Abstract
Non-fungible tokens and metaverse environments have introduced novel forms of digital asset creation, distribution, and commercialisation that challenge established intellectual property frameworks. An NFT is a unique cryptographic token recorded on a blockchain that represents ownership of, or a licence to, a digital asset, most commonly digital art, music, video, or other creative works. The metaverse, a persistent, immersive, three-dimensional virtual environment, creates spaces in which digital assets, virtual goods, and user-generated content are created, traded, and consumed. This article assesses the intellectual property frameworks applicable to NFTs and metaverse assets under EU and international law, examining the extent to which existing copyright, trademark, and design right regimes can accommodate the ownership, licensing, and enforcement challenges that these technologies present. It analyses the foundational question of what an NFT buyer actually acquires (ownership of the token, a licence to the associated digital asset, or a transfer of copyright), drawing upon the terms of service of major NFT platforms and the relevant provisions of EU copyright law. It examines trademark infringement in the metaverse, including the high-profile disputes involving luxury brands whose trademarks have been reproduced on virtual goods without authorisation, and the question of whether existing trademark classifications extend to virtual products. It evaluates enforcement challenges, including the pseudonymity of blockchain transactions, the decentralisation of NFT marketplaces, and the cross-jurisdictional character of blockchain networks. The article concludes by proposing strategies for global harmonisation, including the extension of existing IP classifications to encompass virtual goods, the development of blockchain-based IP registries, and the adoption of smart contract mechanisms for automated IP licensing and royalty distribution.
Keywords: NFTs; metaverse; intellectual property; copyright; trademark; blockchain; digital assets; virtual goods; smart contracts; enforcement
1. Introduction
The emergence of non-fungible tokens and metaverse environments has created new categories of digital property that do not fit neatly within existing intellectual property frameworks. An NFT, at its most basic level, is a unique entry on a blockchain (most commonly the Ethereum blockchain) that contains metadata linking to a digital asset. The NFT is not the asset itself; it is a certificate of authenticity and provenance, a digital proof of ownership or licence that is recorded on a distributed, immutable ledger.
The metaverse, a term that encompasses a range of persistent, three-dimensional virtual environments (including platforms such as Decentraland, The Sandbox, and Roblox), creates spaces in which users interact through digital avatars, purchase virtual real estate, wear virtual clothing, and display virtual art. The economic activity within these environments is substantial: the global metaverse market was valued at over USD 65 billion in 2023 and is projected to grow rapidly.
The intellectual property questions raised by NFTs and the metaverse are both doctrinally novel and commercially significant. This article examines these questions in three domains: copyright (Section 2), trademark (Section 3), and enforcement (Section 4). Section 5 proposes strategies for harmonisation. Section 6 concludes.
2. Copyright and NFTs
2.1 What Does the NFT Buyer Acquire?
The foundational copyright question in NFT transactions is what the buyer acquires. The answer, in nearly all cases, is not copyright. The overwhelming majority of NFT platform terms of service expressly provide that the purchaser acquires the NFT (the token on the blockchain) and a limited licence to display the associated digital asset, but not the copyright in the underlying work. OpenSea's Terms of Service, for example, provide that the buyer acquires no copyright or intellectual property rights in the associated work except as expressly granted by the seller.
Under EU copyright law, the transfer of copyright requires an express agreement to that effect. Article 2 of the Information Society Directive (2001/29/EC) vests the exclusive right of reproduction in the author, and Article 3 vests the exclusive right of communication to the public. These rights can be licensed or assigned, but the purchase of an NFT does not, without more, constitute an assignment or licence of any copyright unless the smart contract or accompanying terms expressly provide for such a transfer.
The practical consequence is that an NFT buyer may own a unique token that authenticates their connection to a digital work, but they may not reproduce, distribute, communicate to the public, or create derivative works based on that work without infringing the copyright of the original creator. This disconnect between the perception of ownership (buyers often believe they are "buying the art") and the legal reality (they are buying a token with limited display rights) has generated confusion and potential for consumer detriment.
2.2 The Minting Question
The creation ("minting") of an NFT that references a copyrighted work may itself constitute copyright infringement. The minting process typically involves the creation of metadata that includes a link to the digital asset (often hosted on a decentralised storage network such as IPFS) and may involve the reproduction of the work in the course of uploading it to the platform. If the minter is not the copyright holder and has not obtained a licence to reproduce the work, the minting of the NFT may infringe the reproduction right under Article 2 of the Information Society Directive.
The problem of unauthorised minting is widespread. Artists have reported that their works have been minted as NFTs without their knowledge or consent, with the proceeds of the sale going to the minter rather than the creator. The pseudonymity of blockchain transactions makes it difficult for copyright holders to identify and pursue the infringer, and the decentralised nature of many NFT marketplaces complicates the enforcement of takedown requests.
2.3 Resale Royalties and Smart Contracts
One of the frequently cited advantages of NFTs for creators is the ability to embed royalty mechanisms in the smart contract that governs the NFT. A smart contract can be programmed to automatically transfer a percentage of the sale price to the original creator each time the NFT is resold on the secondary market. This mechanism implements, in a technological form, the artist's resale right (droit de suite) recognised by Directive 2001/84/EC on the resale right for the benefit of the author of an original work of art.
However, the enforceability of smart contract royalties is dependent on the platform's infrastructure. Major NFT marketplaces have adopted inconsistent approaches to royalty enforcement, with some platforms making creator royalties optional or allowing buyers to bypass royalty payments. This inconsistency undermines the resale right mechanism and raises questions about the adequacy of smart contracts as a substitute for legal enforcement.
3. Trademarks and the Metaverse
3.1 Virtual Goods and Trademark Classification
The extension of trademark protection to virtual goods has emerged as a critical issue in metaverse commerce. The Nice Classification, which governs the classification of goods and services for trademark registration purposes, was not designed with virtual goods in mind. Trademark holders who have registered their marks for physical goods (clothing, accessories, vehicles) may not be protected against the use of their marks on virtual versions of those goods unless they have obtained registrations in the relevant virtual goods classes.
The question of whether existing trademark registrations for physical goods extend to virtual versions of those goods is unresolved. In some jurisdictions, trademark offices have created new classifications for virtual goods and NFTs (the United States Patent and Trademark Office, for example, has accepted applications for trademarks covering "downloadable virtual goods" in Class 9 and "retail store services featuring virtual goods" in Class 35). The European Union Intellectual Property Office has similarly issued guidance indicating that virtual goods are classifiable in Class 9 as "downloadable digital files authenticated by non-fungible tokens".
3.2 The Hermès v Rothschild Case
The most prominent trademark dispute in the NFT context is Hermès International v Mason Rothschild, decided by a jury in the Southern District of New York in 2023. Rothschild created and sold "MetaBirkins", digital images of Hermès' iconic Birkin bag rendered in faux fur, as NFTs. Hermès sued for trademark infringement, dilution, and cybersquatting. Rothschild argued that the NFTs were protected artistic expression under the First Amendment.
The jury found in favour of Hermès, concluding that the MetaBirkins infringed Hermès' trademark rights and were likely to cause consumer confusion. The case established that trademark protection extends to virtual goods and that the creation and sale of NFTs depicting branded products without authorisation may constitute infringement, notwithstanding arguments based on artistic expression.
3.3 Brand Protection Strategies in the Metaverse
Major luxury and consumer brands have responded to the metaverse trademark challenge by filing trademark applications covering virtual goods and services, entering into licensing agreements with metaverse platform operators, and pursuing enforcement actions against unauthorised uses of their marks in virtual environments. Nike, for example, acquired the virtual sneaker company RTFKT and has registered trademarks for virtual footwear and clothing. Gucci has created virtual goods for sale in Roblox and The Sandbox.
4. Enforcement Challenges
4.1 Pseudonymity and Identification
Blockchain transactions are pseudonymous: they are associated with cryptographic wallet addresses rather than real-world identities. An infringer who mints an NFT of a copyrighted work or creates a virtual product bearing a registered trademark can do so without revealing their identity to the rightsholder. The identification of the infringer requires cooperation from the blockchain network, the NFT marketplace, or the wallet provider, which may be unwilling or unable to provide identifying information, particularly where the entities are decentralised or based in jurisdictions with limited cooperation agreements.
4.2 Decentralisation and Platform Liability
Decentralised NFT marketplaces, which operate without a central authority and are governed by smart contracts rather than corporate policies, pose particular enforcement challenges. Unlike centralised platforms such as OpenSea or Rarible, which can implement takedown procedures and suspend infringing accounts, decentralised marketplaces may have no entity that can be compelled to remove infringing content or comply with court orders.
4.3 Cross-Jurisdictional Enforcement
Blockchain networks are inherently global. An NFT minted by a user in one jurisdiction, listed on a marketplace hosted in a second jurisdiction, and purchased by a buyer in a third jurisdiction creates a multi-jurisdictional enforcement problem that existing IP enforcement frameworks are not well-equipped to address. The Brussels I Regulation (Recast) provides rules for jurisdiction in civil and commercial matters within the EU, but the application of these rules to blockchain-based transactions is uncertain.
5. Proposals for Harmonisation
5.1 Extension of IP Classifications to Virtual Goods
The Nice Classification should be formally amended to include specific classes for virtual goods, NFTs, and metaverse-related services, providing trademark holders with a clear pathway to protect their brands in virtual environments. The EUIPO's guidance on virtual goods classification is a positive step, but formal amendment of the Nice Classification would provide greater legal certainty.
5.2 Blockchain-Based IP Registries
Blockchain technology itself offers a potential solution to the enforcement challenges it has created. Blockchain-based IP registries could provide a transparent, immutable record of IP ownership that could be cross-referenced by NFT marketplaces before minting and sale. A work registered on the IP blockchain would be flagged if a third party attempted to mint an NFT of that work without authorisation, enabling proactive enforcement before infringement occurs.
5.3 Smart Contract Licensing Standards
The development of standardised smart contract templates for IP licensing in the NFT context would reduce the ambiguity that currently characterises NFT transactions. These templates could specify the scope of the licence granted to the buyer (display only, commercial use, derivative works), the royalty percentage payable on resale, and the conditions for revocation of the licence.
5.4 International Enforcement Cooperation
The cross-jurisdictional nature of blockchain-based IP disputes calls for enhanced international cooperation frameworks. The WIPO and the Hague Conference on Private International Law should develop guidance on jurisdiction and applicable law in blockchain-based IP disputes, and explore the creation of a streamlined international enforcement mechanism for NFT-related IP infringement.
6. Conclusion
NFTs and the metaverse have created new categories of digital property that test the boundaries of existing intellectual property frameworks. The disconnect between the perception of NFT ownership and the legal reality of limited licensing rights, the extension of trademark protection to virtual goods, and the enforcement challenges posed by pseudonymous, decentralised, and cross-jurisdictional blockchain transactions all require doctrinal development and regulatory reform. The proposals advanced in this article, the extension of IP classifications, blockchain-based IP registries, smart contract licensing standards, and international enforcement cooperation, would provide a foundation for the equitable and effective governance of intellectual property in virtual environments.
Bibliography
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EUIPO, Intellectual Property and the Metaverse (Discussion Paper, 2023)
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WIPO, Non-Fungible Tokens (NFTs) and Intellectual Property (2022)
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