Web 3.0 and the promise of the metaverse has generated excitement about new markets for businesses large and small. But as with any technological frontier, legal uncertainties cause new risks to emerge alongside the opportunities. One area currently full of legal questions is trademark law. We will examine what we
Last month, our post about art NFTs and the DMCA highlighted the distinction between non-fungible tokens and the copyrighted works they represent. In the context of copyright, this dichotomy is generally uncontroversial: In most cases, an NFT merely points to an underlying work but does not contain a copy of the work it represents, and so it is conceptually and legally separate from that work for copyright purposes. But NFTs can be used to signify ownership of products beyond digital artworks—and where those products involve trademarks, new legal issues arise.
Enter Nike: On February 3, the apparel and footwear giant sued StockX, an online resale marketplace for sneakers and other collectibles, in the US District Court for the Southern District of New York, alleging trademark infringement in connection with StockX’s issuance of NFTs featuring Nike sneakers. In the complaint, Nike asserts that these Nike-branded “Vault NFTs”—which StockX’s website says merely track ownership of a physical pair of sneakers in the company’s possession, like a virtual claims ticket or receipt—are in fact “new virtual products.” (Nike v. StockX LLC, No. 22-00983 (S.D.N.Y. filed Feb. 3, 2022)). In their March 31 answer, StockX reasserts their website’s position and insists that “Vault NFTs are absolutely not ‘virtual products’ or digital sneakers” (emphasis in original). StockX instead claims that the Vault NFTs are merely a convenient use of new technology that allows buyers to track ownership without having to possess the physical sneaker, such that the “owner can make a future trade without incurring transaction costs, delay, or risk of damage or loss associated with shipping physical sneakers to StockX and then to the ultimate recipients.”