Back in 2022, the Senate requested the U.S. Copyright Office and the United States Patent and Trademark Office (USPTO) conduct a joint study to determine if the current intellectual property laws needed updating to address non-fungible tokens (NFTs).  The resulting joint report looking into the legal framework has just been released.

As background, NFTs serve as digital certificates of authenticity.  They can confer ownership of a collectible (such as art, music, sneakers, baseball cards, etc.) and the chain of title is preserved on the blockchain.  This means tracking and authenticating collectible goods is streamlined.  This is especially valuable to artists who can possibly make a profit each time the NFT is transferred from one buyer to another and mitigates the risk of counterfeit goods.

While these are positive outcomes of NFTs, the Copyright Office and USPTO note in their study that there is "widespread concern that NFT buyers and sellers do not know what IP rights are implicated in the creation, marketing and transfer of NFTs and that NFTs may be used to facilitate copyright or trademark infringement."  With the decentralized nature of blockchain networks, it's difficult for IP owners to enforce their rights if misused in the metaverse.  The report continues stating, "While some individual NFT platforms have developed protocols to help trademark owners enforce their rights, there is no centralized authority that requires all platforms to do so. …There are also no cross-platform mechanisms to allow trademark owners to identify and take down infringing content, settle trademark-related disputes involving blockchain-based domain names, or confirm that sellers own the trademark rights associated with the assets they offer."

Despite raising these concerns, the study finds that the current intellectual property laws are sufficient to respond to these issues.  In other words, NFTs may be helpful from a perspective of authentication and managing the chain of title for collectible goods, but they may also pose challenges for IP owners in enforcement actions due to their decentralized nature.