Several major companies like Lowe’s, Lego, UnderArmour, Acura, and Tommy Hilfiger & DKNY, have been turning to the metaverse to grow their current businesses by creating and using NFTs to expand their offering of products and services to their customers, old and new. The media and several data sources seem to indicate there are signs of a consumer slowdown or looming recession following the COVID-19 pandemic and perhaps even the current state of affairs in the U.S. and around the world. When expanding or launching any new product or service, there are certain legal considerations every business owner should keep in mind.
If you are a business owner and have been thinking about growing your business in the metaverse or using NFT’s, or have already started doing so, here are just a few critical things to consider or add to your business “to do” list:
- The metaverse is not above the law and neither are NFTs. Businesspeople and lawyers like myself will often say things like “technology moves much more quickly than the law”, or “the law always has to catch up to emerging or new technologies or technical advancements”. While there may be some truth to these statements, certain loopholes that currently exist in the law will surely be closed or become regulated by a governmental entity somewhere in the world EVENTUALLY. As a result, we must all observe not only any current laws, but any updated or additional laws that concern the digital world in its current and evolving state. The metaverse and NFTs are NOT an exception to established federal laws, such as copyright or trademark law, or state-level contract law or common law protections that pertain to an individual’s name and likeness or right of publicity. If you are considering launching your own line of NFTs or creating a presence in the metaverse to expand your business, take some time to consult with your attorney and learn what you need to do to protect your brand in the metaverse, while simultaneously respecting the legal rights of other entities and individuals.
- Use a contract to hire graphic designers and other freelancers. Don’t make the mistake of thinking a freelancer’s invoice for services is legally the same thing as a signed contract between you and that freelancer. It is NOT the same thing AT ALL, legally or otherwise. Invoices and contracts are 2 different documents with 2 different purposes. An invoice, unlike a signed contract, is not legally binding on anyone and cannot force anyone to do anything. Unless you are currently employing a part- or full-time graphic designer or other technical team member who will be helping you create and launch your new NFTs in the metaverse, I strongly recommend using a professional services agreement or independent contractor agreement to hire any creative or technical freelancers. Ask your attorney to draft one of these for you; sometimes, for an additional fee, you can even ask the attorney to create a custom template that you can re-use for a limited time for other freelancers you want to hire. If you decide to do this, I recommend hiring your attorney once a year to simply look over the contract and make any necessary updates to any provisions, services, compensation, or company information. Hiring your lawyer to draft a services contract for any freelancers you hire will ensure that your company’s intellectual property rights are protected to the fullest extent of any local or federal laws, and ensures all rights to any content being made by any freelancers remain with you and your company and NOT with the freelancer. If you are currently employing a graphic designer or any technical staff, this is generally understood to be the case: any content created by the employee during the course of their employment remains property of the employer unless you and your employee agree otherwise IN WRITING.
- Make a list of your NFT’s notable characteristics in preparation for federal registration. Several companies like the ones I mentioned above are actively registering their NFTs and other digital products and services for U.S. copyright and trademark protection. Why? Because early registration ensures their proprietary brands and content will be given the highest level of protection available, as early as possible. Early registration also helps deter competitors from illegally copying or misusing a brand’s unique advertising and promotional content and brand identifiers. Infringers, or copycats, illegally use registered content or brand identifiers to promote or sell their knockoff versions of a signature product or service all the time. This content can consist of photos, videos, sonic or music jingles, logos, slogans, and other brand identifiers that are designed to indicate the source of a particular brand of products or services. Early registration also gives companies the legal grounds to sue any infringers who copy or misuse their content or brand identifiers in the metaverse, or anywhere, really, depending on the registration. By making a list of your NFT’s notable characteristics ahead of time, you and your attorney can save valuable time and money by working together to determine how your customers are finding and identifying your products or services and filing the appropriate legal applications before you launch your new NFTs in the metaverse. And wouldn’t it be nice to be able to use the ™, ℠, ®, ℗, and © symbols as soon as you launch your new NFTs, just like the major brands do? I think so!
- Do not launch any NFTs anywhere until you have certain legal protections in place. Don’t give in to the FOMO on the NFT boom. I personally don’t see NFTs or the metaverse going anywhere soon and my guess is they are both here to stay for the long haul. It is NEVER a good idea to skip or postpone legal housekeeping in order to “get ahead of the curve”, whether we are discussing NFTs or any other content pertaining to your business It is never a good idea to launch your new NFT or any content without any legal protection in the pipeline. If you have already thought about creating or using NFTs to expand your business into the metaverse, or have considered hiring someone to do this for you, then it is time to talk to your attorney about it.
- Add “Content Registration” to your business plan or budget as a line item. Every business owner has, or should have, an operating budget. Very often, entrepreneurs will budget for obvious business expenses, like staff hires, purchasing equipment, or leasing space, but very rarely do they budget for legal expenses connected to their promotional or commercial activities in the real world, much less the metaverse. Adding a line to your business’s budget for necessary legal expenses connected to these activities can help you plan ahead for necessary legal expenses connected to filing critical trademark and copyright registration applications and attorneys’ fees. Planning ahead for these costs is necessary and important for any business to thrive and grow. The last thing any business owner wants is to get stuck with excuses for why you didn’t register your content, especially when you are already in a situation where someone has stolen your content or is using it on the internet and social media to sell knockoffs of your product or service. Legally speaking, being on the offensive is much cheaper in the long run than being on the defensive, so plan ahead, budget for legal expenses, and register early!
Postponing critical legal steps in connection with NFTs or expanding your brand into the metaverse will only set you on a painful path of uncertainty, chasing copycats, initiating disputes, diluted branding, and potential lawsuits. Applying for brand registration and drafting contractual agreements with any third parties working for you early in the process can save you lots of pain, time, and money in the long run. An easy way to avoid most of these pitfalls is to keep your attorney in the loop of your NFT plans and let us be part of your plan and process for your grand debut into the metaverse. Think of your attorney as your brand’s “bodyguard”. It is your job to grow your business and our job to protect your interests as you grow it. Excuses don’t win lawsuits or resolve disputes, but a valid, federal copyright or trademark registration, or a series of the same, can be a powerful step toward a quick resolution of a dispute or legal judgment in your favor. Take the steps to protect your company’s content and brand identifiers so your legal investment can protect you in return!