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Currently, brand owners are at a crossroads – should they dip their toes into new web3 media and opportunities, or should they guard against potential pitfalls in this new space?
While there is no one-size-fits-all answer for brand owners to the new web3 frontier, there are steps businesses can take to minimize the risk of new technologies like non-fungible tokens, interactive “metaverses” and augmented reality.
Here are five steps a brand owner can take to better minimize the risk of licensing their trademarks for use in web3 efforts.
1. Register early and often and know your rights
To established brand owners, it probably comes as no surprise that if a company intends to use a source identifier in the long term, it is often beneficial to seek registration of the trademark with the United States Patent & Trademark Office (as well as any other relevant agencies ). Having a registered trademark associated with any source identifiers involved in a web3 license agreement reduces ambiguity among the parties and prevents other parties from attempting to claim or improperly register the trademarks as their own later on. Simply put, obtaining a trademark registration can save a brand owner a lot of time and energy if a dispute over ownership rights arises later.
In a license agreement, having a registered trademark also makes it clear to all parties exactly which trademarks are involved in the transaction and which trademarks are approved for licensed use. When all parties are aware of which trademarks are involved, it also makes the scope of an agreement clearer.
If, for example, a brand owner only has a trademark registered in the United States, it may not be possible or permissible for the brand owner to allow use of the same source ID in China without registrations in that territory. Likewise, identifying specific trademark registrations can also be beneficial to the brand owner if it only wants to pass on trademark licensing rights in certain geographic areas.
Once a brand owner has identified the applicable trademark registrations it would like to license and the geographic area to which the license applies, another consideration should be whether the license is exclusive or non-exclusive. Given the constant evolution of web3 technology, business owners may want to minimize risk and increase potential opportunities by not limiting themselves to exclusive licenses in the new space.
2. It’s not you, it’s me – Include indemnification provisions
Although it is typical to include indemnification provisions in a license agreement, a brand owner should be aware of provisions it can include to limit its exposure to risks associated with new web3 technology.
For example, if a brand owner licenses its trademarks to a software company that plans to use the brand’s logo to create a store in an online world, the brand owner may want to include provisions in the license that would require the software company to indemnify it in the event that the software company’s technology infringes the intellectual property rights of others, involves false advertising, or causes personal injury, among other scenarios.
3. Keep it simple, stupid—avoid legalese
Many early adopters of web3 technology may not be familiar with legal terms, so to minimize risk and disputed terms, make any public terms or disclosures involved in the license agreement as simple as possible. Not only will clear terms reduce risk, but they are more likely to appeal to web3 markets and users.
4. Notify stakeholders – state the terms clearly
To minimize the risk associated with licensing trademarks in the web3 space, the brand owner should confirm that all users of the web3 technology are aware of any license terms that may be implied in the technology.
For example, a notice indicating the brand owner’s intellectual property rights should be included in an NFT listing and may be included in all pop-up notices and in all terms and conditions of stand-alone websites associated with the web3 experience.
5. Have a backup plan – Include jurisdiction provisions
In the event that a licensed trademark is not used in accordance with the brand owner’s specifications, the brand owner should try to preemptively include license terms that can assist in enforcement efforts in the event that trademark infringement or a breach of the license agreement occurs.
If the brand owner e.g. is located in New York City, it may include a provision in its license and/or web3 terms and conditions stating that users of its trademarks or technology consent to and accept jurisdiction in New York, NY . Jurisdictional provisions are particularly important in the web3 space, where users of the technology can be found worldwide and can operate anonymously, making it difficult for trademark owners to bring enforcement actions.
The content of this article is intended to provide a general guide to the topic. Specialist advice should be sought regarding your specific circumstances.
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