Non-fungible tokens (NFTs) and the metaverse are too often perceived as being linked only to "virtual" works of art and to a sort of technologically updated version of "second life", respectively. They are certainly both of these, but they are also much more. Correspondingly, there is a need for a correct legal framing of the problems and opportunities they raise, which requires virtuously (and safely) integrating the real and virtual worlds. This article discusses the IP implications of NFTs and the metaverse and looks at the impact these might have on brands' strategies.
This integration is primarily evident in NFTs, which are usually secured through the use of blockchain technology. NFTs are not only used to make the "originals" of digital works of art recognisable (and negotiable) – distinguishing them from even legitimate copies – but can also become real and proper sui generis bonds, negotiable in turn and representing (as tokens) goods and services of the real world. Network users will be able to choose such goods in virtual shops and then collect them or get them delivered in the real world. Such goods and services may not yet be produced, and may only be produced on the basis of demand, thereby reducing waste.
This process requires appropriate contractual terms, which frequently also provide for the payment of a royalty to the rights holder in the event of the token's transfer, according to a model reminiscent of the resale right on successive sales of works of figurative art. The rules on intellectual property are also fully applicable to NFTs.
NFTs also include fan tokens, through which the owner of rights to distinctive signs or images or other copyrighted material can establish a closer and more engaging relationship with the public, making it feel part of a community that is formed precisely around the communicational and experiential value of these virtual objects. Such tokens are also protected through IP rights.
In this context, the metaverse is not only a virtual world parallel to the real one, but can also become an important component of corporate communication and consumer loyalty. It can reproduce and integrate the shopping experiences of the real world and extend them to services that, for the consumer, have a value precisely because they are related to the real world and not because they represent a more economically accessible alternative to it. This opens up a new frontier for competition between companies, based on the ability to internalise and exploit the positive externalities that are created around distinctive signs and thus the exploitation of the advertising, communication and investment functions that trademarks are today recognised as having.
This tool therefore not only constitutes a challenge for registration and anti-counterfeiting strategies, but will also create (and indeed is already creating) new opportunities for licensing and especially co-branding activities. The metaverse makes it easier to coordinate the use of business distinctive signs, but also of territorial trademarks, protected designations of origin and protected geographical indications. This makes their respective positive communicational values mutually profitable, especially to compete on a market that remains global.
What is needed is not new case-based rules, but rather an evolutionary interpretation of the already existing general rules on exclusive IP rights and competition. Both of these can be applied without substantial differences, but through interpretation instead, to the web and to the subjects operating therein.
For further information on this topic please contact Cesare Galli at IP Law Galli by telephone (+39 02 5412 3094) or email ([email protected]). The IP Law Galli website can be accessed at www.iplawgalli.it.