Do NFTs have legal protection?

NFTs (Non Fungible Token) are digital assets created with blockchain technology, which have the characteristic that they are unique and exclusive, so they cannot be divided, modified or exchanged for another of equal value (such as It does happen, for example, in the case of currencies, whether physical or bitcoins), and neither can they be destroyed, eliminated or replicated, since their chain of blocks is verifiable, normally, through the Ethereum network.

The content of NFTs may have no correlation with the physical world and be completely original, or respond to the digitization of something pre-existing in the offline world, such as paintings, stamps, or works of art in the broadest sense of the word, such as This is the case of those considered the best goals by soccer player Leonel Messi, who were immortalized in his collection “The Messiverse”, made up of four works created by the Australian artist Bosslogic (“The king piece”, “Worth the weight”, “ Man from the future“ and “Impossible brief“).

And taking into account that these NFTs can reach millions in value, the question arises regarding the protection conferred by the Legal System on these assets, which are not only limited to the field of works of art. Indeed, from the point of view of Fashion Law, the irruption of the metaverse and NFTs has had a great impact as a result of the campaigns launched by brands such as Adidas, Nike, Balenciaga, Gucci, Burberry, Louis Vuitton or Zara, which have just to release his third “phygital” collection called “Y2K Creatures” last September 2022.

But this can also cause conflicts when the NFTs are not made by the rights holder but by a third party, as has happened with the “MetaBirkins”, NFTs inspired by the well-known bags of the French firm Hermès, which sued in January from 2022 to its creator, Mason Rothschild, for understanding that it violates his rights by having the registered trademark. And it is that Rothschild put up for sale in a specialized market (OpenSea) more than 100 NFTs that came to be valued at a million dollars, claiming that they were not replicas of their bags, but designs inspired by them, for which they would have under the First Amendment to the United States Constitution.

The content of NFTs may have no correlation to the physical world and be completely original, or respond to the digitization of something pre-existing in the offline world.

As far as Spanish regulations are concerned, this action could constitute a violation of article 34 of Law 17/2001, of December 7, on Trademarks, which grants the owner of the trademark an exclusive right of use over it. Precisely, one of the questions that were raised in relation to the legal protection of NFTs, is how the trademark registration should be carried out and to which class they correspond to in the Nice Classification.

Well, this dilemma was resolved in July 2022 by the basic recommendations issued by the European Union Intellectual Property Office, which provide that NFTs must be registered in class 9 of the Nice Classification, when equated to digital content and images, without prejudice to the fact that the request must indicate that it is an NFT, so that when the 12th Edition of the Nice Classification is published, express reference will be made in the aforementioned class 9 to the term “downloadable digital file authenticated by non-public tokens”. expendables”.

And, in the event that it is considered that a forgery of the original bags had been produced, it could constitute a crime against intellectual property typified by the Penal Code, which is punishable by imprisonment from 6 months to 4 years and a fine of 12 to 24 months for the person who reproduces, plagiarizes, distributes, communicates publicly or economically exploits, in whole or in part, a work (art. 270-1), as well as who, in the provision of services of the society of the information, facilitates in an active and non-neutral way and without limiting itself to a merely technical treatment, access or location on the internet of works (art. 270-2).

With regard to crypto art, in September 2022 the question was raised about the importance of the support in which the works of art are embodied, as a result of the scandal that occurred when it was learned that on July 30, 2022, the millionaire Martín Mobarak would have burned the drawing “Sinister Ghosts” (1944) by the famous Mexican artist Frida Kahlo, valued at 10 million dollars, in Miami to turn it into 10,000 exclusive NFTs, and sell each unit at a rate of three ETH (Ethreum cryptocurrency with a value of 1,416 euros), with which he expects to obtain more than 42 million euros.

Notwithstanding the supposed intention of this action is to “introduce Frida’s work to the metaverse and promote her powerful image to unite a community of collectors, creators and art lovers”, the National Institute of Fine Arts and Literature (INBAL) of Mexico is investigating the alleged destruction of an original work, given that the Federal Law on Monuments and Archaeological, Artistic and Historical Zones declares all of Frida Kahlo’s work to be an artistic monument, including her easel work, graphic work, engravings and documents. technicians owned by the nation or by individuals, as published in the Official Gazette of the Federation on July 18, 1984.

In the event of a similar event occurring in Spain, the provisions of article 323 of the Penal Code would apply, which establishes that the penalty of imprisonment from 6 months to 3 years or a fine of 12 to 24 months will be applied, whichever causes damage to assets of historical, artistic, scientific, cultural or monumental value; imposing the highest penalty in degree when particularly serious damages have been caused or that have affected assets whose historical, artistic, scientific, cultural or monumental value is especially relevant.

By Javier López, partner at Écija