The US government says IP infringement is everywhere in the NFT markets

The non-fungible token (NFT) bubble has burst a long time agobut the US government only now published a report consideration of the surrounding legal framework. The study, conducted jointly by the US Copyright Office (USCO) and the US Patent and Trademark Office (USPTO) following a 2022 request by the Senate, found that current intellectual property laws are robust enough to deal with the infringement of copyrights or trademarks in NFT. The agencies also determined that while there are some advantages to tokens, “trademark infringement and misuse are prevalent in NFT markets.”

As a reminder, an NFT is a digital certificate of authenticity granting ownership of a collectible, such as a piece of art or a piece of music. This is effectively a verified link to a piece of media that may or may not live on the blockchain, but anyone who owns the destination of the NFT URL can change the media it points to at any time. In one notable case in 2021, Signal founder Moxie Marlinspike created an NFT that he promised would look like a poop emoji when someone bought it.

The offices noted that NFTs and related smart contracts can assist trademark owners in managing, licensing and transferring IP rights. Those who weighed in on the issue in public comments pointed out that NFTs could help artists earn money from future sales of their work as well. This is not inherently a bad thing, even if a large part of the NFT art is extremely ugly.

However, learning noted “widespread concern that buyers and sellers of NFTs do not know what intellectual property rights are involved in the creation, marketing, and transfer of NFTs, and that NFTs can be used to facilitate copyright or trademark infringement.”

The report notes that the decentralized nature of NFTs and blockchain networks complicates any attempts to enforce trademarks. “While some individual NFT platforms have developed protocols to help trademark owners enforce their rights, there is no centralized authority requiring all platforms to do so,” the report said. “There are also no cross-platform mechanisms to allow trademark owners to identify and remove infringing content, settle trademark disputes involving blockchain-based domain names, or verify that sellers own the rights on trademarks associated with the assets they offer.’

With all of this in mind, the offices said that educating the public about NFTs can help ensure a better understanding and awareness of the tokens and how they work. However, they recommended in their report to Congress that the current use of NFTs does not require changes to current intellectual property laws. They also noted that “the inclusion of NFTs in their registration and recording practices is not necessary or advisable at this time.” In other words, they don’t think they need to deal with NFTs either.