Copyright and Patent Offices Call for Comments on NFTs

The US Copyright Office and the US Patent and Trademark Office (USPTO) have announced that they will collaborate on a joint study of intellectual property (IP) issues related to non-fungible tokens (NFTs). This study was requested by Senators Patrick Leahy and Thom Tillis in June. An NFT is not in itself a form of IP under current law. It’s a blockchain token that can be used to represent ownership of something like a work of art. Merriam-Webster defines ‘‘NFT’’ as ‘‘a unique digital identifier that cannot be copied, substituted, or subdivided, that is recorded in a blockchain, and that is used to certify authenticity and ownership (as of a specific digital asset and specific rights relating to it)” An NFT is thus similar to a receipt, and NFTs can be bought and sold. A work of art to which an NFT attaches can be protected under IP law but is a separate and distinct legal object. As Coindesk explained,

Jack Dorsey sold his first-ever tweet as an NFT to a buyer named Sina Estavi. While Estavi owns the non-fungible token linked to the tweet, Dorsey retains the copyright, which means that Estavi can’t print the tweet on T-shirts or sell other merchandise without Dorsey’s permission.

Also,

if an NFT project doesn't specify its IP license, it is safest for a buyer to assume that they do not own the intellectual property rights and that their use of the NFT is restricted to personal only. Under a personal license, buyers can only use the NFT artwork for non-commercial purposes. For example, a collector can use the NFT as their profile picture on social media or display the art in their home using a digital frame. But holders can’t use their asset to make a profit, like selling prints of the artwork or using the artwork to create a spin-off book series.

NFTs first emerged in 2015 and became especially popular in 2021 – and very lucrative for some. As the New York Times reported in March, 2021,

The artist Mike Winkelmann, also known as Beeple, has just sold an NFT at a record-breaking $69.3 million, the third-highest price achieved by a living artist. The sale, at Christie’s, for the purely digital work was the strongest indication yet that NFTs, or “nonfungible tokens,” have taken the art market by storm, making the leap from specialist websites to premier auction houses. Beeple, a newcomer to the fine-art world who first heard about NFTs five months ago, is the most high-profile artist to profit off the huge boom in sales of these much hyped but poorly understood commodities.

NFT prices are very volatile. The value of the NFT market grew by 299 percent in 2020, when it was valued at over $250 million. But as Bloomberg noted in September, NFT market trading volume fell 97% from its January peak. As Decrypt reported recently,

Crypto prices are down across the board this week amid news of FTX’s liquidity crunch and alleged mismanagement of customer funds—and the market turmoil may be extending into the NFT world, as well. Popular Ethereum project the Bored Ape Yacht Club is seeing sinking prices as ETH falls and owners potentially panic-sell their valuable NFTs. According to data from NFT Price Floor, the cheapest available Bored Ape Yacht Club NFT on the market (i.e. the “floor price”) is listed for 57.5 ETH as of this writing, or about $76,400. Measured in ETH, that’s a 7% drop over the last 24 hours. But measured in USD, given the declining value of ETH (which is down 13% this week), it has fallen almost 24% over the past day.

The USPTO/Copyright Office notice seeks written responses from the public to various questions about NFTs, for example:

1. Please describe: a. The current uses of NFTs in your field or industry, including the types of assets associated with NFTs (e.g., digital assets, physical goods, services); and b. Potential future applications of NFTs in your field or industry, including the types of assets that could be associated with NFTs (e.g., digital assets, physical goods, services). 2. Please describe any IP-related challenges or opportunities associated with NFTs or NFT markets. 3. Please describe how NFT markets affect the production of materials subject to IP protection.

Comments must be received by January 9, 2023. As the Federal Register explains,

comments must be submitted through the Federal eRulemaking Portal at www.regulations.gov. To submit comments via the portal, enter docket number PTO–C–2022–0035 on the homepage and click ‘‘Search.’’ The site will provide a search results page listing all documents associated with this docket. Find a reference to this request for information and click on the ‘‘Comment Now!’’ icon, complete the required fields, and enter or attach your comments. Attachments to electronic comments will be accepted in ADOBE® portable document format (PDF) or MICROSOFT WORD® format. Because comments will be made available for public inspection, information that the submitter does not desire to make public, such as an address or phone number, should not be included.

The Copyright Office and USPTO also plan to hold livestreamed online public roundtables on the issue in January, on the following dates:

• Patents: Tuesday, January 10, 2023 • Trademarks: Thursday, January 12, 2023 • Copyright: Wednesday, January 18, 2023

As the Copyright Office notes,

Members of the public interested in participating as a panelist in one or more roundtable sessions may submit a request to do so via email to NFTStudySpeakingRequests@uspto.gov. This request must include their name, professional affiliation, and contact information and designate the roundtable(s) at which they wish to speak. Requests must be received by December 21, 2022.

Additional information regarding these roundtables and instructions for registering to view them will be posted at https://www.uspto.gov/ip-policy/ joint-study-intellectual-property-rightsand-non-fungible-tokens. Additional information regarding the copyright roundtable and instructions for registering to view it will be posted at https://copyright.gov/policy/nft-study. The roundtables will also be videorecorded and transcribed, and copies of the recordings and transcripts will be available on the above USPTO and Copyright Office websites. More details are in the Federal Register.