTs and intellectual property over the next year:

  1. What are the current applications of NFTs and their respective IP and IP challenges?

  2. What potential future applications of NFTs do you foresee and what are their respective potential IP challenges?

  3. For current and potential future applications of NFTs:

    a. How are the transfers of rights applied? What is the impact of the transfer of an NFT on the intellectual property rights in the associated asset?

    b. How are license fees applied? Can and how can intellectual property rights in the associated asset be licensed in an NFT context?

    vs. How does the offense apply? What is the analysis of potential infringement when an NFT is associated with an asset covered by the intellectual property of a third party? Or when the underlying asset associated with an NFT belongs to the creator of the NFT and is violated by another?

    D. What intellectual property protection can be granted? What IP protection can be granted to the creator of NFT? What if the creator of the NFT is a different person or entity than the creator of the associated asset?

    e. If not, how does 17 USC § 106 apply?

  4. What are the current and potential future uses, internal and external to your agencies, of using NFTs to secure and manage intellectual property rights?

  5. How do current legal copyright protections, such as the DMCA, apply to NFT marketplaces and are these protections adequate to address current infringement concerns?

The senators seek to “understand how NFTs fit into the world of intellectual property rights – as those rights exist today and as they may evolve as we move into the future” 2 and urges Directors to consult with the private sector to formulate responses. Although some of the questions may seem broad, they are intended to produce a wide-ranging report that ideally will provide guidelines on how NFTs should be treated in the field of intellectual property in the future.

The questions are important because copyright and trademark rights, and in some scenarios patent rights, box protect the NFTs or certain elements thereof; various trademark and copyright owners have successfully enforced their rights through infringement claims in district court or by filing DMCA takedown requests on NFT Marketplaces (for example, OpenSea). However, disputes in the relevant area are proliferating and the results are uncertain; we expect subsequent alerts to discuss some of these decisions as they are released.

Unfortunately, the problems that NFT innovation seeks to solve by providing an NFT buyer some verification of authenticity does not always correspond to the reality of whether an NFT seller actually owns a trademark or copyright that may be attached to the NFT. Similarly, the sale of an NFT does not necessarily transfer copyright or trademark ownership (or even license rights). Therefore, proof of ownership of NFT is not currently sufficient to prove ownership of intellectual property rights to the USPTO or the Copyright Office.

It is clear that as the use of NFTs grows rapidly, the legal implications will also increase. The USPTO and the Copyright Office have a difficult task in preparing a report on intellectual property rights in response to the questions posed by Sens. Tillis and Leahy which addresses both the present and the future of NFTs.


1 Letter, p. 1-2.

2 Letter, p. 1.

Copyright © 2022, Hunter Andrews Kurth LLP. All rights reserved.National Law Review, Volume XII, Number 173

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