Non-Fungible Tokens (“NFTs”) are units of digital data (tokens) stored in the blockchain that are not inherently interchangeable with other digital (non-fungible) assets. They represent real objects such as images, videos, artworks that are bought and sold online, usually with crypto-currency.
NFTs operate as digital signatures attributable to a single owner. The underlying content represented by the NFT is given a unique identifier, making it a certified digital asset that unequivocally belongs to a specific person or entity.
An NFT is stored in the owner’s electronic wallet.
In most cases, these NFTs are backed by decentralized blockchains that are managed autonomously and automatically. The blockchain itself does not belong to anyone. Therefore, only the last owner of the NFT has the possibility to transfer it to another owner.
NFT domain names result from new web extensions linked to the blockchain via smart contracts. These extensions, such as <. eth> (“eth” referring to the Ethereum blockchain), are not recognized by ICANN at this time.
Hence, from a legal point of view, it is not easy to act against an unauthorized use of a trademark in an NFT domain name. For instance, the rules provided by the UDRP do not allow for the resolution of conflicts for this type of blockchain domain name. Thus, blockchain developers have created their own version of the Domain Name System (DNS), which fall outside of ICANN’s regulatory control.
To date, there is no international authority or court that could order the deletion or transfer of NFT domain names. This is a consequence of the decentralized nature of blockchain domain names and the anonymity of the registrants, key elements of the blockchain mechanism. The immutable nature of blockchain also forms an obstacle.
Even if these new extensions will undoubtedly bring many opportunities, the legal framework remains unsettled for the moment. New legislative evolutions on the subject of domain names and the defence of trademarks will certainly be expected in the coming years.