Also known as NTFs or NFTies, non-fungible tokens represent a type of digital asset and its ownership is recorded on a blockchain, which is a digital ledger that was made popular by digital currencies like Bitcoin. 

However, if in the case of digital currencies, tokens had a similar value and could easily be swapped for any other (they are fungible products), NFTs are unique and not interchangeable (or “non-fungible”). In fact, the best comparison with the real, tangible world is an art gallery, where each piece is unique in both aspect and value. And, just like with art pieces, NFTs are sold in an auction. 

The main purpose of non-fungible tokens is to broaden the options of artists and online creators when it comes to receiving proper recognition and payment for their work. Right now, if there’s a suspicion of IP theft, you’d need the help and advice of specialists like Heer Law, who can properly represent your interests. However, in the near future, NFTs may provide a faster way to discover the creator or owner of an online creation without a shade of doubt. In short, NFTs are a way to stop the piracy of songs, texts, movies, and other similar digital creations that can easily be replicated indefinitely due to the immense popularity of the internet. 

The NFT acts as a digital certificate of authenticity and allows both the rightful owner and the creator of digital art to reap the benefits of their work. For instance, the original Nyan Cat gif (considered a piece of crypto art) was sold by its creator in an online auction for 300 ETH (nearly $600,000)! 

But this is not the only example of an NFT that comes to mind. For instance, the digital artist Beeple sold an NFT art collection for over $3.5 million (also in cryptocurrencies). And people are not just buying digital art and memes – they are also buying tweets (yes, posts made by someone with a Twitter account), and other forms of digital originality. Due to NFTs, collectors now have a whole new market to spend their money on! 

Still, since NFTs are rather new on the market, many fear this is only a digital bubble in the making. And, while the same worries existed with Bitcoin and other cryptocurrencies, it’s also true that this is a very volatile market that can go away overnight. So, are there any ways to protect NFTs?

Is There Legal Protection for Creators & Owners?

Most specialists are a bit skeptical when it comes to NFTs. First of all, even if the technology uses blockchain to record the seller and buyer (plus other rules) it does not mean the buyer has complete ownership of the original. Therefore, in the case of the Nyan Cat, owning the original gif doesn’t mean you can prevent anyone else from using it in their online posts or even altering its original design. In addition, a transaction does not guarantee you are buying the art piece from its creator since it is difficult to establish such a thing. 

Therefore, from an intellectual property perspective, an NFT is more like a receipt that proves you bought a version of something. Nothing less, nothing more. As a result, it is difficult to enforce in the real world, using the current laws. Still, this hasn’t stopped people from spending their money on NFTs. Some even seem to believe the practice will seep into the real world and that we will be able to turn real estate properties into such assets. 

Wrap Up

The only conclusion that can be drawn right now is that NFTs are quite popular at the moment. Therefore, international patent protection laws and regulations may have to change in order to accommodate a new type of authenticity certificate. But until this happens, the world of digital creations is in a bubble of its own. Only time will tell if buyers were right to spend their cryptocurrencies on gifs and tweets.

International patent protection has been gaining popularity over the years. Now more than ever, intangible assets such as patents have never been more important. As businesses continue to expand their market reach, patent protection has been one of the most important assets that jump-start their success abroad.

It is worth noting, however, that the journey of obtaining patents abroad can be costly. There is also no such thing as an international patent that you can use or enforce in other countries. But, there are several ways to obtain international patent protection.

Direct Filing

The direct route of obtaining an international patent is recommended for applicants with a tight budget. It is best for those who are interested in obtaining patents for only a limited number of countries.

The direct or Paris route allows applicants to file their initial application in their home country. Afterward, they have a 12-month period wherein they can file a patent application abroad. The countries where they filed the application would be the one to determine whether they are eligible for patent protection.

For instance, a US applicant wants to obtain a patent in his only two niche countries. Using the direct route, he would have to file a patent application to the United States Patent and Trademark Office (USPTO) first. Upon application, he then only has a 12-month period to file the application for the two countries where he wants to market his invention.

Patent Cooperation Treaty

The Patent Cooperation Treaty (PCT) facilitates the applicant’s international patent application. It streamlines the initial filing process by buying the applicants enough time (up to 30 months) to file for a national phase entry. National phase entry is when an applicant files an application to the country where they want to obtain the patent.

Note that the PCT does not examine an application fully and it does not necessarily grant patents to applicants. Rather, it is one of the routes to take when obtaining patents abroad. In essence, PCT grants an applicant enough time to further develop the patent and examine countries where it would be most suitable to obtain patent protection.

Since there is no such thing as an international patent, the PCT made it possible for an applicant to file one international application in one language and one location. This route is best suited for applicants who are interested in obtaining patents for numerous countries.

To further illustrate, let us take a US pharmaceutical company as an example. The company wants to obtain a patent in 12 countries. They already filed a patent application with the USPTO, but they are still not certain whether obtaining a patent for these 12 countries would be enough or, even, worth the cost. With the PCT route, they have enough time (30 months) to further observe the market behavior of a country, as well as further, develop the invention they want to patent. When they finally decide that they want to obtain protection in these countries, they can  then easily proceed with the national phase entry and file applications for each country. 

The World Intellectual Property Organization summed up the process of obtaining patent protection abroad in the illustration below.

Cost and benefits of obtaining a patent abroad

Having discussed the two different routes, applicants still need to take several factors into consideration before starting their international patent application journey.

1.    Cost

As mentioned above, obtaining a patent abroad can be costly. Since the patent process is associated with several fees (e.g filing fees, translation costs, attorneys fee, maintenance fees, and so on), applicants need to carefully assess their budget and resources.

2.    Enforceability

When obtaining protection abroad, applicants must evaluate whether the country’s patent system is reliable.

3.    Eligibility

Different countries have different patent laws. For instance, software or living organisms are not patentable in other countries as compared to the United States. It is important to have a basic understanding of the patent laws of different countries before filing an international patent protection.

4.    Longevity

Is the invention worth the patent protection? Or will it just be overshadowed by another product in the next 3-4 years? It is crucial to also conduct a market study and weigh its benefits before proceeding to file an application.

5.    Competition

If an invention is most likely the target of infringers, then it might be a good indicator to obtain protection for that specific country.

Overall, it is worth noting that the information set above is merely an overview of the international patent application process. It is still highly advisable to consult and ask for assistance from a qualified patent attorney. They would be able to provide a more strategic approach as well as give more details about the patent application process. With the help of a patent attorney, it would be much easier to navigate through the market of different countries.

The meteoric rise in the number of trademark applications in China over the last five years is a testament to the power and importance of China as a market for brand owners. In 2012, there were approximately 1.5 million applications filed in China, and by 2016 that number rose to 3.6 million. In 2017 applicants filed 5.7 million new applications[i]. That number dwarfs the 590,000 new applications filed in fiscal year 2017 at the U.S. Patent and Trademark Office, the second busiest trademark office[ii].

Brand owners recognize that in order to do business globally, they need to devise a strategy in China, whether they will offer products or services directly there or not. Part of the reality of this brand protection strategy is a defensive attempt to prevent fraudulent filings by third parties in order to avoid either paying the applicant to get the brand “returned” to the rightful owner or paying steep legal fees for seemingly never-ending legal battles that may not go in their favor[iii]. China is a “first-to-file” country, meaning that rights in a mark are established through registration, not use. The filing date preserves the applicant’s rights in the mark, whether legitimate or not. U.S. business owners wanting to do business in China often find themselves facing a whole host of frustrations not only due to issues such as fraudulent registrations, but also because of other legal restrictions that impose undue burdens on evidence production and bringing claims in court.

Has Chinese trademark law and policy kept pace with China’s ever-increasing importance in the global marketplace for businesses wanting to protect their brands? After new trademark legislation was introduced in 2013, China announced earlier this year that it is considering further sweeping changes to its IP administrative structure and legal processes, including the creation of a single IP agency (the State Market Supervision Administration)[iv]. As part of this process, China has solicited public opinion on potential revisions to Chinese trademark law. Below are five recommendations for modifications to the current legal regime that would benefit U.S. business owners seeking to do business in or with China.

1. Hire more trademark examiners

While not a change in the law per se, hiring more trademark examiners will help overcome some of the legal pitfalls that come with having too few examiners to keep up with the ever-increasing number of applications. The current wait from time of application to registration can run as long as 12 to 18 months even if no refusal issues, meaning that even though an owner can preserve a filing date, the status of registration and the rights that go with it are in limbo for a long period of time. Without a registration, a trademark owner cannot fight counterfeiters, particularly on sites such as Alibaba, TaoBao, and TMall, cannot record their trademark with China Customs, and will have a much harder time trying to file any type of unfair competition action in courts in China.

What’s more, each examiner gets about ten minutes to examine each application, which includes a determination of conflicts with prior registrations or prior-filed applications, examination of the application formalities, determination of distinctiveness, and examination of the proper identification of goods and services. With so little time to give to each application, the quality of examination is bound to suffer, resulting in frustrated applicants and a large number of registrations on the Register that may not belong there. With extra clutter on the register, trademark examiners are likely to cite these irrelevant registrations against future applicants, blocking their registrations.

2. Institute a declaration of use requirement after three years

Some first-to-file jurisdictions, such as the Philippines, require the registrant to prove use of the mark in commerce in connection with the goods or services of the registration after three years in order to maintain the registration. This gives applicants the incentive to file applications for marks they actually intend to use, since there is extra cost involved in either submitting the declaration of use or refiling a new application before the third year is up. A lot of the “chaff” on a registry could be removed by instituting this requirement, allowing legitimate brand owners to have more options.

This type of requirement is not without potential downsides, however. Fraudulent filers can easily fake use specimens or declarations, as some have done in the U.S. to try to get around the strict use requirements for registration[v]. It also makes defensive filings more difficult and costly. And, it could add a burden to the trademark examiners who are already overburdened. Nevertheless, in combination with the third recommendation below, adding the declaration of use requirement could help combat fraud by making non-legitimate filing less profitable and more difficult.

3. Formalize sanctions for lawyers, agents, and other individuals who knowingly file fraudulent applications

There are few if any consequences for fraudulent filers and for the lawyers and trademark agents who knowingly assist them. Monitoring repeat fraudulent filers and formalization of a black list would make it more difficult for trademark squatters to profit from registering multiple famous or well-known trademarks[vi]. Monetary sanctions or other legal consequences along the lines of censure or disbarment from practice before the trademark office for lawyers and agents who knowingly help squatters file the fraudulent applications would also help reduce these types of filings. While it’s certainly possible that clients aren’t always forthcoming with accurate disclosures to their counsel, it’s fairly obvious when someone other than Apple files an application to register the mark iPhone or iPad[vii] that something is not above board.

4. Make evidentiary procedures more transparent and less onerous for foreign parties

Any foreign lawyer who has ever tried to work with clients to collect evidence to support a client’s opposition or any other administrative or judicial proceeding in China has had moments of significant frustration. Foreign witness declarations are not generally accepted in China Trademark Office (CTMO) proceedings, or are given little to no weight, even if signed and properly notarized. The CTMO does not have any formal guidelines for how to present evidence generated outside of China, and it is unclear as to how it may be treated in a proceeding[viii]. The Trademark Review and Adjudication Board (TRAB) has formalized guidelines to accept documents generated outside of China but requires such documents to be both notarized and legalized[ix]. The legalization process is both time consuming and costly if there are more than a few documents.

In addition, in a proceeding before the CTMO, such as a non-use cancellation proceeding (which is often necessary to try to cancel marks that have been on the Register longer than three years, do not appear to be in use, and are blocking a client’s application), the party bringing the action does not have the opportunity to examine the registrant’s evidence submitted to the CTMO until after the decision has been rendered[x]. The complainant must file a request to review the evidence with the TRAB, and then try to challenge the evidence. The process again becomes more time consuming and costly, which acts as a disincentive to any foreign trademark owner with legitimate claims.

Providing policy guidelines to the CTMO for how evidence should be treated will take some of the guesswork out of the process for foreign parties that need to present evidence from outside of China to support their case. Also, giving the complainant a chance to challenge potentially fraudulent or weak evidence in an ex parte proceeding before the decision is final will allow the CTMO to take that argument into consideration, and perhaps make decisions that will further help to prevent fraudulent or inactive registrations from cluttering up the Register.

5. Streamline judicial and administrative, and make bad faith a sole ground for invalidation

It is common in opposition proceedings against fraudulent applications or non-use cancellation actions against inactive registrations for the defending party to not respond. In the U.S., the Trademark Trial and Appeal Board may issue a default judgment against the defending party, which can be appealed. However, in CTMO proceedings, the prosecuting party must continue with the case and present arguments and evidence through final determination, notwithstanding the lack of any response from the other side. Allowing for the issuance of default judgments would not only save time and money for the prosecuting party, but also save CTMO resources that are needed elsewhere.

Perhaps the most helpful change that would benefit foreign filers dealing with trademark squatters is allowing invalidation and opposition proceedings to be brought on the sole grounds of fraud or bad faith filing. In the current version of the China trademark law, there is no provision for bad faith as a ground for opposition or invalidation, although it may be considered in conjunction with other claims and as part of the supporting evidence presented[xi].

It is heartening that China is actively examining and proactively modifying its laws, procedures, and policies to reflect the issues and realities faced by both domestic and international brand owners and is addressing the exponentially increasing influx of trademark applications. The evolution of its intellectual property legal framework to match the demands of both domestic and international filers will only help to strengthen its position in the global marketplace.

[i] https://www.lexology.com/library/detail.aspx?g=d03004b3-4737-4513-a49b-d3af0840c944
[ii] https://www.uspto.gov/dashboards/trademarks/main.dashxml
[iii] New Balance learned a hard lesson about not filing an application for the Chinese character equivalent of its mark before using it: See https://www.wilsonelser.com/news_and_insights/insights/2329-chinese_court_stuns_new_balance_with_16_million
[iv] http://www.worldtrademarkreview.com/Blog/detail.aspx?g=209a6df8-bcd7-4dc6-83e4-27bb198f2f89
[v] https://www.wsj.com/articles/flood-of-trademark-applications-fromchinaalarms-u-s-officials-1525521600?mod=searchresults&page=1&pos=3
[vi] Currently, under the 2013 law, the CTMO may put agencies on a blacklist and issue monetary penalties, but do not have to enforce these restrictions. Kossof, Paul, “The New Chinese Trademark Law” The Trademark Reporter Vol. 104 No. 4, July-August 2014.
[vii] https://www.nytimes.com/2016/05/05/technology/apple-loses-iphone-china-trademark-case.html
[viii] Various discussions with local counsel in Beijing, China, 2018.
[ix] Id.
[x] Id.
[xi] Ferrante, Michele, “Strategies to Avoid Risks Related to Trademark Squatting in China” The Trademark Reporter Vol. 107 No. 3, May-June 2017.