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NFTs & Metaverse: AI’s trouble in paradise

Published on 15 Feb 2023 | 2 minute read
Can we enforce IPRs against AI generated-content?

How much of a threat does progressive AI pose to brand owners? Developments in the metaverse have caught the attention of brands and consumers alike. The recent high increases in the number of registered IP rights concerning digital goods to CNIPA, USPTO and EUIPO demonstrates a trend of brands establishing their meta presence in the coming months. It is also not a secret that brands, such as, Nike, Tiffany and Gucci, made millions by embracing new the meta reality. As we move quickly towards higher digital consumer engagement, we can reflect on the underlying technologies that pose a threat to established IP.

Some might argue that Web3 technology is still in its infancy with regards content protection and rights holders’ enforcement generally and therefore creates a weakening system against bad actors.  In pre-meta times, IP law was clear that rights holders have full ownership of physical goods, and many brands have taken steps to protect their ownership in digital spaces, including having registered marks for metaverse and digital goods. Meanwhile infringers’ typical strategies include minting (creating) NFTs without rights owner’s authorisation/licence through diverting traffic to mirroring social media channels (see The Pokémon Company International, Inc v Pokemon Pty Ltd [2022] FCA 1561) and cybersquatting blockchain domain names featuring well-known brands' trademarks. Whilst taking action against these infringements have gained traction from brands and lawyers, resulting most recently in the victory of Hermès in the MetaBirkins NFT case, the rising threat of AI generated-content is ever more present and is here to challenge our current understanding of IP law… Or is it?

AI-generated content

It is broadly accepted that AI is 'the hand' behind production of mass-generated digital content. Similar practices apply to NFT Collections, where AI generates on average 10,000 pieces of digital assets stored on a blockchain. For example, a notable NFT collection, Bored Apes Yacht Club (BYAC) is stored on the Ethereum blockchain. Web3 technologies are commonly praised for its systematic efficiency, this includes seamless transactions between users which greatly contribute to record-breaking primary sales of digital assets. The speed at which NFTs are generated and transferred to a new owner pose a real threat to IP protection and instant damage to a brand's image.

Furthermore, the recent lawsuit concerning trade mark infringement of BYAC NFT collection (Yuga Labs, Inc. v. Ryder Ripps) has sparked conversation among experts as to why the plaintiff (Yuga Labs) sued on the basis of trade mark infringement as opposed to copyright violation. Even controversially, Yuga Labs claimed that their BYAC NFTs have "no copyright"1. This is very much at the heart of the debate ignited by the U.S. Copyright Office regarding whether or not to cancel the registration of copyright for partially AI-generated graphic novel, Zarya Of The Dawn, by a US novelist, Kristina Kashtanova and the AI text-to-image tool, Midjourney. Copyright is covered by the human creation process but AI-generated content questions the human element within creation of art itself, and more importantly the extent of enforceability of these rights. This problem already extends to unauthorised use of trade marks in the metaverse, where many blockchain domain names are generated based on most popular words and names from the web. The algorithm does not know the difference between IP content and generic words and/or numbers. Though perhaps some answers could be provided to what extent we can enforce against AI scraping images without licence from Getty Images v. Stability AI. Nevertheless, brands owners may still find themselves victims to these machine-learning technologies without even being aware they are involved.

The speed at which thousands of unauthorised digital assets through various metaverse platforms and channels are created on a daily basis, it might be difficult to strategise where to start with IP portfolio and IPR enforcement to protect your brand in the new Web3 landscape. Contact our specialists for further advice.

1 This was later clarified as the copyright was not registered, but was protected by default under US copyright law.

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+44 (0)20 7536 4115
Brand Protection Consultant
+44 (0)20 7536 4115