While not reiterating explanations concerning what NFTs are, there are at least two areas worth mentioning from the perspective of trademark issues. One of these is certainly the increasing popularity of trademark applications that use NFT-related terminology when listing goods and services, and how they should be correctly classified. The other issue, which has now arisen in practice, is potential trademark infringement due to use of another’s mark in the form of an NFT.

With regard to the issue of trademark applications – the hype surrounding NFTs is also having an impact on authorities that grant intellectual property rights. As of January 2020, there were no trademark applications containing the term NFT in the USPTO (USA), while exactly one year later the term was mentioned in dozens of applications every day. Naturally, these include the major global brands such as Victoria Secret, McDonald’s, Nike, and others, apparently reacting more to certain marketing or PR trends rather than to legal necessity. Meanwhile, the applications concerned not only NFTs, but also terms that have recently been in vogue, which are metaverse, virtual goods or virtual services.

Likewise, the EUIPO has observed a significant increase in NFT trademark applications over the last two years, with

  • 1,277 NFT trademark applications in 2021, and 
  • 1,157 NFT trademark applications in 2022 

Questions concerning the correct classification of the term NFT as goods or services would inevitably be raised, considering the volume of applications. In June 2022, the EUIPO published a statement on its approach to classification of trademark applications containing the term NFT. The EUIPO stated that class nine in the twelfth edition of the Nice Classification would contain the term downloadable digital files authenticated by non-fungible tokens. Importantly, the term non-fungible tokens by itself cannot be accepted, as the EUIPO always requires the type of digital item authenticated by the NFT to be specified. This is because the EUIPO makes a distinction, and incidentally rightly does so, between the NFT and the item it “authenticates” – an NFT is a kind of “front cover” for a particular digital item.

In view of the nature of an NFT – which “authenticates” a particular digital item, the situations can be considered in which use of another’s mark in the form of an NFT by a third party will constitute trademark infringement. Current laws (Polish or EU) sufficiently address a situation of this kind, because from the point of view of trademark infringement, the crucial issue is use of a particular mark for specific goods and services in trade. Thus there could be cases in which a third party uses another’s mark as an NFT on the Internet (for obvious reasons NFTs can only be used in the virtual world). Whether infringement has occurred will naturally depend on the goods or services used, or, where applicable, whether there are grounds for considering a trademark with reputation to have been infringed. When considered in this way, interpretation of current laws with regard to use of a mark in NFT form does not present particular problems.

Meanwhile, in practice, one noteworthy case arose of potential infringement connected with an NFT. It will come as no surprise that the case has been in progress since February 2022 in the US, as it is mainly there, for the moment, that any court cases concerning NFT have been instigated. In the case, StockX – a popular online footwear store, launched the Vault NFT series in January 2022. The idea behind it was that an NFT was linked to a particular footwear item, in this case NIKE shoes. As, in general, limited edition footwear is resold by a series of buyers until the final customer is found, linking an NFT to a specific item meant firstly that the goods could be authenticated, and secondly that the physical item of footwear could be kept in the StockX storage facility until the final buyer claimed it. 

Thus StockX customers each in turn “resold” only the NFT linked to the footwear item concerned, and not the physical goods. The item was therefore traded much more quickly than by the conventional method. This situation led NIKE to file a claim against StockX for infringement of NIKE trademarks, stating that using the NIKE trademark in the form of an NFT could be misleading for consumers. Interestingly, NIKE included in the trademark infringement claims allegations that StockX was selling counterfeit products, which is odd, because before the dispute arose NIKE itself recommended the authentication procedures used on that site, and its policy regarding combating counterfeit goods. Naturally, StockX denies NIKE’s allegations. 

Assuming that StockX sells genuine NIKE products and not counterfeit products, the question is whether the site was entitled to use the NIKE trademark to generate an NFT and then allow the site’s customers to “trade” in that NFT. StockX has stated that in this instance the NFT merely serves as a “virtual receipt” for a specific product, while StockX itself does not allow trade in “digital goods” which are in some way separate from the physical goods. However, because the physical product is kept in the StockX storage facility until it is claimed by the final buyer, the NFT can be sold repeatedly during this time, which in NIKE’s view is grounds for concluding that the NFT is somehow a separate product, and not a “virtual receipt”. Therefore, the foremost issue to be ruled upon in court is what in fact an NFT is, and subsequently whether use of the NIKE trademark in this way may constitute trademark infringement. All of this assumes, of course, that StockX did not have counterfeit footwear on its site; if this was the case the dispute would center on entirely different issues. In view of this factual background and the essence of an NFT, NIKE’s assertion that an NFT is a product separate from the physical goods seems too extreme.

When the issue described above is considered in terms of Polish or EU law, the question of exhaustion of the right conferred by the trademark has to be addressed. Assuming that StockX had on sale items of NIKE shoes that could be demonstrated in an effective way to have been placed on the market for the first time by the trademark proprietor or with their consent, the right conferred by the trademark was exhausted with respect to those particular items of NIKE footwear. This raises the question of whether, due to exhaustion of the right conferred by the trademark, StockX was entitled to generate an NFT using the NIKE trademark, and link that NFT to each particular pair of shoes. The exception according to which the trademark proprietor is able to object to trademark-related activities is quite broad in scope – under Polish law and EU regulations, provisions on exhaustion of the right conferred by the trademark do not apply when this is supported by reasonable grounds for the trademark proprietor to object to further distribution of the product, especially when the condition of the product changes or deteriorates after being placed on the market. Proprietors of trademarks with reputation make use of this exception relatively frequently, stating that certain behavior with respect to the mark (such as the manner of distribution, advertising, etc.) breaches the reputation of the trademark concerned. In view of the above, it is of course unclear whether using an NFT with the NIKE trademark falls under that exception. 

While unfortunately none of the concerns expressed above are properly solved, at present we can at least consider whether use of an NFT with a registered trademark relating to a specific product is an evident infringement of a trademark, or whether it may fall under exhaustion of the right conferred by the trademark.