Trademarks and NFTs: Protecting Digital Assets

In today’s digital-first world, non-fungible tokens (NFTs) have emerged as a groundbreaking innovation, redefining ownership and value in the virtual space. From digital art and music to virtual real estate and gaming items, NFTs have unlocked a new form of asset with unique identifiers verified on the blockchain. As this technology evolves, a critical question arises: how can creators, businesses, and collectors protect their digital assets? The intersection of trademark law and NFTs offers compelling insights—and challenges.

Understanding NFTs

NFTs are cryptographic tokens stored on a blockchain that certify the uniqueness and ownership of a digital item. Unlike cryptocurrencies such as Bitcoin or Ethereum, NFTs are non-fungible, meaning each token is distinct and cannot be exchanged on a one-to-one basis. They are often used to represent digital collectibles, artwork, videos, music, virtual goods in games, and even metaverse real estate.

The growth of the NFT market, particularly since 2020, has turned digital content into tradable assets, sometimes worth millions. However, the rapid rise in popularity has also exposed gaps in legal frameworks, especially concerning intellectual property rights.

What Are Trademarks?

Trademarks are legally registered signs, symbols, names, or logos used to identify and distinguish the source of goods or services. Trademarks are essential for brand identity, consumer trust, and market protection. Traditional trademark protection applies to physical and digital goods, but when it comes to blockchain-based assets like NFTs, the application of trademark law becomes more complex.

The Collision of Trademarks and NFTs

As NFTs become part of mainstream commerce and brand marketing, trademark issues are increasingly surfacing. Brands are finding their logos, names, and even virtual products being minted as NFTs—sometimes without their consent. This has raised serious concerns about infringement, misappropriation, and consumer confusion.

For example, in 2021 and 2022, well-known brands such as Nike and Hermès pursued legal action against NFT creators for allegedly infringing on their trademarks. These cases highlight the need for clearer legal guidelines and the expansion of existing protections to digital formats.

Case Study 1: Nike vs. StockX

Nike filed a lawsuit against resale marketplace StockX for allegedly minting and selling NFTs featuring Nike sneakers without authorization. Nike argued that the NFTs used their trademarked logos and designs, which could mislead consumers into thinking Nike was involved or endorsed the digital goods. This case underscores the importance of brand control in both physical and digital marketplaces.

Case Study 2: Hermès vs. MetaBirkins

Digital artist Mason Rothschild created “MetaBirkins” NFTs inspired by Hermès’ iconic Birkin bags. Hermès sued Rothschild for trademark infringement, claiming the NFTs violated its brand and confused consumers. In 2023, a U.S. court sided with Hermès, signaling that trademark rights can extend to NFTs that mimic or reference protected designs.

Trademark Protection Strategies for NFTs

To safeguard digital assets, especially NFTs, trademark owners and creators should consider proactive legal and strategic measures:

1. Register Trademarks for Digital Goods and Services

Traditional trademark registrations may not cover virtual or blockchain-based goods. Businesses and creators should expand their trademark applications to explicitly include digital products, NFTs, and virtual environments. Several trademark offices, including the United States Patent and Trademark Office (USPTO), have begun updating classification systems to reflect this need.

For example, Class 9 (software and downloadable digital media) and Class 42 (technological services) are frequently used to cover NFT-related products.

2. Monitor the Market

With decentralized platforms, anyone can mint and sell NFTs. Brands need to actively monitor NFT marketplaces (e.g., OpenSea, Rarible) for unauthorized use of their IP. Third-party services and AI tools can assist in scanning for potential infringements.

3. Utilize Smart Contracts Wisely

NFTs rely on smart contracts for function and utility. By embedding usage rights, licenses, and restrictions into smart contracts, creators can define how the NFT may be used, resold, or modified. While not a substitute for legal protection, smart contracts can enforce terms at the technical level.

4. Cease-and-Desist and Legal Action

If infringement occurs, the traditional tools still apply—cease-and-desist letters, DMCA takedowns, and litigation. However, enforcement may be challenging in decentralized or anonymous environments. Legal jurisdictions and NFT platform policies play a crucial role in how effectively infringement can be addressed.

5. Engage the NFT Community Transparently

For artists and creators, building transparency and clear terms around the minting of NFTs is vital. Clarify what rights the buyer receives (e.g., viewing, commercial use, reproduction). Misunderstandings can lead to disputes or legal claims, especially when NFTs become valuable.

Challenges in Trademark Enforcement

Despite growing awareness, enforcing trademarks in the NFT space is far from simple. Some challenges include:

• Jurisdiction: The decentralized nature of blockchain means infringers could be located anywhere in the world.

• Anonymity: NFT creators often use pseudonyms, making it difficult to identify and hold them accountable.

• Marketplace Governance: Platforms vary in their enforcement of IP claims. Some are cooperative, others less so.

• Fair Use and Artistic Expression: Some NFT creators claim protection under free speech or artistic parody. Courts must balance IP rights with freedom of expression.

The Future of Digital Asset Protection

As NFTs evolve beyond collectibles to utility tokens in gaming, real estate, and metaverses, the importance of comprehensive IP strategies will only grow. Major brands like Adidas, Coca-Cola, and Gucci are already experimenting with NFTs as a branding and marketing tool. This convergence of IP law, digital commerce, and decentralized technologies requires both innovation and caution.

Emerging legal frameworks may need to:

• Define standard usage rights for NFTs.

• Clarify ownership rights vs. copyright and trademark rights.

• Offer international enforcement tools tailored for blockchain environments.

NFTs have reshaped digital ownership, offering unprecedented opportunities for creators and brands. However, they’ve also introduced new legal grey areas, particularly in trademark protection. Whether you’re an artist minting your first NFT, a collector investing in digital art, or a brand navigating the metaverse, understanding the role of trademarks is essential to protecting your digital assets.

A proactive approach—rooted in legal awareness, smart contract design, and market vigilance—will be key to ensuring that your identity, creativity, and intellectual property are respected in the digital frontier.