Best Practices and Brand Exclusives: NFTs and Community Building in the Metaverse | Pillsbury – Internet & Social Media Law Blog

We’ve written extensively on the still somewhat recent arrival of non-fungible tokens (NFTs) as both a potential revenue stream, caveat-filled investment destination and pop culture marker of the moment. Back in 2018, we wrote about the Los Angeles Dodgers giving away digital bobbleheads to fans, who could redeem a private hidden key to send the bobblehead to a personal cryptocurrency wallet or sell the unique serialized bobblehead to another fan. Later, we wrote about NFTs in the art world, from a burned Banksy to the record-setting sale of Beeple’s Everydays – The First 5000 Days, which sold for $ 69.3 million (including fees). Increasingly, the practical uses of NFTs are being examined in places beyond entertainment and IP portfolios, including the real estate market. Recently, Spanish airline Air Europa even sold the first NFT plane ticket, called a “NFTicket,” for just over $ 1 million.

NFTs can also be viewed as a point of entry for individuals and brands trying to understand where they fit, if at all, in the Metaverse. An NFT can be a video, GIF, avatar, piece of art, real estate, tweet or designer shoe.

But while the multimillion-dollar deals get all the attention (and, often, much deserved scrutiny), many are sold for much less money, making the medium of the day an appealing destination for brands seeking new ways to build relationships with consumers and grow new markets.

Here are some ways brands are diving in:

Exclusive Experiences

    • Earlier this year, Coachella sold lifetime passes to the music festival through its new NFT marketplace. The limited Coachella Keys Collection NFTs included passes to Coachella every year, special perks at the festival, digital collectibles, and lifetime access to virtual experiences.
    • One lucky NFT collector may be going to space in a suborbital rocket. Uplift Aerospace, a space industry pioneer, released its Launch Pass NFT collection, which includes 10,921 NFT artworks, each of which provides the NFT owner with the opportunity to apply for a trip to space aboard a Blue Origin rocket. Once the company selects an amateur astronaut, all NFT owners will be able to convert their token into a Starborn NFT, which will include an avatar in the company’s space metaverse and access to real-life experiences such as rocket launch events.

Exclusive Memberships

    • Adidas Originals launched an exclusive series of NFTs with limited offering called Into the Metaverse, although some may be available through the secondary market on OpenSea. Owning an Into the Metaverse NFT provides exclusive access to merchandise and virtual land experiences.
    • Luxury car maker and famed Formula One team McLaren launched McLaren Special Operations (MSO) LAB, a new division of the company dedicated to digital. To start, McLaren dropped “a pioneering collection of rare supercar NFTs” consisting of 2,012 NFTs that also unlock access to the MSO LAB community. This first collection, however, is invite-only, meaning only those who own a physical McLaren car or are specially invited will be granted access to these NFTs.

Community Building

    • Starbucks is creating a global digital community to cultivate connections, relationships, and collaboration. They plan to start by launching a series of branded NFT collections that will allow NFT owners access to exclusive experiences and perks.
    • For its twentieth season, American Idol launched NFT Card Packs, which provided the fan community with special digital assets and opportunities to earn crypto currency and possibly win an exclusive golden ticket that can be redeemed for a real-life trip to Hollywood.

Best Practices for Brands
There is a theme here. For many, exclusivity and unique opportunities are what make NFTs valuable. That unique, one-of-a-kind piece of code is exciting — and strange — for many people and companies.

Know Your Audience: The Metaverse is vast, varied and still largely defined by fragments of community. People from all over the world are creating, buying and selling NFTs every day. Some are young; some are old. Some know a lot about the technology, and some know very little. Finding spaces where the intended audience and conceived product align is no less crucial in the virtual world than the real.

Join In: One strategy for understanding the space better is to be in the space. Branded NFTs can also be a proactive way to establish a place in the Metaverse and guide consumers to authentic digital assets, rather than knockoffs or other infringing assets.

Know the Limits (of IP Rights): Content creators and NFT buyers may not know, or understand, the rights and limits of IP and how those can impact an NFT transaction. For example, as we’ve previously discussed, ownership of a physical object and ownership of a copyright are separate and distinct. When a person buys an NFT artwork, that likely does not convey the copyright in the underlying artwork such that the NFT purchaser can then print and sell that artwork on a t-shirt. The terms of an NFT transaction, including IP rights and limits, should be clearly communicated in the smart contract or traditional contract governing the transaction. Likewise, there are limits on smart contracts and so, in most cases, the governing terms of an NFT transaction should still be captured in a traditional contract.

No matter a company’s approach to NFTs, branding and the Metaverse — be it dipping a toe, wading on or diving headfirst — it’s important to remember that wherever there is intellectual property, there is the danger of IP infringement. Ensuring all copyright and trademark registrations are up to date is a must, as is an evaluation of trademark registration classes. A mark, for example, may be registered for clothing, such as shirts, pants and shoes, but that does not necessarily include virtual clothing worn by an avatar or collectible NFT shoes. In other words, a brand’s existing trademarks may not cover the Metaverse. To take action, some brands are re-evaluating their trademark portfolios and now registering marks in additional categories to expand protection in the world of digital assets and experiences.

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