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.
As the world becomes progressively dependent on technology, the increasing intertwinement of intellectual property and compliance is evident in the business setting. In the face of unprecedented yet inevitable legal transformations, it is crucial to identify the risks and solutions associated with compliance in both the virtual and real intellectual property world.
How are intellectual propertyand compliance related?
Compliance describes the practice of acting in accordance with a set of laws, regulations, global standards and specific internal policies. As regulatory compliance protects and directs a business’s resources and reputation, intellectual property has become an integral part of the assets worthy of protection. A 11.7% increase in trademark filings at the which is a strong testament to the growing significance of intellectual property. Furthermore, with the digitalisation of business models and assets, these codes of conduct should encompass intellectual property protection as external threats such as counterfeiting and cyber-attacks become ever-more rampant. It was estimated that the value of counterfeiting goods amounted to 2.5% of world trade in 2019, along with a 22% surge in domain name disputes in 2021. According to the European Union’s Cybersecurity Agency (Enisa), the number of cyber-attacks against critical sectors and institutions in Europe has doubled (304 incidents recorded) since the beginning of the pandemic.
The interconnection between the two fields had not always been apparent. Initially, the interactions between intellectual property and compliance departments were rather limited. It was common practice to operate each department separately and to focus on matters concerning their own subject. This isolation was later broken by the Vinci case, which led the way to radical changes in the co-working of the two sectors.
The Vinci case concerned the domain name ‘vinci.group’ for the French concessions and construction company Vinci and another fraudulent domain name which was registered. Although Vinci’s monitoring services detected this fraudulent domain name, due to it being inactive for over three weeks, they did not pursue any actions against it. Once it became active, it was associated with a fake website leading Vinci’s customers to believe it was legitimate. Using a fake email address, the fraudsters sent press releases alerting the customers that the performance and revision of the previous year’s account releases were subject to inaccuracy and fraud. As a result, Vinci’s share price fell by 18%.
This highlights how a company’s reputation and financial well-being can be damaged due to the fraudulent use of a domain name. Since then, market regulators have set up guidelines to mitigate domain name risks to avoid similar situations. The Vinci case illustrates the importance of compliance and intellectual property departments working hand in hand – the ultimate goal being efficient risk management. Such a joint effort facilitates the implementation of preventive
measures and timely retaliation to suspected intellectual property infringements.
As such, companies, regardless of their sectors of expertise, should put in place a compliance program for the identification, protection and maintenance of their intellectual property rights. Such a program should be fully comprehensive, taking into consideration all potential risks, especially those concerning intellectual property. As intellectual property takes on increasing importance, it constitutes substantially heightened risks related to other crimes as well. For instance, money laundering is a common consequence of a primary domain name offence. Criminals camouflage their illicit proceeds through the violation of intellectual property ownership by exploiting its commercially viable and flexible nature. While intangible assets have to be appraised to be accounted for as company capital, the assessments of their economic value are often arbitrary. This creates a loophole which enables infringers to transfer to façade companies abroad to round trip dirty money back to its source masqueraded as legitimate earnings. In this sense, the prevention of the primary intellectual property infringement could likely limit the manifestation of any further illegal activity.
Who is at risk?
Banks, particularly online banking, and insurance firms are most likely to be exposed to such risks. As a matter of fact, any industry that engages in e-commerce can be at risk on Web 2.0 and 3.0. As for counterfeiting, the luxury industry falls victim to intellectual property infringement. Recently, the EUI jointly published a report on intellectual property crime & threat assessment, in which a study estimated that 5.8% of all EU imports in 2019 were pirated and counterfeited goods. These luxury fashion brand counterfeits were worth around EUR 119 billion.
Apart from major corporates, everybody is exposed to such risks as well. The degree of exposure depends on different factors, such as the nature of underlying activities, the size of the organisation, the geographical location and the jurisdictions applied. In a nutshell, companies should direct their efforts towards properly comprehending their intellectual propertyrisks and include them in their compliance setup. It is vital for companies’ intellectual property departments to take the lead and show the compliance departments the risks related to intellectual property, specifically those on the internet.
Impact of Web 3.0 on Intellectual Property and Compliance
Over the past few years, the Web 3.0 decentralisation revolution has emerged from obscurity and gained growing acceptance even in the most conservative of practices. One notable example is the enforcement of contracts. Powered by blockchain technology, a smart contract automatically implements itself once the predetermined conditions come to fruition. The irreversible and autonomous nature of smart contracts could translate to vast applications in the realms of intellectual property. Rather than documenting intellectual property registries in the traditional database, the entire life cycle of an intellectual property right could be recorded effectively in a distributed, immutable ledger. It displays clear, authoritative evidence of the use of intellectual property rights and creatorship, which often comes in handy whenever disputes or revocation proceedings arise. These ledgers also allow for provenance authentication, with which consumers and businesses alike could verify genuine products and distinguish them from counterfeits.
However, as with many new technologies, these benefits do come with risks. The resilience of a smart contract heavily depends upon the coding prowess of its developer and whether due diligence was carried out for these protocols. In 2021, one of the most high-profile heists was pulled off when hackers stole $613 million from Poly Network by exploiting a vulnerability in their smart contracts. As blockchains keep transactions out of reach of governments and courts, the distribution of unauthorized, copyrighted materials to encrypted servers could go untraced and unpunished. Even if these illegalities come to light, an injunction would hardly be enforceable since these programs exist on thousands of machines dispersed everywhere around the world.
Despite the rapidly increasing reliance on Web 3.0 technologies, legislations have yet to stipulate a solid legal framework which provides legal certainty in commercial activities. With traditional intermediaries obliterated, there has to be sufficient legal supervision to ensure the compliance of agreements as in conventional contracts. For this reason, a solid technical team is needed in order to work with the legal department to draft a comprehensive compliance plan. An intellectual property compliance program could effectively prevent commitments to activities which undermine or conflict the company’s intellectual property interests. The construction of a compliance framework around Web 3.0 could be complex, yet also immensely valuable.
Additionally, a three-step process is recommended for the protection and enforcement of intellectual property rights for companies; (I) develop audits (II) carry out prior rights searches and (III) put in place a solid monitoringsystem. This includes the monitoring of blockchain domain names and virtual lands in the metaverse and marketplaces.
Though Web 3.0 could appear challenging and intimidating, one major advantage of blockchain is the traceability of all transactions. Take blockchain domain names as an example. Though it is hard to find the holder of a fraudulent domain name, it is not impossible. Fraudulent domain names can be tracked down through the same blockchain, and a ‘cease and desist’ letter can be sent to try to arrange a transfer, withdrawal or purchase of the blockchain domain.
Web 3.0: a challenge or an opportunity?
It’s both. Web 3.0 offers powerful functionalities relevant to intellectual property rights, for example, the traceability of artistic owners through blockchain technology. Decentralisation is definitely the future of law in terms of ownership rights over virtual assets and personal data, and its protection. Regulation is still needed in order to provide similar protection as in the real world. Web 3.0 should be seen as a double-edged sword where users cannot seek its benefits without being ready to meet its risks and challenges.
Hence, I recommend a three-step strategy to avoid situations like the one encountered in the Vinci case.
First, to conduct prior research among domain names to get an idea of the current situation: identify the legitimate domain names and the fraudulent domain names.
Second, to conduct an audit. The audit allows us to set up the right strategy tailored to the company’s needs. We can then assess the risks and map them out for companies. We also help to put in place a crisis management policy to tackle fake news.
Third, to set up a daily monitoring on domain names and worldwide. This is important because it helps us to identify immediately relevant domain names, analyse them, and assess the level of risk to plan out the right actions.
Finally, I advise a collaboration between intellectual property and compliance departments to tackle the risks. For example, by identifying the key people to contact and having a process in place to secure proofs of a fraud or infringement.
We can also take immediate actions. How do we do so? We start with a technical IP/IT study of the situation. We then set up the right strategy. For example, a request of disclosure of registrant data, blocking a domain, taking down a website and removing e-mail servers. If the domain name is of interest to the company, we initiate action to obtain the amicable transfer of the domain name or we file ADR complaints such as UDRP.
At Dreyfus.io, our experts help with any possible infringements and disputes related to your copyrights, trademarks and NFT projects. Our team would be happy to assist you and answer your questions.
The WHOIS protocol now appears to be outdated due to the evolution of technical requirements in the digital era. Indeed, this tool, provided by registrars, is inter alia not capable of working with either encoding or with non-latin characters. Consequently, since 2015, ICANN in collaboration with the Internet Engineering Task Force (IEFT) has been working on the replacement of WHOIS through the RDAP (Registration Data Access Protocol), in compliance with the Temporary Specifications and the GDPR.
Like WHOIS, the RDAP provides registration data, although its implementation is different since it allows standardization, security data access and enquire response formats. As a result, it will be possible to search all the registration data available from various registrars, unlike WHOIS that is limited to the database being searched. It also takes into account the internationalisation of domain names.
The possibility of granting different accesses to the registration data is being considered. For instance, access for anonymous users could be limited whereas authenticated users could have full access to all data.
While some elements still have to be worked out, registrars are required to implement the RDAP service prior to August 26, 2019.
Cyber-attacks are on the rise, and they are becoming more sophisticated. Our current business model is globally interconnected; commercial transactions and even social life transcend national borders. Consequently, our vulnerability to cyber-attacks has been increased, however, the competences of the cyber security and police authorities, as well as political responses, are predominantly national.
This situation has made European authorities aware of the need to deal with these threats in an effective and coordinated way, relying their actions on policies dealing specifically with cybersecurity within the European Union. By means, the aim is thus to improve cooperation, exchange of information and coordination between the Member States and the institutions, bodies, offices and agencies of the Union.
The European Commission, as part of the Digital Single Market Strategy, has approved Regulation No. (EU) 2019/881, on ENISA (the European Union Agency for Cybersecurity) and on certification of information and communications technology cybersecurity, which came into force on June 27, 2019.
This new regulation has two main objectives. On the one hand, to give ENISA (the European Agency for Cybersecurity, now named the European Union Agency for Cybersecurity) a greater role in the field of cybersecurity, establishing a series of objectives and tasks. On the other hand, the creation of a common certification framework at European level, with the aim of guaranteeing an adequate level of cybersecurity of ICT products, services and processes in the EU, avoiding the fragmentation of the internal market.
Concerning the first objective, the first substantive point of the Regulation is to give more powers to the European Union Agency for Cybersecurity (ENISA). It will now have a permanent mandate facilitating the exercise of the new functions assumed, one of which is to increase cooperation on cybersecurity within the Union, for example in cases of large-scale cyberattacks or cross-border crises. This strengthening is also reflected in the economic resources for ENISA, increasing from 11 to 23 million euros over a period of five years.
It is noteworthy that European regulation focuses on users by addressing concepts such as users’ awareness, and the application of good practices online. Both public bodies and private stakeholders will receive recommendations on safe configurations and maintenance of their devices, and the availability and duration of updates, as well as the perceived risks.
With regard to the second objective, the regulation creates a framework for European Cybersecurity Certificates for products, processes and services that will be valid throughout the EU. It is the first EU legislation on the internal market to take up the challenge of enhancing the security of connected products, Internet of Things devices and critical infrastructure through such certificates.
The creation of the cybersecurity certification framework incorporates security features in the early stages of their technical design and development (security by design). It also enables their users to ascertain the level of security assurance, and ensures that these security features are independently verified.
As to the second objective of the regulation, the certification framework will provide EU-wide certification schemes as a comprehensive set of rules, technical requirements, standards and procedures. This will be based on agreement at EU level for the evaluation of the security properties of a specific ICT-based product or service, for instance, smart cards. This will certify that ICT products and services which have been certified in accordance with such a scheme comply with specified requirements. In particular, each European scheme should specify: a) the categories of products and services covered, b) the cybersecurity requirements, for example by reference to standards or technical specifications, c) the type of evaluation such as self-assessment or third party evaluation, and d) the intended level of assurance for instance, basic, substantial and/or high.
ENISA’s mandate is immediate from the entry into force of the Regulation, whereas the cybersecurity certification framework will have to be developed. In this respect, the Commission’s agenda has already included the submission of proposals to ENISA for the preparation of certification projects, as well as the creation of expert groups on cybersecurity.
Finally, this European regulation not only seeks to increase users’ confidence in the use of connected devices, but also to strengthen the European cybersecurity industry and the European Single Market, positioning it as a global benchmark, in line with other markets such as the United States or China.
With significant expertise in protecting innovative products and designs, and in defending intellectual property rights on the Internet, Dreyfus is well positioned to assist you in enhancing your assets on the web.
In a short time, networking sites have become one of the main channels for companies’ communication. eBay, Tripadvisors, Amazon or even the more conventional social networks such as Facebook or Twitter have, in fact, become preferential showcases for advertising. They do undoubtedly represent an opportunity for making a company visible, but they nonetheless pose a real threat to reputation. Companies are now faced with a new, major challenge in terms of unfair competition, that is to say “fake customer reviews”, that, although false, have a great influence on the consumption of the products and services they target.
The French Directorate-general for competition, consumer affairs and prevention of fraud (DGCCRF) revealed that 74% of surfers have already changed their minds about buying a product because of negative comments or reviews.
Faced with this hefty problem, companies endow themselves with legal instruments with the intention of stamping out such practices.
Disparagement and deceptive marketing practices
The case law has already determined in the past, that defamation cannot be a valid foundation for “judgements, even excessive, concerning the products or services of an industrial or commercial undertaking”.[1]
Concerning unfavourable reviews regarding a commercial activity, undertakings must base their case in the domain of unfair competition, particularly by referring to an act of disparagement. This practice consists in a person or an undertaking discrediting the goods or services of an undertaking with the intent to harm reputation. Like any act of unfair competition, the author of disparagement can be held liable on the basis of article 1140 of the Civil Code.
For instance, on this basis, the Court of Appeal of Paris ruled against a company selling food supplements which had strongly criticised the products of their rival on their site in the “product reviews” section, describing them as “crap” among other things.[2]
The Court had, in the case in point, also based its decision on article 121-1 of the Code of Consumption which sanctions deceitful marketing practices to the extent that such comments corrupt the natural behaviour of the consumers.
Similarly, sanctions had been pronounced concerning negative opinions of a restaurant which had not yet even opened when they were posted.[3]
New sanctions for false online reviews
Although disparagement and deceitful practices had been the traditional foundations concerning these exaggeratedly negative remarks, the legislator specifically intended to control and thereby punish these fake reviews.
In the light of this, three implementing decrees of the law for a DigitalRepublic entered into force on 1st January 2018. Introducing the new article L111-7-II of the Code of Consumption, they oblige undertakings and individuals whose activity consists in collecting, moderating or disseminating online reviews from customers, to provide fair, clear and transparent information on their processing and publication. This must be presented alongside said reviews, their date of publication as well as that of the consumer experience concerned and whether or not they underwent a control procedure. These decrees replace individual platforms’ voluntary compliance with the Afnor standard, which is supposed to ensure the fairness of the comments. It remains to be seen how the platforms will comply with such requirements.
This new obligation which imposes increased monitoring of such reviews on undertakings, shows that, although unfair competition was a convenient tool, case law has shown that these extensive large scale practices represented a real challenge for companies and should be framed by specific texts.
The firm Dreyfus & associés specialises in the field of intellectual property. Their team is up to date on the new developments in European legislation. They will be able to provide you with all the help and guidance you require concerning your intellectual property rights in Europe.
After the filing of an intellectual property right, several types of changes are likely to occur, such as the owner’s move, the change of his name in a legal way or the assignment of his rights. Such corrections must be recorded in the relevant register, as this could have very damaging consequences for the holder.
Appropriateness of registration by the rights holder
By definition, registration is an approach made with the National Register of Trademarks, Designs and Patents by means of a paper or electronically, allowing the owner to notify changes in his intellectual property rights. This is important because it enables third parties to be informed of the ownership of trademarks, patents, designs and models as well as of the operations carried out on them.
Registries are national
In France, the National Registry of Trademarks only accepts registrations of trademarks whose effects are effective in France. Registrations concerning international trademarks are also impossible except in cases where they cannot be effected at the International Office (OMPI). This is particularly the case for the license, which must be registered directly with the National Registry in accordance with its own legislation. This is because the legislation of certain states such as Germany, Australia or New Zealand does not provide for the registration of trademark licenses, thus rendering their registration in the international register ineffective.
Changes affecting ownership or enjoyment of the trademark
According to Article L. 714-7 of the Intellectual Property Code, “any transmission or modification of the rights attached to a trademark must be registered in the National Register of Trademarks in order to be effective against third parties”. This article shows that if the assignee fails to register its assignment or trademark license, the assignee may not oppose these acts against third parties. On the one hand, this will prevent him/her from taking opposition action against a subsequent filing or in the context of a legal action and on the other hand, he/she may be held liable in the event of a mistake committed by the beneficiary of a trademark license, as stated in a judgment handed down by the European Court of Justice on 4 February 2016.
On the other hand, other more rare deeds such as mortgages, pledges or guarantees also deserve to be registered with the Registry, otherwise these deeds will not be enforceable against third parties.
Thus, licenses and assignments are not the only amendments requiring registration by the rights holder. The latter may indeed be affected by other operations although they are not expressly covered by Article L. 714-7 of the Intellectual Property Code.
These transactions include the following:
–Total or partial withdrawal of trademark rights: where the trademark has not been registered, it is possible to withdraw or specify some goods and/or services, or to withdraw the entire trademark. You may find yourself in this situation if the proprietor of an earlier trademark believes, for example, that this new application infringes his rights and requires the withdrawal of certain goods or services or, more significantly, the withdrawal of the trademark.
–The total or partial renunciation of the trademark: even if it is less common, these are cases in which modifications are requested after the registration of your trademark.
From a practical point of view, the right holder must also register in the Trademark Register:
–The change of address explained by the fact that if the INPI is not informed and the owner of the rights is not represented by an agent, he may never receive a reminder letter to renew his trademarks.
–The change of legal form (a SAS becomes an SA for example) because if the INPI is not informed of this change, it will refuse the renewal of the trademarks with the new data without justification.
–The change of name as illustrated by the harsh decision of the European Court of Justice of September 8th, 2016 confirming that the holder must register his change of name in order to avoid being deprived of his rights.
Limits of registration by the owner of the trademark right
The corrections that the holder may enter are limited, and are limited to the possibility of limiting the protection of his rights. Therefore, it is impossible to modify your sign, name or logo, nor is it possible to extend the protection of your right by adding products and/or services through registration.
Registration: the solution against the loss of rights
Failure to register the above-mentioned changes can have very damaging consequences such as forfeiture of rights. Moreover, the positions adopted by the courts continue to be increasingly rigorous, prompting companies to systematically register events affecting all intellectual property rights or their holders in order to avoid all types of damage.
Registering changes affecting your intellectual property rights is an essential step in terms of protection. Dreyfus & Associés has experts in trademark law, as well as in national, European and international trademark registrations. Dreyfus & Associés is the ideal partner to support you in this process of securing and updating your intellectual property rights.
The law of 22 March 2011, which overhauls the legal framework governing country code top level domains in France and its overseas territories, has now been published and will enter into force on 30 June 2011 (this law will be included in the French Code on Postal Services and Electronic Communications, Articles L.45-2 to L.45.8).
1. Scope of application
This law is intended to apply to the following top level domains : <.fr> France, <.gf> French Guiana, <.gp> Guadeloupe, <.mq> Martinique, <.yt> Mayotte, <.re> Réunion, <.pm> Saint-Pierre and Miquelon, <.bl> Saint Barthélémy, <.mf> Saint Martin, <.tf > French Southern Territories et <.wf > Wallis and Futuna.
2. Management of the domain names
Each of these top level domains will be attributed and managed by registries designated by regulation. These registries will be required, in particular, to prepare on an annual basis an activity report, to publish on a daily basis all domain names published and to provide full details on the cost of their services. They will also be required to establish non-discriminatory and transparent rules, guaranteeing compliance with the freedom to communicate and to trade and with intellectual property rights.
Upon entry into force of the law, registrars will have to be accredited, in accordance with a non-discriminatory and transparent procedure (new Article L.45-4 paragraph 1 of the French Code on Postal Services and Electronic communications).
3. Enlargement of registrants entitled to reserve these top level domains
As from 31 December 2011, the following persons will be entitled to reserve these top level domain names: individuals residing on the territory of the European Union and legal entities having their registered office or their principal establishment on the territory of one of the Member States of the European Union.
4. Disputes
The reservation or renewal of a domain name can be refused or a domain name cancelled:
– if it is contrary to public policy or to accepted principles of morality or to the rights guaranteed by the Constitution or by statute;
– if it infringes intellectual property rights or individual rights, unless the registrant establishes a legitimate interest and is acting in good faith;
– if it is identical or similar to a sign of the French Republic, a regional body or a national or local institution or service, unless the registrant establishes a legitimate interest and is acting in good faith.
This exception relating to a legitimate interest and good faith set out in the French Code on Postal Services and Electronic Communications does not correspond with the principle set out in the French Intellectual Property Code that acting in good faith does not exclude a finding of infringement.
The new law also provides for a dispute resolution procedure to be organised by the Registry. The rules governing such a procedure must be approved by the Minister in charge of Electronic Communications (new Article L.45-6 of the French Code on Postal Services and Electronic Communications).
Lastly, in a press release of 11 April 2011, the AFNIC, the current French top-level domain name registry announced the suspension of the alternative dispute resolution procedures, the PARL before WIPO’s Arbitration and Mediation Centre as from 15 April 2011 and the PREDEC as from 15 May 2011. However, the recommendation procedure before the Paris Arbitration and Mediation Centre, whose decision is not binding on parties, remains available. Accordingly, only court action, which is long and costly, will during a few weeks be the only binding procedure available to earlier right holders in relation to infringing domain names. Details on the new dispute resolution procedure, which should become available in the forthcoming weeks, are already much-awaited.
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