DOWNWARD SPIRAL OF INTELLECTUAL PROPERTY PROTECTION: REGRESSION OF LAWS FROM INFRINGEMENT IN DOMAIN NAME TO NFTS IN THE METAVERSE

1st Spiral: Unresolved Enforcement Issue of Removing Infringing Domain Names—

The difficulty in enforcement of removing an infringing domain name emerges when a domain name is registered using false information; when the domain registrars disguise or hide the registrant’s information, or due to the lack of information in “Who is responsible for this domain name?” (“WHOIS”) records, this renders the entire purpose of it useless as a rights holder cannot track down the violator in cases involving domain name infringement. In the case of Jockey International v. www.jockeyfranchise.com, it was discovered that the registrant information given by the registrar was false. The bank where the owner of the website was allegedly holding an account was named as a proforma defendant by the plaintiffs. Even though the summons to court was successfully served, it was discovered that the Know Your Customer (KYC) information provided by the banks was inadequate, and the owner of the disputed domain had not yet been in court.

The Registrars frequently argue before the Judicial Forums that the procedure of allocating domain names is automated and cannot be manually engaged in. As registrars are not the adjudicating authority on issues of false similarity/identity as entrusted with judicial authorities, there is no human element engaged in supervising or evaluating the authenticity of any chosen domain name. Therefore, it is theoretically impossible for the registrars to exclude certain domains or put them on “continuous suspension.”

However, the courts have issued orders directing the registrar to not assign any additional domain names containing the registered trademarks of the Plaintiffs in a number of cases, including Gujarat Cooperative Milk Marketing Federation Ltd. & Anr. v. Amul-franchise.in & Ors., andITC v. Ashok Kumar & Ors., Nevertheless, because of the lack of technological tools accessible to the registrars, the implementation of such directives continues to be a significant problem. In the cases of Tata Sky Limited vs. National Internet Exchange of India (NIXI) & Ors. and HUL v. Endurance[i], the same has been rightfully acknowledged.

In the recent case of Snapdeal Private Limited v. GoDaddycom LLC and Ors., the Delhi high court recognized that a case involving the infringement of a specific mark could not continue indefinitely and that the plaintiff could not be expected to file a lawsuit each time a domain name containing its trademark is registered. It would turn into a very time-consuming and expensive exercise. In light of this, the court determined that the domain name registrars must develop a mechanism for trademark owners to request the cancellation or transfer of objectionable domain names.

2^nd Spiral: Sale of Unauthorized NFTs on Rogue Websites—

Now, the above-mentioned problem becomes an add-on complication when unauthorized NFTs are offered for sale from those objectionable domain name websites. This means that now, the rightful owner of the trademarked domain name is not merely facing a cybersquatter, but is even at the risk of facing an IP infringement or passing off of its trademark in the form of the sale of NFTs with trademarked or copyrighted work. The cybersquatter could also offer for sale, unauthorized content in NFTs of other rightful owners on those rogue websites.

In many of the recent IP infringement cases via NFT it is a common pattern that after making the NFTs containing IP infringing content, the alleged infringer offers these for sale or auction on a rogue website.

Starting with the case of Yuga Labs v. Ryder Ripps[ii] the accused artist had created and sold NFTs that bore the very same trademarks that Yuga Labs uses to market and sell legitimate BAYC NFTs, which constituted trademark infringement, and cybersquatting. In the recent case of Hermès International v. Rothschild (Hermès case)[iii]the defendant had created NFTs of the images titled “MetaBirkins” and sold them by cybersquatting on the luxury fashion house. Even in the case of Playboy v. www.playboyrabbitarsapp[iv], the defendants were selling counterfeit Playboy Rabbitars NFTs from their phony websites without the proper authorization from the original trademark holder of the mark. The domain URLs for the counterfeit websites contained exact replicas of the Playboy trademark and were closely identical to Playboy’s legitimate website, which sells genuine Rabbitar NFTs.

Even if the court orders are successfully implemented to take down such domain name websites, this will loop back to the previously mentioned problem of perpetual registrations of infringing domain names by an anonymous registrant, implying that even if such an offer for sale of unauthorized NFTs on that particular infringing domain name website is removed, the infringer could register another objectionable domain name and repeat the same.

3^rd Spiral: Removal of Unauthorized IP Infringing NFTs from Blockchain—

When an NFT is minted, it is uploaded on a blockchain from a marketplace for NFTs where it can be traded in line with smart contracts that control the transfers. The transaction history is recorded on the blockchain.

The issue that emerges when infringing content has been put up on the blockchain via an NFT is how the same could be removed, despite having, for instance, the legal backing of a court order. One of the notable judgments on this issue is Qice v. BigVerse[v] from the Hangzhou Internet Court which decided on the first NFT copyright infringement case in China. In this instance, BigVerse is a platform for creating and disseminating NFTs. It issued an NFT using a cartoon image made by Qice without prior authorization from the owner of the copyright to that image. BigVerse was found guilty of violating the copyright. The court analyzed that the trading of NFTs is governed by the right of dissemination over an information network and creates a public internet environment. The NFT marketplaces are subject to a stronger duty of censorship and must be treated no differently than any other regular internet platform and they must carry out the IP review mechanism obligations, or be held legally accountable.

Despite the immutability of anything minted on the blockchain, the court went on to recommend a novel technique to prevent NFT works infringement by burning the NFT by sending it to a black hole address.

In respect of India, similar concerns such as data protection in India, cyber security, and privacy, with respect to the evolving nature of Web 3.0 and the metaverse, the Data Security Council of India (DSCI), a premier industry body set up by National Association of Software and Service Companies (NASSCOM®) for policy advocacy, capacity building and outreach initiatives on these issues, by bringing together governments and their agencies, industry sectors including ITBPM, BFSI, telecom, etc.

Another organization that is emerging for the legal structure is the Decentralized Autonomous Organization (DAO), which is a mission-based community of people, which also looks into metaverse matters.

4^th Spiral: Utility of the NFTs in the Metaverse and Governing Law per its Subject Matter—

The treatment of NFT as an artwork or as a commodity determines the subject matter of the law which may govern the treatment of NFTs in that particular case. In the case of Hermès[vi] case, a distinction is made between when a particular NFT minted on the blockchain can be considered to be a commodity and thus a subject matter of trademark law, and when can it be an artistic work, thus be governed under the copyright law.

In this case, the court relied on the Rogers test that was laid down in the Ginger Roger v. Alberto Grimaldi and MGM/ UA Entertainment Co. case. Even though the test laid down in the Rogers test sets a very “low” threshold for “artistic relevance”, it was applicable in the Hermès case because the “artistic relevance” is satisfied in almost any case, unless the user “has no artistic relevance to the underlying work whatsoever”. So, the defendant having “some artistic relevance” qualified for the applicability of the Rogers test, but it didn’t automatically imply a complete immunity from the IP infringement because the artwork was explicitly misleading as to the source or content of the work, which is the second criteria for such immunity that must be expounded by the defendant which was not the case here.

Judge Jed Rackoff, here made a fine line of distinction between when this test may apply. In this case, the NFTs created were linked only to the digital ‘images’ of the Birkin handbag and did not have any utility as a virtual commodity in the metaverse-like platform where it might have been the subject matter of traditional trademark laws. Thus, not all digital files linked to NFTs invokes the Rogers test as this test is only applicable to artistic works and not commodities.

Jurisdiction:

The determination of jurisdiction in the metaverse is unclear. The territorial nature of trademarks implies that the factors such as the place of residence, principal place of business, or the place of conflict have to be considered for determining jurisdiction. But without any boundaries in the metaverse, the factors would completely differ or a separate court has to be established for the same. An approach taken by Europe was when it established its first Arbitral Tribunal of the Blockchain and New Technologies Chamber of Commerce in 2018 for dispute settlement in the blockchain industry.

The Way Forward:

The problems rooting in the persisting sphere of domain names on the internet today spiral into the metaverse. The challenges facing us where NFT is the subject matter are, first, given that there is always a certain level of anonymity, how can the court summons be served on a blockchain wallet owner or defendants, and secondly, how to enforce those orders successfully. Although there are manifold concerns and a dearth of laws in this new domain, current court rulings suggest a positive trend for governing this innovative space. For instance, a New York state court recently authorized the airdrop service of court documents via “a special purpose Ethereum-based cryptocurrency token” in LCX AG v. John Doe Nos. 1-25.

The venture into this new sphere of metaverse and India’s legal advent into this can also be seen in cases such as that of the Delhi High Court in the case of Shree Rajmoti Industries v. Shree Vishwaprabha Food of 2018, which upheld the doctrine of the zone of natural expansion. And even in the case of Laxmikant Patel v. Chetanbhai Shah, the apex court of the country iterated that passing off should be judged from a futuristic perspective, i.e., future expansion of a business as well as and not merely from the existing user of the competing parties. It was held in this case that, “the ground is not to be limited to the date of the proceedings; the court will have regard to the way in which  the business may be carried on in the future, and to it not being carried on precisely as carried on at the date of the proceedings.” 

 It is not long before this is truly not an extra-legal space!

[i] Hindustan Unilever Limited v. Endurance Domains Technology LLP, 2020 SCC OnLine Bom 809.

[ii] Yuga Labs, Inc. v. Ryder Ripps, et al., 2:22-cv-04355 (C.D. Cal.).

[iii] Hermès International and Hermès of Paris, Inc., v. Mason Rothschild, 22-cv-384 (JSR).

[iv] Playboy Enterprises International, Inc. v. www.playboyrabbitarsapp; www.playboyrabbitcom and John Does, 21 Civ. 08932 (VM).

[v] Shenzhen Qice Diechu Cultural Creativity Co.. Ltd. (Qice) v. Hangzhou Yunyuzhou Technology Co. Ltd. (BigVerse), (2022) zhe 0129 min chu 1008.

[vi] Supra Note 3.