A token Approach – Web3 domains

Since 2021, we have seen the rise and rise of NFTs (non-fungible tokens). The NFT boom has been powered by the sale of NFT artwork, the first-ever tweet on Twitter and even popular memes, which have all fetched a pretty penny.

The hype following the minting and sale of some NFTs has also brought into question the rights of NFT owners versus the rights of brand owners and copyright holders, whose underlying intellectual property, it seems, may have been filched in the creative or frugal pursuits of others. Courts have been tasked with considering whether NFTs relating to a rap album, uncut movie scenes, images of branded bags and virtual and physical sneakers constitute an infringement of intellectual property rights, amongst other legal violations. In the legal fraternity it has even been said that these cases will determine the future of NFTs. Interestingly, these cases may well still be decided on the fundamental principles of trade mark and copyright infringement. Even so, in a bid to safeguard their interests and err on the side of caution, brand owners have sought to register their trade marks in relation to goods and services that ensure that they have coverage for or rights in relation to NFTs or, at least, virtual goods.

With the immense commercial interest in NFTs and the largely publicised litigation concerning these specific NFTs, in South Africa, at least, we have not yet turned our attention to NFT or blockchain domains, also called Web3 domains, which, for the moment, seem pale by comparison to the NFTs dominating headlines. This article is intended to highlight the significance of NFT domains for brand owners.

The internet that most persons know and use today, Web2, uses the Domain Name System (DNS). The DNS includes domain names (e.g. google.com) that ease our browsing of the internet. These domain names are governed by a central authority which regulates their registration, sale, use and transfer. Many brand owners have registered domain names in different domain name extensions (e.g. .com; .org; .love ; .shop) which contain their trade marks. Domain names take the place of IP addresses, consisting of a string of arbitrary, hard-to-remember numbers and are therefore valued for being user-friendly. Typically, they are available on a first-come-first served basis and they are one of a kind (e.g. coca-cola.co.za or adams.africa). Domain names are linked to websites and therefore secure brand identity and custom online. In light of their utility and value, prominent brands often fall victim to cybersquatting, which includes trafficking in domain names, closely resembling a brand, to benefit unfairly from that brand’s reputation and magnetism. However, with the regulation of the internet or Web2, mechanisms have been put in place to limit the degree of cybersquatting and assist brand owners in addressing bad faith domain names.

Web3 is an alternative or new version of the internet and is decentralised because it is based on blockchain technology, the same technology that underpins the much-publicised NFTs and cryptocurrency. With the innovation and rise of cryptocurrency, the domains market has and continues to evolve. It has become a space for crypto investment and not simply a means to create a virtual presence. The appeal of cryptocurrency is the ability to transact without the need for a bank. However, those transactions were complicated by the fact that the transaction had to be made to a crypto wallet, which like IP addresses, consist of a long line of arbitrary numbers or characters. Web3 domains take the place of those complex crypto wallets and are intended to break the barriers to transacting in cryptocurrency. In addition, these NFT domains or blockchain domains can resolve to a website and, since they will not be centralised or regulated by one controlling body, the owner of the domain will have complete autonomy over the content of that website. These domains are also susceptible to squatting or token-squatting. The private companies currently providing blockchain or NFT domain names use different technologies which affect, for instance, the cost of acquiring these domains and their accessibility on certain internet browsers. Examples of blockchain domain extensions currently offered include .crypto and .nft.

A Web3 domain name, unlike a Web2 domain name, may be fully owned and controlled by one user. The transfer of the Web3 domain name is subject only to the consent of that user and is without the involvement of any controlling body or domain name registrar, which can make addressing an infringing Web3 domain name challenging.

The inherent risks associated with these domain names is that, in addition to linking to a website that mimics the official website of a brand owner, it will be linked to a crypto wallet and possibly even decentralised blockchain applications, including social media applications. Web3 domains are therefore being heralded as universal virtual and physical identities.

Despite their innovation and convenience, it seems clear that these domains may well be used to take advantage of consumers and that risk is more apparent in a world where virtual goods are being prioritised, in some cases, over physical goods, and even paid for in cryptocurrency. With this in mind, brand owners should likewise consider the development and effect of Web3 and NFT domains on their businesses and virtual presence.

Insofar as enforcement goes, we continue to follow developments and landmark cases with a view to creating a playbook for dealing with Web3 infringements. Time will tell if we have an innings or whether Web3 is a passing phase with no real intercept with the world wide web or physical realm.

Petition made on constitutional grounds to the Kenyan High Court to protect image rights

In this matter[1] Rafiki Microfinance Bank Limited, the Respondent, used an image of Mutuku Matingi, the petitioner, on its pamphlets in the promotion of its credit or financing facility, “Get a boda”, for the purchase of motorcycles, also known as a “boda boda” in Kenya. The Petitioner was a boda boda driver and made a living transporting people and goods. The photograph or image of the Petitioner had been taken by a photographer at a branch of the Respondent.

The Petitioner averred that he had not consented to the Respondent’s use of his photo or image for the purpose of its advertisement or promotions and sought a declaration that the Respondent had violated his right to human dignity and privacy as envisaged in articles 28 and 31 of the Constitution.[2] The Petitioner also sought a declaration that the Respondent subjected him to slavery, servitude and forced labour in terms of article 30 of the Constitution as the advertisement was for the Respondent’s commercial gain with no financial advantage gained by the Petitioner.

In response, the Respondent alleged that the Petitioner had consented to his photograph being used for the Respondent’s promotion. The Respondent could not, however, produce any evidence to prove that it had obtained consent from the Petitioner to use his image.

The court held that the right to dignity includes the right-bearer’s entitlement to make choices and decisions that affect his life.[3] The court therefore held that the publishing of the Petitioner’s image, depicting him as a recipient of a credit facility, violated his right to dignity.

With respect to the issue of privacy, the Court held that the right to privacy encompasses the protection of personality rights, including one’s image or likeness, and includes the avoidance of the publication of private photographs. It further held that every individual has the exclusive right to market their image for financial gain, [4] and that the use or use of an individual’s image, without his consent, violates his right to privacy.[5]

On this basis, the Court upheld the petition and ruled that the Respondent had violated the Petitioner’s fundamental rights of privacy and dignity and ordered a permanent injunction against the Respondent to restrain its conduct and compel it to refrain from further use of the Petitioner’s image without consent. In addition, an award of damages and costs were made in favour of the Petitioner[6].

This case reinforces that personality rights fall within fundamental rights enshrined in the constitution and are entitled to protection on this basis.

Of course, this is but one basis on which image rights can be protected. Remedies may also be sought on other grounds including unlawful competition in certain circumstances.

[1] Republic of Kenya, in the High Court of Kenya at Machakis (Coram: Odunga, J) constitutional petition no.10 of 2020 in the matter of application under articles 22, 23, 165(3)(b) of the Constitution of Kenya and In the matter of : alleged contravention of fundamental rights and freedoms under articles 19, 22, 23, 25, 27(1), 28, 29(d) 30 &31 of the Constitution of Kenya and In the matter of: the Constitution of Kenya (Protection of rights and fundamental freedoms) practice and procedure rules, 2013 and In the matter of Constitution of Kenya rights enshrined in Chapter Four thereof in so far as the petitioner’s constitutional rights were infringed between Mutuku Ndambuki Matingi v Rafiki Microfinance Bank Limited.

[2] The Constitution of Kenya, 2010.

[3] Mayelane v Ngwenyama and Another (CCT 57/12) [2013] ZACC 14.

[4] Jessicar Clarise Wanjiru v Davinci Aesthetics & Reconstruction Centre & 2 Others [2017] eKLR .

[5] T O. S vs Maseno University & 3 others [2016] eKLR.

[6] Mutuku Ndambuki Matingi v Rafiki Microfinance Bank Limited supra at paragraphs 57 (a) to (d).

A Long Road, Less Travelled, to Protect the SEVEN SEAS Label Trade Mark

In what is believed to be the first case of its kind, the Ethiopian Supreme Court has issued a decision recognizing rights in an unregistered label trade mark in the context of opposition proceedings which culminated in an appeal to that court

The Appellant in this case was The Procter & Gamble Company, or P&G, which owns the registered trade mark SEVEN SEAS in Ethiopia. The SEVEN SEAS product is a supplement made from cod liver oil and it is distributed, sold and advertised in packaging (depicted below), consisting of a combination of colours, namely black, yellow and red and certain distinctive design elements. P&G acquired the SEVEN SEAS product and associated intellectual property rights from Merck KGaA (”Merck”) towards the end of 2018. First sales of the supplement in Ethiopia date back to 1996.

In 2018 it came to the attention of Merck KGaA, then owner of the SEVEN SEAS supplement and trade marks, that an entity called Clap Industries Pvt Limited (“Clap”), had been selling a supplement in Ethiopia under the mark HEALTH 1st with a label that mimicked the label of the SEVEN SEAS supplement. This label is also depicted below. At the time, the SEVEN SEAS product had not been sold in Ethiopia for a period of approximately two years and it seems that Clap had tried to take advantage of that interruption in sales. It was also discovered that Clap had applied to register its label trade mark in Ethiopia in class 5. As can be seen from the images, the labels had the ssame colour combination and very similar to identical design elements. With a view to protecting the reputation and goodwill acquired in the SEVEN SEAS label trade mark, Merck opposed the registration of the HEALTH 1st label trade mark.

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The opposition was based on largely untested grounds in Ethiopia. Because the word marks SEVEN SEAS and HEALTH 1st were different, the opposition relied heavily on unregistered rights acquired in the label of the product through use. The legislation in Ethiopia does recognise that well-known marks are deserving of protection, but Ethiopia is not a member of the Paris Convention for the Protection of Industrial Property which envisages protection for unregistered, well-known marks. Consequently, the opposition had to be based on prior use and the resultant residual reputation acquired in the SEVEN SEAS label trade mark. The Opposition was defended with Clap trying to make much of the fact that the SEVEN SEAS label trade mark had not been in use when its HEALTH 1st product entered the market. Among other things, Clap argued that there could be no reputation in the SEVEN SEAS label trade mark, due to its non-use over a period of time and that rights can only be asserted in registered trade marks.

The Directorate of the Ethiopian Intellectual Property Office (“the EIPO”) dismissed the opposition and an appeal to the Intellectual Property Tribunal of the EIPO was similarly dismissed. The Directorate was swayed by the argument that there could be no protection for a mark based on user rights, the use of which had been discontinued, despite Merck having provided cogent reasons for the temporary discontinuation and having confirmed that it had no intention to abandon the product or its right in and to the SEVEN SEAS label trade mark. In addition, the rulings issued by both the Directorate and Tribunal did not include any comparison between the parties’ marks, which is the point of departure in any trade mark dispute.

On appeal to the Federal Supreme Court, P&G  adduced evidence to show that, even during the period that importation of the SEVEN SEAS product had ceased temporarily in Ethiopia, the products remained in the market due to their lengthy lifespan and, consequently, the label remained in use. In early December 2021, the Supreme Court issued a unanimous decision reversing the decisions of the Directorate and Tribunal of the EIPO and the Federal High Court. It criticised the decisions for misconstruing the issues for determination and confirmed that the long-standing use of the SEVEN SEAS label mark had resulted in user rights in the mark that are entitled to protection, notwithstanding the lack of registration. The Supreme Court also found that the allegations of non-use of the mark were inconsequential in these proceedings, where the vulnerability of a mark due to non-use was not an issue for consideration.

The decision of the Supreme Court is still subject to further appeal to the Court of Cassation and this journey of the SEVEN SEAS label mark may continue. However, this decision of the Supreme Court is to be celebrated as IP matters have seldom come before this Court for deliberation and the decision has clarified that unregistered marks in which user rights have been acquired or exist are entitled to protection and capable of enforcement in Ethiopia. The decision also suggests that a residual reputation acquired through previous use may also be sufficient in the enforcement of trade mark rights.

The court did indicate that Clap would be entitled to registration of the HEALTH 1st (word) mark, having rightly considered that the marks SEVEN SEAS and HEALTH 1st, on their own, are distinguishable.

Notwithstanding this positive decision, some important take-aways from this case are to consider:

  1. registering trade marks both as word marks and in the logo/label format used in Ethiopia;
  2. conducting a due diligence prior to the acquisition of any business and trade marks for both the seller and buyer; and
  3. very carefully, the discontinuation of a product line, even if temporarily, especially if the product or jurisdiction(s) in question are important

We hope to assist you with any queries that you may have regarding the acquisition or enforcement of IP in Ethiopia and will, of course, keep readers updated if P&G set sail on another appeal.

Making a song and dance about Copyright in Choreography

Dance as a copyright-protected work came under the international spotlight over the last year in the USA.

Epic Games, Inc. creator of the hugely popular video game, Fortnite, has faced a slew of legal suits based on copyright infringement. In 2018, Epic Games released an update to Fortnite that allowed players to obtain new dance moves or, in gaming lingo, emotes. The avatars in the game perform a brief sequence of gestures, like fist pumps, and dance steps to, inter alia, celebrate victorious play.  These victory dances, which are plainly explained as a recreation of a dance (or part thereof) popularised or inspired by celebrity persona, have become the subject of the copyright disputes.

In the interim, the persons who have inspired these dances have been quick to make application to the US Copyright Office for registration of the dances that they claim to have created and popularised. A question that is fundamental to the success of the suits against Epic Games, therefore, is whether copyright can subsist in a dance or dance moves?

The Copyright legislation in the USA does envisage copyright protection for choreographic works. Choreography is defined as the composition and arrangement of a related series of dance movements and patterns organized into a coherent whole. It is also noted that choreography consisting of ordinary motor activities, social dances, common place movements or gestures may lack sufficient authorship to qualify for protection. In a circular issued by the US Copyright Office, social dance steps and simple routines have been side-stepped and specifically excluded from the definition of choreographic works. The note states that Registrable choreographic works are intended to be performed by skilled performers before an audience. Social dances are intended to be performed by members of the public for enjoyment. It is also specifically noted that routines not performed by humans are not entitled to copyright protection as a choreographic work.

The primary issues likely to come up for determination, therefore, include whether the dances in which copyright is being claimed are entitled to protection as choreographic work or fall under the exclusion of social dances. It will likely also be questionable whether the brief sequence of dance movements or emotes by the avatars constitute copying and therefore copyright infringement. Additional issues being danced around, but which have not yet been wholly exposed, include the originality of some of the dances in which copyright is being claimed. A quickstep down memory lane in pop culture has seemingly revealed that some dances may have originally gained popularity through performances by other persons. Could it be that some of these potential copyright claimants have simply followed (in) someone else’s footsteps?

At present, some of the cases against Epic Games have been temporarily halted due to a decision earlier this year by the US Supreme Court which seems to have changed the procedure in copyright lawsuits. Previously, litigants could file for copyright infringement as soon as they had applied for registration with the Copyright Office. Now, it seems that litigants are required to wait for the Copyright Office to act on the application before taking any steps.

The US Copyright Office could dance to a distinct tune in the case of all applications, as two applications have already been refused registration by the Copyright Office. Let’s just say the applicants are being kept on their toes.

In South Africa, the issues detailed above have not come under consideration by our Courts and there are obvious differences in our legal systems, including the fact that registration is not a requirement for copyright to subsist in a work eligible for protection in South Africa. Our legislation also does not include choreographic works as a separate category of works, although dance may fall under “performance”, which is a category of copyright works. Despite these differences, the decisions in the Fortnite cases, should any proceed, could be ground-breaking and may well influence future disputes in South Africa. Indeed, our Copyright law is on the brink of major change and, while we will not dance to anyone else’s tune, it is expected that we will draw perspective from foreign jurisdictions when interpreting our new Copyright Act or dealing with innovative infringements.