NFT Domain Names: How to Protect Trade Mark Rights Against Usurpation │ France

The letters at the tail end of a web address are known as a “domain extension”, but examples such as .x, .crypto, .wallet, .bitcoin, or .blockchain may look unfamiliar to some internet users. This is because they are neither generic top-level domains (gTLDs) – for example, .com or .org – nor country code top-level domains (ccTLDs) such as co.uk or .fr; rather, they are NFT domain names.

Without doubt, NFTs are the latest trend in technology to get everyone talking. For the uninitiated, non-fungible tokens (NFTs) are blockchain-based cryptographic assets that can be distinguished from each other by unique identification codes and metadata. Whether used as part of the Metaverse, for artistic purposes, or as domain names, NFTs have found themselves at the centre of attention.

To date, two leading entities have developed the following notable NFT domain name extensions:

Unlike traditional domain names such as ccTLDs or gTLDs, NFT domain names are not regulated by the Internet Corporation for Assigned Names and Numbers (ICANN). Indeed, CcTLDs and gTLDs are approved by ICANN and abide by ICANN policies and rules. Specifically, ICANN set out the Uniform Domain-Name Dispute Resolution Policy (UDRP), which is implemented by – among other providers – the World Intellectual Property Organization (WIPO) and protects brand-owners against cybersquatting registrations in a fast and cost-effective way.

NFT domain names do not follow the same rules, however. There are no official authorities that regulate them. Therefore, as these domain extensions are not centralised, they can be created by anyone and no specific procedure exists to safeguard legitimate IP rights in this context.

Given that no specific rules apply and NFT domains are not bound by any mandatory procedures, the protection of IP rights is absolutely not guaranteed and there is no system in place to prevent cybersquatting. “Cybersquatting” broadly refers to the deliberate, bad-faith registration of a domain name in violation of trade mark rights.

Should a litigious NFT domain name be registered and even used by a third party in an infringing way, the owner of prior IP rights will unfortunately not have the opportunity to pursue ADR. As such, prior IP rights-holders may have to negotiate directly with the infringer – leading to uncertain results.

Traditional court proceedings may also not be an option if the NFT domain name registrant is anonymous. Indeed, identifying the domain name owner is one of the first difficulties faced by the prior rights owner. There may be no accessible information concerning the NFT domain name registrant.

Reaching out to an unidentified registrant to make an offer may therefore not result in the desired outcome – let alone the chance to sue before any competent court. Further investigations are recommended to help decide upon the most appropriate course of action.

Another inherent issue is the price. As is often the case with traditional domain names, cybersquatters can register NFT domain names purely to resell them at a higher price. In July 2022, for example, the domain name 000.eth has was sold for the exorbitant price of 300 ETH – the equivalent of USD317,000.

The most effective way to protect prior IP rights is to make preventive registrations. Indeed, various companies have registered NFT domain names in order to prevent others from doing so – even though they are not using the extensions themselves yet.

Companies are also monitoring new registrations in order to take proactive measures. Alternatively, many have put backorders in place, thereby enabling the companies to register any new NFT domain names that could come back into the public domain.

The arrival of these decentralised NFT domain names has escalated the risk of cybersquatting, thereby opening the door to potential abuses of trade mark and IP rights. Such abuses are expected to increase in the coming years, unfortunately – along with the subsequent need to implement more effective repressive measures so as to protect legitimate rights owners.

In the meantime, legitimate IP rights owners are well advised to register their brand names as NFT domain names as soon as possible and thus deprive others of the chance to claim them first. Prevention is always preferable to harsh and unpredictable dispute.