Seemingly, out of nowhere, interest in digital assets like non-fungible tokens (NFTs) has surged in recent years and sales have exceeded a whopping USD 2.5 billion in the first quarter of 2021. With nearly twice as many buyers as sellers, sports memorabilia companies, musicians, artists, and publishers have harnessed NFTs to monetize their works and exploit their intellectual property rights.

What are NFTs and where do they come from?

A non-fungible token, or an NFT for short, is a digital asset that has its authenticity certified on a blockchain ledger. Even though digital copies of these items are available for anyone to download, NFTs are tracked on blockchains. The NFT ledger provides the owner of the NFT with a proof of ownership that is separate from copyright. To put it in terms of physical art collecting: anyone can buy a copy of the Portrait of Paul Eluard, but only one person can own the original.

Despite the fact that NFTs may function like crypto tokens, NFTs are not mutually interchangeable. This means that unlike cryptocurrencies, such as Bitcoin or Dogecoin, NFTs are not fungible because they are distinctive and cannot be exchanged for other NFTs. Moreover, each NFT is a unique digital asset that can be extremely valuable and highly sought-after by potential collectors.

An NFT can be created on one of any number of blockchains, with Ethereum being the most popular. By way of background, Ethereum was the first blockchain to support NFTs with its ERC-721 standard. Other blockchains have added or plan to add support for NFTs with their growing popularity.

Once a blockchain and platform are selected, NFTs can be minted on that blockchain. Depending on the platform, creating an NFT can include uploading an image, video, or music file, and adding a name and description.

What about IP?

With that in mind, and considering the non-fungible nature of NFTs, a new distribution model for the monetization of intellectual property rights arises. It is worth noting that ownership of an NFT is often associated with a license to use the underlying digital asset, but generally does not confer any associated intellectual property rights to the buyer.

Protecting NFTs and other digital assets in the Middle East and North Africa region requires proper due diligence and local familiarity with the relevant laws. While it is possible to protect NFTs in theory, the practice may vary from one jurisdiction to another.

The below table offers a brief overview of what you need to know before filing a trademark application to protect your digital assets in the MENA region.

Countries What You Need to Know
Lebanon, Oman, Qatar, United Arab Emirates, and Yemen In order to ensure proper protection of intangible assets, applicants may file applications to cover digital goods and services (namely classes 09, 35, 41, 42 and other possible classes depending on the type of digital assets being protected)
Bahrain, Jordan, and Morocco Applicants may attempt to file new applications to cover digital goods and services but there is a risk that such applications might face possible office actions. In case of an office action, the applicant or their legal representative can amend the registration to cover class heading
Kuwait, and Saudi Arabia, and Syria Detailed descriptions cannot be filed at this stage, but applicants have the option to file their marks in class 09 and other classes covering relevant services. Filing class headings for such classes is a suggested alternative to seek protection

As NFTs continue going viral, they present both opportunities and potential risks for brand owners, who will undoubtably be asking questions along the line of how to navigate this burgeoning and intangible world. As aforementioned in the discussion above, brand owners have the option to list NFTs in the scope of the goods/services in certain jurisdictions in order to mitigate any uncertainties and ensure that the protection afforded by registering a trademark is sufficient for their digital assets. With that said, the countries and jurisdictions in the MENA have yet to issue any jurisprudence on digital assets, which necessitates the need to form a proper strategy in order to enforce and protect intellectual property rights in the virtual realm.