Sonal Agarwal Discusses IP Ramifications Around NFTs

09 February 2022 Wisconsin Lawyer News

Foley Senior Counsel Sonal Agarwal was quoted in a Wisconsin Lawyer article, “What’s Hot, What’s Not: Wisconsin Practice Trends 2022,” on the implications of intellectual property laws as they relate to nonfungible tokens (NFTs).

The article notes a growing trend of investments being made in NFTs, prompting a need for buyers to be aware of potential legal pitfalls.

First, buyers of an NFT should understand that while they own the NFT, they do not have ownership rights to the underlying physical or digital assets – artwork, photos, drawings, songs, etc. – that the NFT is associated with.

“Second, as part of the smart contract or other sale terms, the NFT seller may license certain intellectual property rights in the underlying asset to allow the buyer to use the NFT in certain ways. Therefore, buyers should carefully consider an NFT’s terms before buying one,” noted Agarwal.

Agarwal also indicated that inventors seeking to file patent applications for NFTs or NFT-related inventions should be aware of challenges they may face in the U.S. Patent and Trademark Office. These challenges include establishing that the invention is “directed to patentable subject matter.” That is, the invention should not be directed to a judicial exception such as an abstract idea.

“Subject matter eligibility is generally a bigger concern in software-related inventions,” Agarwal said.