• Nike filed a lawsuit against StockX to sell non-fungible tokens (NFTs) with its brand without prior permission.
• Lawsuits from big wigs like Nike are piling up in the NFT ecosystem.
• The hope is that the regulations will arm small artists, who have similarly defrauded, with ammunition to fight their own claims.

Nike, one of the biggest footwear brands in the world, is suing the StockX sneaker swap for selling non-fungible tokens (NFTs) with its brand without permission. According to the “Just Do It” brand, the sale by StockX – which has seen more than 500 NFTs fly off the shelves – was not allowed.

Nike is far from the only brand to be frustrated by the use of its brand to sell digital assets.

Without regulations or clear guidelines in the mix, cases like this are not uncommon. French fashion house Hermes is embroiled in a legal battle with Mason Rothschild over the sale of Hermes Birkin-inspired NFTs called MetaBirkins. Famed Hollywood director Quentin Tarintino is caught in a standoff with Miramax producers over NFTs based on the movie
Pulp Fiction.

As the value of NFT sales rises with the biggest marketplace, OpenSea, stalling sales worth $3.5 billion in January – a new all-time high – lawsuits are also piling up. The influx of brands and institutional money pouring in suddenly raises concerns that were otherwise ignored by the NFT industry. Both show no signs of slowing down with more big names set to come up against the NFT Gold Rush.

Revolution with a loophole

The blockchain revolution, which was meant to create a new era of ownership where things like copyright law may not even be necessary, isn’t as transparent as expected when it comes to copyright laws. intellectual property and trademarks. But that is far from reality. Yes, putting something on the blockchain saves a timestamped transaction, but it does nothing to verify where the item came from before it is on the network.

To complicate matters, NFTs – just like cryptocurrencies – are a global concept. However, the rules that govern copyright and trademark issues vary from country to country. Many fear that without any legal parameters in place to regulate this emerging asset class, not only is fraud inevitable, but it can also lead to the elimination of small artists from the bigger guns.

As things stand, only players with deep pockets can afford to claim their rights. Small artists, on the other hand, are left behind, with the most common line being, “You should have jumped on the bandwagon sooner.” The only silver lining that seems to be present is that the NFT craze is likely to be a boon for lawyers trying to navigate the boat for their clients.

Nike’s NFT trial

In its lawsuit, Nike seeks to “destroy” these NFTs, stop their sale and promotion, and compensate StockX for monetary damages.

StockX had created NFT’s “Vault” collection in mid-January. While these NFTs themselves could be traded online, they would also be tied to physical products, and the buyer could take possession of them on demand.

Much of StockX’s Vault NFT collection consisted of Nike sneakers. The market called them “digital investable assets,” in the context of some Nike shoes that skyrocketed in price last year.

In theory, speculators could buy in-demand shoe NFTs, leave them stored in the StockX vault, and resell them later at a higher price for the buyer to take delivery directly. Unfortunately, product names and photos will necessarily have to use Nike’s trademarks – an action not endorsed by Nike, and which is meant to affect goodwill towards Nike.

The bigger issue is that StockX’s decision clashes with Nike’s own NFT plans. The brand is releasing its “MNLTH” NFTs yesterday as a free airdrop at first. These are made in collaboration with RTFKT, a digital art studio he acquired in December. Although Nike prefers not to sell through third-party online marketplaces, they do have a direct online presence, for example through Nikeland, licensed as a “customer experience” facility on Roblox.

NFTs are the new crypto “wild west”

To be fair, in most cases, the person or company that already owns the intellectual property of a physical item is the one that makes a virtual version of it – i.e., hits an NFT to derive profit – like a painting, music, photo, meme, etc.

However, many artists have discovered that others have turned their work into an NFT by obtaining any type of permission or clearance for sale. So far, most of these artists, including
William Shatner, were small enough that prosecuting such an unauthorized NFT creator in US court would be prohibitively expensive. Twitter’s response to small artists boils down to the fact that they should have gotten into the NFT game themselves before someone else could emulate them.

Annabelle Gauberti, a lawyer specializing in the creative industries, explains to AFP that “it’s the wild west when it comes to online execution. Even if the prosecution is successful, how do you prosecute the guy who already bought the item or prevent it from being sold at secondary auctions?”

Copyright attorney Mike Dunford went so far as to say, “Copyright law is a disaster area in this area. Saying that at least some artists hate NFTs, New York publication Futurism notes the irony that “much of the resistance against NFTs comes from the artists they were meant to help”.

Last week’s Nike case suing StockX was simply the most recent. HitPiece was forced to suspend its NFT music marketplace, after backlash from artists and users. Prior to this, brand owner Darden Restaurants demanded that NFT “Olive Gardens” stop trading.

Closer to home, Virender Sehwag has posted repeated clarifications that he is not associated with Hashcards, which sold 2,100 NFT-based digital cards based on the likenesses of many cricketers including him.

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Coca Cola, Nike, McDonald’s and other brands that have jumped on the NFT bandwagon this year