The Who, What, Why, and How of NFTs, the Metaverse, and IP

The Who, What, Why, and How of NFTs, the Metaverse, and IP

Recently, Jennifer Ko Craft (Member, Las Vegas) and John Krieger (Member, Las Vegas) presented at ACC Nevada’s monthly virtual CLE webinar on “The Who, What, Why, and How of NFTs, the Metaverse, and IP.” They discussed the basics of blockchain technology and opportunities in the metaverse as well as enforcement strategies for protecting digital assets.

Understanding Blockchain Technology

To understand the importance of blockchain technology and how to monetize it, you should first understand what a blockchain is. A blockchain is an append-only electronic database that stores data chronologically. Once a transaction is minted (submitted and validated), it is cryptically secured and becomes a block on the blockchain. Since the blockchain is decentralized, identical copies can then be distributed among thousands of unaffiliated computers. The data is permanent and irreversible and can only be changed by creating a new block.  What then are bitcoin, ETH, and NFTs and how do they fit into the picture – they are digital assets that run on blockchain infrastructure.

How are digital assets possessed and ownership proven?

• Digital assets, like NFTs and bitcoin, are registered on the blockchain to a specific wallet’s public address, proving ownership.
• The digital wallet registered on the blockchain is identified by a unique public address and serves to store an owner’s private key that allows transfer of ownership of digital assets.
• The public address for the wallet is registered to the blockchain ledger.

Opportunities in the Metaverse

Last year, approximately $54 billion was spent on virtual goods, with many celebrities investing in the metaverse. These virtual goods can be anything from digital Nike shoes you purchase for your avatar to wear in the metaverse to the virtual land adjacent to Snoop Dogg’s Sandbox that sold for $450,000 in cryptocurrency.

The metaverse is a virtual experience that bridges in-game play with real life. What differentiates the metaverse from the internet is that you, as a consumer, can own and control your experience, unlike various platforms on the internet such as Facebook or Twitter.

A lot of money is being flooded into the industry as people see the value of getting involved sooner rather than later. Currently, over 9,000 USPTO applications for NFT and blockchain-related goods and services are in process. Additionally, many applications are being filed for virtual real estate as there are only a certain number of land plots in Sandbox.

Staying on the forefront could be very valuable as – besides protecting your marks, brands, names, and likenesses – there are opportunities to bridge the metaverse / in real life (IRL) gap. Some of the possibilities include using NFTs to create customer engagement, improve customer stickiness, create sales opportunities in the metaverse with an IRL product/service tie-in, etc. Other next level ideas to consider:

• Create unique quests within the fan base (e.g., scavenger hunts, attending events, completing product questionnaires), rewarding completion with NFTs to create competitive superfans.
• Drop surprise rewards, tickets, and access to fans who show up to events.
• Elevate customers to participants: allow NFT holders to vote on key features of the next launch (e.g., product flavors, distribution), fortifying brand loyalty.

Protecting Your Digital Assets

Protecting digital assets can be tricky because of the very nature of these assets. Fortunately for those experiencing the theft or misappropriation of their digital assets, we have sophisticated methods to address the infringement we see across different platforms.

Send a Cease and Desist Letter. You can often use the infringing platform’s Terms of Use or Service as a predicate since most include a prohibition to “not infringe on the intellectual property rights of others.”   You can also utilize DMCA takedowns as they are an established internet standard followed by most website owners and internet service providers.

Take Judicial Action. When necessary, cases can be taken to federal or state court, or in the case of copyright matters valued less than $30,000, the Copyright Claims Board (CCB).

Courts must have three things to hear a case, which can be tricky when dealing with digital assets and the metaverse:

1. Jurisdiction over persons or things

• Ability of the court to compel an individual or thing into its court.
• May be based personal jurisdiction (the location of the person) or in rem jurisdiction (the location of the digital asset).
• In the case of an NFT, blockchain does not have a physical location like other types of assets and requires some creativity in order to establish jurisdiction.

2. Subject Matter Jurisdiction 

• The court’s ability to hear a particular kind of claim.
• For example, copyright claims must be brought in federal court.

3. Venue – where will you go with these types of claims?

• The legally proper place where a case should be filed and heard within the jurisdiction.

So what is your metaverse strategy? If you would like to discuss these opportunities and enforcement options further, please give us a call.