Threat of Digital Products

What do you see as the risks related to digital representations of products in the virtual world?

How would you suggest brand protection professionals allocate their enforcement efforts and approach development of strategies to address?

Minelli E. Manoukian

Executive Director, Center for Art Law, New York City

It’s probably easy to say that, at this early point in the game, counting the things that aren’t at risk is probably easier than counting the risks associated to digital representations of products. The risks at this point are countless—you have copyright issues, trademark issues, securities issues, anti-money laundering concerns and then that’s just the legal enforcement side of things. But from the artistic viewpoint, content clearance is going to be one of the major points that brands should make sure to double check. It may feel a little bit like starting at the beginning, but it’ll be difficult to enter the space and assert dominance over any fraudulent postings and creations if you don’t even know if your future metaverse plans are covered. Run clearances the same way as you would for any other type of campaign—check to make sure that contractual assignments and licenses of rights include NFTs, and double check things like the grant of rights of publicity if you’re choosing to use a person’s likeness. 

As a person that works with visual artists, my additional caution would be to double check and see if the contracted creators of your company’s photos, graphics, and digital images, the “authors” of those copyrighted works, have waived their moral rights to the creations that they have made. While the Visual Artists Rights Act may only cover works of a recognized stature, it wouldn’t be the first or last time that a brand graphic or photograph has gone viral. If a brand plans to monetize these in the form of an NFT, it will be a lot less of a headache to check a contract than to create an NFT and then get a letter from an artist saying that their work was never intended to be an NFT and by putting it into that webspace it’s detrimental to their honor or reputation as an artist. 

Another first step that I would offer brand protection professionals as they begin their strategies is to educate themselves on the space. Not all NFT marketplaces are the same, and the usage and intent of NFTs varies greatly. Whatever solution the legal world creates for these infringement issues is hardly going to be one-size-fits-all. So, treating it like that is only going to cause more headaches down the road. It’s okay to start with what you know—Digital Millennium Copyright Act (DMCA) takedowns, contacting marketplaces to take down listings of infringing works—but thinking creatively, and in a multi-disciplinary way is what’s likely to get you farther. NFTs have been in the art space since 2013, and their uses have been everything from art, authenticity and beyond. In the legal context, it’s extremely easy for us as professionals to try and find a box that we can fit a new issue into, however, NFTs and the metaverse are far from that and treating them as such turns the enforcement problem into the square peg into a round hole problem. Start with what it feels like and go from there. We still don’t have set rules for the e-commerce space, but with the creativity and collaboration strides that have been made, a once unruly space is far more manageable than it was. Sometime in the future, the metaverse will feel just the same. 

Virginia Cervieri

Senior Partner, Cervieri Monsuárez

The main risk lies in trademark infringement, and the lack of clarity about the legality of digitally representing physical products that have been legally acquired. On this aspect, there are companies that say that digital representation is only an artistic expression, part of their freedom of expression and therefore constitutes a form of fair use in the market. While on the other hand, there are companies that use digital representation as a form of marketing for the sale of physical products or to indicate the destination of the physical product already on sale, indicating that it is therefore a brand depletion.

I suggest further study on these two relevant aspects: fair use and trademark exhaustion.
The professionals dedicated to the protection of trademarks should be able to elucidate that in cases related to tokenization of physical products, the doctrine of fair use would not be applicable—since the purpose given to the NFTs is commercial and these infringing NFTs may affect the profitability of the original NFTs generated by the trademark owners.

The same happens with the exhaustion of trademarks, which is not an applicable criterion in the digitalization of the products, since the NFTs constitute themselves a new product, it would not represent advertising of the physical products, but opening a new market where a new and totally different commercial exploitation is made.


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