Non-fungible token ("NFT")

The non-fungible token, or NFT, is a unique record entered on a blockchain which associates an identifier with a digital file, most often through a link to content hosted off the chain. It is a certificate of registration whose circulation can be traced, and constitutes neither a work nor an intellectual property title. No provision of the French Intellectual Property Code is specific to it, so that the rights attached to the content to which it refers remain governed by the general law of copyright, trade marks and designs.

Separation of the token from the rights in the work

Acquiring a token carries no assignment of copyright in the associated content. The principle that intangible property is independent of the physical object, laid down in Article L. 111-3 IPC, applies without difficulty: the buyer becomes the holder of the entry on the chain, not of the right to reproduce or perform the work. An assignment of copyright requires a written instrument which separately mentions each right assigned, its scope, its purpose, its territory and its duration. The terms attached to the issue of the token, often embedded in the smart contract or in the marketplace, therefore specify the permitted uses, which are generally limited to private display.

Infringement through the issue of tokens

Issuing a token that refers to a work without the author’s authorisation amounts to an infringing reproduction and making available to the public once the file is copied or made accessible. The reproduction of a trade mark on a virtual item associated with a token may be pursued as trade mark infringement, provided that the mark covers the goods or services concerned, which has led the offices to clarify the classification of virtual goods in the Nice Classification. Rightholders have an interest in extending their filings to downloadable files, virtual goods and online platform services. Identifying the issuer, who is often pseudonymous, and locating the platform are the main difficulties in litigation.

Evidence and the value of the entry

The entry of a token on a blockchain provides a timestamp and a record of the chain of transfers, which are useful for establishing the priority of a creation or the date of a transaction. That evidential value is a matter for the court’s assessment and confers no statutory presumption of ownership. The token may, however, serve as a medium for proving the date of creation, under the rules set out in the entry on timestamping and blockchain evidence.

Key points

The non-fungible token is a certificate of registration, not an intellectual property right. Its purchaser acquires no right to exploit the work without a written assignment complying with the Code. The unauthorised issue of a token referring to a work or a trade mark is an infringement. Before any issue, check the chain of title to the content and draft the terms of use. Rightholders should extend their trade mark filings to virtual goods and monitor marketplaces so as to act without delay.

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This glossary entry is general in scope and does not constitute legal advice.

Dhenne Avocats is a patent litigation firm. Matters outside that field, such as trade marks, designs, copyright and IT contracts, are handled by practitioners the firm works with regularly, and by the firm itself when they arise in a patent dispute.

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