US says new IP laws governing NFTs ‘not necessary or advisable’ for now
USPTO and US Copyright Office publish report into whether existing legislation is sufficient for protecting IP rights in the world of NFTs | Offices agree with stakeholders that new laws would be premature.
New IP legislation governing non-fungible tokens (NFTs) is not necessary for now, the US Patent and Trademark Office (USPTO) and US Copyright Office have said in a joint report into whether existing enforcement mechanisms were sufficient to cover the technology.
‘Non-fungible Tokens and Intellectual Property: A Report to Congress’ was published yesterday (March 12) in response to a request made in 2022 from then-chair of the senate committee on the judiciary subcommittee on IP Patrick Leahy, and ranking member Thom Tillis.
To compile the report, the offices requested public comments, held three public roundtables on NFTs regarding copyrights, trademarks and patents, and examined existing literature and case law.
Despite concerns raised by stakeholders about copyright and trademark infringement associated with NFTs, most respondents told the offices that they believed current IP laws were adequate to deal with it, and that NFT-specific legislation would be premature and could impede the technology given its evolving nature.
In particular, commenters referenced the Digital Millennium Copyright Act’s (DMCA) notice-and-takedown system as being a successful avenue for copyright owners to ask NFT marketplaces to delist NFTs associated with infringing assets.
The offices agreed with these assessments and concluded that “changes to IP laws, or to the offices’ registration and recordation practices, are not necessary or advisable at this time”.
Issues were also discussed arising from the use of smart contracts—including confusion about their enforceability—but some respondents suggested these could in fact give rights owners finer control over transfers of their IP.
Under Secretary of Commerce for IP and director of the USPTO, Kathi Vidal, said: “NFTs offer unique opportunities for creators to leverage their IP rights, but also present new challenges in keeping their work secure.
“At the USPTO, we continue to work side-by-side with industry and government collaborators such as the Copyright Office to better understand the IP implications of these evolving technologies through initiatives such as our artificial intelligence and emerging technologies (AI/ET) partnership.
“We look forward to continuing these efforts and our ongoing work to ensure USPTO’s practices and US policy evolve to address emerging technologies so that we best serve the needs of our nation’s creators and innovators.”
Education and guidance needed
The most common concern raised about NFTs in the report was the prevalence of consumer confusion about the IP rights associated with their creation and transfer.
This lead unsophisticated consumers to conflate the purchase of an NFT with ownership of IP rights, and even sophisticated consumers were said to struggle with
understanding what rights accompanied a particular NFT due to a lack of marketplace standards for clear disclosure by sellers.
NFT platforms should develop and publish clear terms of use that spell out the rights associated with the purchase of an NFT, one commenter suggested.
The report cited public education initiatives and product transparency as playing an important role in ensuring greater awareness and understanding of the technology.
Issues not unique to NFTs
The offices found that in general, the use of NFTs did not raise new IP problems.
Issues associated with the decentralised storage or pseudonymity of NFTs—such as identifying infringers, jurisdictional challenges and difficulty with removing infringing content—were ultimately not unique to the technology.
The report noted that the internet itself was to some extent a decentralised network, and rights owners had long reported challenges in identifying infringing users of common internet platforms.
