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Recent Developments in the NFT, Metaverse and Web 3 space

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Published Date: May 4, 2023

As technology continues to advance, the digital landscape is constantly evolving, presenting new opportunities and challenges for Intellectual Property (IP) law. There have been notable developments involving the interplay between Intellectual Property, Non-Fungible Tokens (“NFTs”), and the Metaverse, since the publication of our previous article on the topic.

Firstly, the Hermès v Rothschild case, which was touched on in our previous article, involved a trade mark infringement matter between Hermès, the luxury fashion brand, and artist Mason Rothschild over Rothschild’s use of an NFT called “MetaBirkin,” which depicted an image of a handbag resembling Hermès’ iconic Birkin bag. The court recently ruled in favour of Hermès, finding that the use infringed Hermès’ BIRKIN trade mark. The court held that Rothschild’s use of the MetaBirkin NFT was likely to cause confusion among consumers and dilute the value of Hermès’ BIRKIN trade mark. Rothschild’s First Amendment (expressive art) defence was dismissed. This case, although decided in terms of the laws of the United States of America, is important as it considered the extent to which NFTs can infringe existing trade mark rights that do not cover uses of the trade mark as NFTs. Whilst the case was not viewed from a copyright perspective, the existing trade mark law in the United States of America proved to be adequate to cover trade mark infringements in the new digital space. It is difficult to say whether legislation in other countries will be applied in a similar manner.

On 31 January 2023, the Companies and Intellectual Property Commission issued a notice, in terms of Regulation 4(3) of the Trade Marks Act 194 of 1993, directing that the 12th Edition of the Nice Classification of Goods and Services is applicable to all trade mark applications filed from 1 January 2023 in South Africa.

The 12th Edition of the Nice Classification addresses the classification of digital assets by updating specific classes with the applicable goods and services. For example, class 9 has been updated to include “downloadable computer software for managing crypto asset transactions using blockchain technology”; “downloadable cryptographic keys for receiving and spending crypto assets”; and “downloadable digital files authenticated by non-fungible tokens [NFTs]”. The updates to class 9 signal an intention to cover NFTs by broadening the term ‘cryptocurrencies’ to ‘crypto assets’, which would encompass other blockchain-based digital assets, including NFTs.

Class 41, which encompasses services such as “education; providing of training; entertainment; sporting and cultural activities”, has been updated to include “providing online virtual guided tours”, which covers specific services offered in the Metaverse.

Cryptocurrency mining/crypto mining” was already catered for under class 42 in the 11th Edition of the Nice Classification. However, the 12th Edition now includes “mining of crypto assets / crypto mining” services. As shown in the updates to Class 9, the broader category of digital assets, as opposed to cryptocurrencies alone, has been included in the 12th Edition of the Nice Classification to address the developments NFTs and the trade of NFTs, even via the Metaverse. This provides some much-needed clarity, given the influx of trade mark filings by brand owners who seek to protect their brands in the digital space or who wish to take full advantage of these technological developments and propel their brands into the Web3 revolution.

It is interesting to note that the UK Intellectual Property Office (UK IPO) has, since the 12th Edition of the Nice Classification came into force this year, released guidelines relating to trade mark filings and, specifically, the appropriate classifications relating to filings covering NFTs and the Metaverse. The UKIPO states that NFTs cannot be classified as a stand-alone term but must provide an indication of the asset that it relates to, such as digital art, downloadable graphics, or downloadable digital files authenticated by NFTs. The guidelines also clarify that NFTs can be used to authenticate physical goods, which will be accepted in the appropriate class in which the physical goods would ordinarily fall. Additionally, virtual goods must also be clearly defined, such as downloadable virtual footwear or handbags, which, for example, relate to virtual goods downloaded in the Metaverse for use on users’ online avatars. Where a service can be delivered virtually, the UKIPO will continue to accept terminology such as “educational services delivered virtually” in class 41, in line with the recent update to the 12th Edition of the Nice Classification. Similarly, the European Union Intellectual Property Office (EUIPO) has also released guidelines concerning the filing of trade marks relevant to NFTs and the Metaverse.

In April 2023, the International Trade Mark Association (“INTA”), spearheaded by its committees and sub-committees, published two white papers dealing with NFTs and the Metaverse, respectively. The white papers focus on key aspects of both NFTs and the Metaverse and analyse both from a trade mark perspective. The intention was to assist the IP community in navigating largely unchartered waters. The papers may also prove useful in assisting policy/law makers in formulating guidelines or legislation. For readers wanting to delve deeper, the white papers can be accessed from the following link on INTA’s website.

In this rapidly changing digital landscape, we will have our finger on the pulse and be monitoring developments in the NFT, Metaverse and Web3 space.

Darshan Moodley

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