Trademarks Archives - The Fashion Law

Luxury Companies Continue to Pare Back in Enduring Blanding Trend

September 22, 2022 - By TFL

In an Instagram post from Salvatore Ferragamo on Wednesday, the Italian leather goods and fashion brand announced that “Salvatore Ferragamo [has] become FERRAGAMO.” The revelation – which also included a subtly-stylized new word mark and a custom red-ish Pantone hue – comes on the heels of the appointment of 27-year-old Maximilian Davis in March to the helm of the Florence, Italy-headquartered brand and just ahead of his runway debut during Milan Fashion Week on Saturday. In addition to reflecting a number of recurring trends in branding (from the rising adoption of color marks and moves by companies to simplify their brand names), Ferragamo axing Salvatore and the cursive stylization of its previous mark and opting, instead, for a more pared back font, is a nod to the “blanding” trend that has found a home in the fashion/luxury goods space over the past several years.

The newly-introduced Ferragamo word mark and the 95-year-old company’s decision to bring the red hue (which has roots in the company’s branding to date) to the fore falls neatly in line with enduring trends in the realm of branding. Other companies are placing emphasis on signature shades to complement more traditional forms of source-indication, such as word marks and logos. Bottega Veneta’s green, Valentino’s PP Pink, and Tom Brady’s “Brady Blue” come to mind as recent examples. In addition to adopting color branding, Ferragamo’s decision to move away from its previous signature-style mark is not without precedent either, and is immediately demonstrative of the “blanding” movement.

Still yet, Salvatore Ferragamo leaning into a shortened moniker is not uncharted territory, as it follows from similar steps taken by the likes of Ermenegildo Zegna, Hugo Boss, and Yves Saint Laurent. Fellow Italian fashion brand Ermenegildo Zegna became Zegna (and debuted a new logo) in December 2021. Shortly thereafter, Hugo Boss announced that it would split its formerly unified brand and create two distinct brands – HUGO and BOSS. And best known, of course, was a move by Yves Saint Laurent – under the watch of former creative chief Hedi Slimane – to famously drop the “Yves” for the ready-to-wear collection brand. (It is worth noting that this trend is not limited to fashion, and companies like The Boca Raton (formerly The Boca Raton Resort & Club) have simplified their names, as well.)

It is clear that companies across the board are opting to operate under more simplified branding, with a notable number of big-name bands following a very similar formula in recent years. The question is: Why? There are an array of reasons driving this branding stint but at least a couple stand out. Primarily, there is the enduring need for companies to create buzz around themselves – whether that buzz be for general brand-promotion purposes or to indicate new endeavors. This is very-easily achieved by way of changes to their branding)

In connection with its recent rebrand, Hugo Boss, for instance, is angling to regain relevance and in turn, boost sales. While the German fashion brand has “maintained its brand awareness” in recent years, CEO Daniel Grieder said earlier this year that it has “lost its relevance in the fashion industry,” prompting management to go back to the drawing board and “reframe” the valuable brand. Against that background, the bifurcated BOSS brand is aimed at catering to millennial consumers (think: ages 25 to 40), whereas HUGO is looking to find its footing among Gen-Z (i.e., those under age 25).

Zegna similarly revamped its branding not too long ago as an indication of what is to come, namely, a planned initial public offering this year by way of a SPAC and a larger plan to engage in global expansion.

Other companies have opted to rebrand – or better yet, de-brand (complete with wiped-clean social media accounts) – to signal the start of a new creative direction. The Saint Laurent rebrand, for instance, coincided closely with the start of Hedi Slimane’s tenure, and the same is true for Ferragamo, which onboarded both Davis and CEO Marco Gobbetti over the past year, and is in the midst of a larger effort to attract millennial and Gen-Z consumers to the brand that has become a relatively dusty over the years.

Practically speaking, companies appear to have become much more willing to play with their valuable branding than they have been in the past. As a result, alterations to companies’ branding that follow from changes in creative directors – or that foreshadow other changes for a company – have become thoroughly commonplace, a sure-fire way to elicit clicks (and potentially, cash) from consumers. “Wrongly, or rightly, this has almost become the de-fecto way a traditional luxury brand communicates that they are having a bit of a rebirth and is still relevant and that it wants consumers to look at its offering with a bit more of a modern lens,” King & Partners founder and CEO Tony King told TFL. “It is almost a battle cry for luxury brands to signal to the world, ‘Hey kids, look at us! We still got it!’”

Beyond the need to create recurring buzz in a crowded and largely-image-driven luxury market, branding changes are a way for companies to adapt to a growing number of markets and mediums, which have increased even further since the initial wave of blanding thanks to the rise of web3 and the metaverse. In addition to seeking “maximum impact” across the mediums where they simultaneously communicate – from smartphones to billboards, Base Design’s Partner and Executive Creative Director Thierry Brunfaut says that “most of these brands are global brands, and they believe that they need to get to the lowest visual and textual common denominator to reach a global audience.”

The line of thinking here, per Brunfaut, is that “the shorter and bolder your name is” the more widely fitting it is and “the better the impact.” And ultimately, replacing stylized branding “with something bolder, simpler” enables brands to “pass the ‘Will this be highly recognizable on a hoodie?’ test,” King asserts. (He notes that the simplification of a brand name also sets companies like Ferragamo up neatly to use the dropped portion of a name for a diffusion or separate line.)

Such de-branding – which is seeing brands “extract all the nuances and considered details of a brand that carefully evolved over decades,” King says, may prove to be an effective way to achieve appeal across markets and mediums, but it is not without potential drawbacks. One of the risks here, Brunfaut contends, is that such de-branding “could empty the brand of its story, heritage, and unique feel,” while at the same time, giving rise to “the danger that all these fashion mega brands today look the same,” thereby, giving consumers the impression that “luxury has become a commodity.” This might not bode well from a positioning and/or pricing point of view, which is the name of the game in the luxury segment.

Finally, from another perspective, what is going on here makes sense. In reality, most of the fashion brands that are engaging in de-branding exercises have come a long way from their origins, with their founders either dead or otherwise not involved with the company, and this fact is being reflected in the removal of “original human/family heritage” elements, Brunfaut says. The message here is “clear,” he claims, these new branding efforts represent a shift “from a person to a corporation.”

As for whether this overarching blanding (or de-branding) will stick – and/or whether it is what companies in the business of manufacturing the image of exclusivity, craftsmanship, and … luxury will want – long-term is not immediately clear. However, Brunfaut, for one, suggests that this may not be the end of the luxury brand as we once knew it.

It is “all about cycles” when it comes to branding. “We could be surprised by the coming of a new trend that gets back to more human-centric branding,” he says. “I think we all crave that.”

Fashion Brands and Marketing

Blanding: What Is It, How Did We Get Here & What Does it Mean Going Forward?

September 21, 2022 - By TFL

“The new logo has a heavier, bold look with a geometric sans-serif treatment.” This is what Bloomberg’s Rob Walker wrote about the newly redesigned Burberry logo. He could, however, actually be discussing any number of recently (and relatively recently) revamped logos – from Balenciaga and Berluti to Saint Laurent and Rimowa. As part of a larger trend in branding, or better yet, blanding, a growing number of high fashion and luxury brands – and other consumer goods and tech companies, as well – are looking to spartan logos, which are “designed not to stand out at all, but to blend in.”

Logos meant to blend in? That is an interesting notion if you consider the practical purpose of branding in the first place. Trademarks – i.e., brand names, logos, and even colors in some cases – have traditionally been used and have derived their value from their ability to enable consumers to easily identify the source of a product and distinguish that product from those of other companies. Given the increasing number of brands contributing to the mass-simplification of logos, it is worth wondering what, exactly, this means, legally speaking, how we got here, and what the broader cultural implications might be.

Trademark Considerations

From a legal perspective, one of the key concerns when it comes to rebranding is the potential loss of trademark rights in a prior logo or specified stylization of a word mark. After all, trademark rights are amassed and maintained in many jurisdictions, including the U.S., as a result of actual – and consistent – use of a mark. As such, discontinued use of a stylized brand name or logo could give rise to complications even when a brand maintains registrations for such marks.

A chart of logos before and after their blanding makeover

This issue is “particularly relevant if that previously-held logo was used for an extended duration, and was recognized and beloved by consumers,” as Sterne Kessler’s Ivy Estoesta and Monica Talley have noted. “At issue in such a scenario will be the need to establish trademark rights and consumer recognition from scratch in a new logo, which will take time and resources, and will also require ensuring that the new logo does not infringe any other parties’ already-existing marks.”

As such, “Companies that wish to refresh their branding but benefit from the goodwill surrounding a prior mark should consider modifications that update – but do not completely change – the commercial impression of the brand.” In such a scenario, “a brand owner may be able to rely on the doctrine of ‘tacking’ in a later procurement or infringement matter, which allows a trademark user to ‘clothe a new mark with the priority position of an older mark.'” While this “sounds simple in theory,” Estoesta and Talley caution brands, noting that the application of the doctrine “is more challenging because the determination of legal equivalency depends on whether the two marks ‘create the same, continuing commercial impression such that the consumer would consider them both the same mark,’ as the Federal Circuit stated in In re Dial-A-Mattress Operating Corp.“

At the same time, it could be argued that brands actually stand to increase the strength of – and the scope of protection for – their marks by adopting this less-is-more approach. As London-based intellectual property lawyer Birgit Clark told TFL, a brand “should always try to register a plain word trademark.” That way, she says, the distinctiveness of the mark “will rest on the word(s) rather than any stylization of those words.”

With that in mind, brands will be able to “go after similar or identical trademarks in any kind of stylization or in combination with a logo,” for example, as opposed to merely being able to claim infringement if the name and any decorative elements are similar. In short: the more distinctive a trademark, itself, is, the wider its scope of protection will be. From this standpoint, the new trend of bland logos bodes well for brands.

“Just Good Business”

Speaking more broadly, there is something to be said about the simplification of logos, a move that has largely been attributed to the desire of brands to use the same logo more seamlessly across multiple format – i.e., on Instagram, billboards, and shopping bags, etc., alike. In this way, creative director Thierry Brunfaut wrote for Fast Co., the adoption of bare bones branding “is just good business.”

The widespread adoption of newly sans-serif-centric logos is also likely due (at least in part) to the reliance of the same handful of individuals’ or companies and their aesthetics. Famed graphic designer Peter Saville, for instance, created both Calvin Klein and Burberry’s new logos and related branding. German creative firm Bureau Borsche was responsible for Balenciaga and Rimowa’s rebrands, as well as recent bland-centric revamps for menswear site Highsnobiety and Nike. The list of commonalities goes on, just as it does elsewhere in fashion.

Beyond that, the uniformity in design is part of the larger approach to modern fashion, which is becoming more formulaic, corporate, and spread sheet-driven. Because a sizable number of fashion brands are owned by publicly-listed parent companies, the stakes, from a bottom line perspective are higher, and as a result, they tend to be increasingly risk averse. Thus, much of what they produce – from garments to branding – is the product of trend forecasting and careful metrics.

As for the trend, itself, it speaks to the larger state of things in consumer goods sales, as well. After all, consumers – particularly high fashion ones – are not necessarily shopping in the same way as they used to. The rise in omni-channel operations calls for is a “tremendous design challenge,” per Brunfaut, and as such, brands have opted for the straightforward, easily-transferrable and super-scalable logo.

More than that, an ever-growing percentage of luxury goods sales, for instance, are occurring online, where labeling tends to be clearer than it is in multi-brand stores, and this has had a practical impact on the need for – and the utilization of – logos. Look no further than the Saint Laurent Sac De Jour bags being offered up by Net-a-Porter. They have the simplified (under the direction of Hedi Slimane) Saint Laurent logo on them. The bags are also being sold under a bold Saint Laurent brand identification tag on the website.

This is demonstrative of the fact that the practical need for a super easily-identifiable logo on a bag, itself, is in the digital era is arguably less intense than when consumers were shopping in brick-and-mortar department stores. Whether that means brands should continue to opt for logos that look very much alike, all more-or-less blend together, and potentially, fail to distinguish one brand’s products from another’s (even if that is less likely than in generations prior), that seems like a negative.

This article was initially published on December 19, 2018.

Business

Kanye West Alludes to Potential Issues Over Restrictions in Gap, adidas Agreements

September 19, 2022 - By TFL

Kanye West’s desire to branch out on his own and operate his Yeezy brand separately from existing partners adidas and Gap may not prove to be an entirely seamless transition. On the heels of revealing plans to terminate his Yeezy Gap venture (which was slated to expire in 2030) and counsel for West confirming that the rapper-slash-design-figure will open independently-operated Yeezy retail outposts, Kanye shared one page of a recent draft summarizing some of the terms of the deals he entered into with Gap and adidas in an Instagram post on Sunday, stating, “Welp I guess the war’s not over,” and seemingly suggesting that a legal squabble could be in the works in the event that he engages in certain standalone activity.

The summary of terms – which was compiled by counsel at Stradley Ronon Stevens & Young and is dated September 13 – summarizes various limitations that were ostensibly set out the licensing and endorsement agreement that Kanye West previously signed-off on alongside adidas for his long-running Yeezy deal and his strategic agreement with Gap for the Yeezy Gap collection. The restrictions place limits on the types of goods that West, who legally changed his name to Ye this summer, and his company Yeezy can endorse, advertise, manufacture, etc. in order to prevent him and/or his brand from competing with adidas and/or Gap and the products/services that they are offering up under his and/or the Yeezy name.

Specifically, the excerpt states that Ye and Yeezy are limited in terms of what they can “use, wear, sponsor, promote, market, advertise, endorse, design, manufacture, license, sell or provide consulting services with respect to … products under the Yeezy trademarks or Ye’s likeness or any other identifiable attribute, feature or indica of Ye (e.g., Donda, Pablo or Jesus Walks).” The products primarily include “Athletic, athleisure, streetwear, sportswear, and lifestyle” apparel, footwear, and accessories. Ye and Yeezy are also prohibited from making, marketing, selling, etc. apparel, footwear, and accessories that “use designs that copy or resemble any designs used for Yeezy by adidas or Yeezy Gap products.”

The applicability of such restrictions from a duration point of view is not indicated on the single page of the summary that Ye shared on Instagram, but the restrictions are presumably limited to the length of his deals with the two companies, conceivably with a window following any termination, which could stand in the way of any immediate retail plans for Ye and/or for the DONDA-related products that recent trademark applications for registration suggest could be in the pipeline.

While Ye’s deal with adidas is still in force and thus, the corresponding provisions are still in effect, it is unclear how exactly the parties have opted to wind down the Yeezy Gap deal and what any settlement terms might look like. It is worth noting that the potential for a period of non-competition following the immediate dissolution of Yeezy Gap seems to be relevant in light of reports that Gap will continue to offer up remaining inventory from the venture; as of the time of publication, the Yeezy Gap e-commerce site was still shoppable and stocked with ten products from the collection. (In a separate Instagram post on Sunday, Ye stated that Gap Inc. Chairman/Interim CEO Bob Martin called him and “said we are amicably ending our deal, but I can’t do a fashion show [and] they can keep selling my product,” which, to the extent that it is true, suggests the existence of enduring non-compete terms.)

As for the nature of restrictions that are included in the summary shared by Ye more broadly, they are hardly earth-shattering. It is not-at-all unexpected, after all, for companies like adidas or Gap to insist upon terms that require the face of a venture to agree to refrain from engaging in directly-competing (or possibly even indirectly-competing) activities for the duration of a venture, and to negotiate the nature/strength of those terms with counsel for the other contracting parties, which would be Ye and Yeezy here. (Entities like adidas and Gap would also undoubtedly push for the inclusion of things like morals clauses and right of first refusal provisions, which the other side would likely look to narrow.)

Against this background, it is customary for companies to use restrictive covenants to prevent big-name collaborators from “exploiting a prominent role on behalf of one company for a direct competitor,” Seyfarth Shaw LLP’s Erik Weibust, Marcus Mintz, and Jeremy Cohen, previously stated in connection with endorsements deals.

The potential for enduring strife involving Ye and his partnerships follows shortly after he accused Gap of failing to make good on their collaborative Yeezy Gap deal and ultimately, notifying the San Francisco, California-headquartered retailer on September 15 that Yeezy LLC was terminating the venture. As we previously reported, West was looking to back out of the deal on the basis that “Gap breached the agreement by not releasing apparel and opening retail stores as planned,” namely by failing to offer up “40 percent of the Yeezy Gap assortment in brick-and-mortar retail stores during the third and fourth quarters of 2021.”

Additionally, counsel for Ye asserted that Gap fell short of a provision in the agreement that the parties announced in June 2020, which required it “to open as many as five retail stores dedicated to showcasing Yeezy Gap products by July 31, 2023.” No such stores have been opened to date. Gap has since confirmed the end of the parties’ partnership, with Gap president and CEO Mark Breitbard writing in a message to employees on Sept. 15 that “while we share a vision of bringing high-quality, trend-forward, utilitarian design to all people through unique omni experiences with Yeezy Gap, how we work together to deliver this vision is not aligned, and we are deciding to wind down the partnership.”

Ye similarly expressed issues over his adidas deal, which is set to expire in 2026, but he does not appear to have taken steps to bring that one to a halt.

A styled look from the Yeezy Gap collection

Business

Kanye West is Looking to Formally Nix Yeezy Collab Deal With Gap

September 15, 2022 - By TFL

A contract battle may be brewing for Kanye West and Gap. On the heels of West publicly accusing the American mall retailer of failing to make good on their collaborative Yeezy Gap deal, counsel for the rapper-slash-design-figure at Cadwalader, Wickersham & Taft LLP has sent a letter to Gap notifying it that West’s Yeezy LLC is terminating the parties’ rocky venture. As first reported by the WSJ on Thursday morning, West is looking to back out of the deal on the basis that “Gap breached the agreement by not releasing apparel and opening retail stores as planned,” namely by failing to offer up “40 percent of the Yeezy Gap assortment in brick-and-mortar retail stores during the third and fourth quarters of 2021.”

Additionally, counsel for Mr. West claims that San Francisco, California-headquartered Gap fell short of a provision in the agreement that the parties announced in June 2020, which required it “to open as many as five retail stores dedicated to showcasing Yeezy Gap products by July 31, 2023.” No such stores have been opened to date.

West shed light on looming issues between the two companies earlier this month, expressing his displeasure in a string of social media posts, stating, among other things, “I signed with both Gap and adidas because it contractually stated they would build permanent stores which neither company has done even though I saved both those companies.” (Counsel for West has not revealed whether he will take a similar stance in connection with his deal with adidas, which is slated to run until 2026.)

“Gap left Ye [with] no choice but to terminate their collaboration agreement because of Gap’s substantial noncompliance,” Nicholas Gravante, West’s attorney at Cadwalader Wickersham & Taft, said in a statement to the AP on Thursday, stating that “Yeezy notified Gap of its concerns in August and gave the company a contractually-designated 30 days to cure its breaches.” While West “diligently tried to work through these issues with Gap both directly and through counsel. He has gotten nowhere,” per Gravante, who also claims that Gap’s alleged “failure to comply with the terms of the contract has been costly.” (Gap reportedly sent a letter in response.)

In light of what could be the making of a fully-fledged legal battle (Gap has not yet publicly responded to news of West’s termination letter), “Items won’t disappear from stores. Gap will be able to sell existing Yeezy Gap products before ceasing to use the brand name, according to the letter,” according to the Journal’s report. Meanwhile, “West’s letter does not affect merchandise made in collaboration with fashion house Balenciaga that is also sold through Gap,” likely given that the tie up between West, Gap, and Balenciaga is governed by a separate contract and divergent terms.

As TFL has been tracking, the breakdown of the deal – which was slated to run for 10 years, with the option to renew after five, and was predicted to generate upwards of $1 billion in revenue for Gap, according to an early estimate from Wells Fargo – comes amid some hiccups on the branding side, with the U.S. Patent and Trademark Office (“USPTO”) taking issue with the mashup of Gap’s signature navy blue hue with Yeezy’s “YZY” mark. While a Yeezy Gap mark was registered by the European Union Intellectual Property Office in July, potential registrations in the U.S. have been a bit less straightforward. In fact, the three joint applications for registration that West’s Mascotte Holdings, Inc. and GAP (Apparel) LLC filed with the USPTO last year were suspended by the U.S. trademark body in June due to a conflict with Y.Z.Y., Inc., an unrelated company that previously filed an application for registration for a stylized Y.Z.Y. logo for use on “fragrances and hair care preparations.”

A formal split for West and Gap would likely put an end to the quest for domestic registrations for the Yeezy Gap marks – depending, of course, on the terms of any settlement.

As for West’s plans in the retail space going forward, he alluded to ambitions of going at it alone (i.e., sans Gap and/or adidas) early this summer by way of a handful of retail-centric applications for registration that his holding company lodged with the USPTO. In June, counsel for West’s company filed two intent-to-use applications for YEEZY SUPPLY for use in connection with “retail stores, retail store services, and on-line ordering services and on-line retail store services available on a global computer network, all of the aforesaid featuring clothing and accessories therefor, footwear, and headwear,” as well as various types of clothing. In July and August, those applications were followed up with additional applications for a mark that consists of “a fanciful design of two concentric circles” for use on similar goods/services.

Counsel for Mascotte has since filed almost three dozen applications for the DONDA DOVES, DONDA SPORTS, DOVE SPORTS, and GROTESQUE word marks for use on goods/services that range from jewelry and cosmetics to athletic gear and printed materials further adding fuel to reports of West’s plans to begin opening Yeezy retail stores of his own, which Gravante confirmed on Thursday.

UPDATED (SEPT. 15, 2022): Gap has confirmed the end of the parties’ partnership, with Gap president and CEO Mark Breitbard, writing in a message to employees, “While we share a vision of bringing high-quality, trend-forward, utilitarian design to all people through unique omni experiences with Yeezy Gap, how we work together to deliver this vision is not aligned, and we are deciding to wind down the partnership.”

Benjamin Franklin wearing sunglasses that say NFT

Future Crypto and Blockchain

The Ethereum Merge Raises Questions for NFT Holders, Creators & Trading Platforms

September 15, 2022 - By TFL

The Ethereum “Merge” is being touted as one of the most important events in the history of crypto, with the blockchain-based software platform describing it as “a truly exciting step in realizing the Ethereum vision – more scalability, security, and sustainability.” At its core, the highly-anticipated event, which went live on Thursday, acts as a significant software upgrade for Ethereum, bringing a new Beacon Chain proof-of-stake system into the equation in furtherance of a move to shift Ethereum’s security mechanism away from a proof-of-work method. In doing so, the Merge is expected to reduce Ethereum’s energy consumption by roughly 99.95 percent by removing the need for energy-intensive mining operations.

Looking beyond the sustainability elements that come into play with the Merge and the potential for more security and “future scaling upgrades,” there are likely to be impacts for token holders in the event that there is a post-merge hard fork (i.e., a blockchain split) that enables Ethereum miners to continue operating a proof-of-work chain. “If the Ethereum Merge results in the blockchain getting split into two chains, duplicate NFTs will exist due to the ETH proof-of-work (‘ETHPOW’) chain and other potential forks,” alongside the ETH proof-of-stake (“ETHPOS”), per Outlook, which notes that there is “likely to be some level of confusion, including around which assets are ‘official’ or ‘authentic,’” among other things.

“For many fungible ‘store of value’ tokens, hard forks have a relatively straightforward impact,” Latham & Watkins’ Jenny Cieplak, Adam Fovent, Ghaith Mahmood, Justin Tzeng, Yvette Valdez, and Stephen Wink state in a recent note. “Each chain ends up with a different version of the token, but each set of tokens is still used in a similar fashion on its respective, newly forked chain.”

The results for non-fungible tokens (“NFTs”), specifically, ones that are tied to content and thus, give holders certain usage rights in connection with the underlying artwork, are likely to be muddier. For these types of tokens, the Latham & Watkins attorneys say that “a hard fork may present challenges because it takes a single record commonly presumed to be unique and splits it in two, creating potential confusion as to how rights might be administered post-fork across the two sets of tokens.”

Such a scenario raises an array of questions, according to DLA Piper’s Mark Radcliffe, Michael Fluhr, Tom Ara and Spencer Hodson, such as, “which [of the post-fork] NFTs holds the license to the artwork that was granted to the purchaser when they bought the NFT from the creator? Does the license exist on the ETHPOW blockchain or the ETHPOS blockchain? And who decides?” Beyond that, what if the NFT holder sells the NFT to a buyer on the ETHPOW blockchain, but continues to hold the NFT on the ETHPOS blockchain, “does the license remain with the holder or transfer to the new purchaser?”

These potential issues are intensified by the importance of the licenses attached to NFTs (both in terms of copyrights and trademarks) and the frequency with which the terms of such licenses can vary – quite widely – from one project to another.

“In the absence of clear guidance from license agreements, the ownership of the license may be ambiguous, and disputes may arise between the parties,” according to the DLA Piper attorneys, who claim that as a matter of best practice, “NFT issuers” – and NFT-trading platforms, as well – “should provide clear guidelines on how they will deal with forks in their license agreement” – or for platforms, in their terms of service – in order “to avoid disputes later on.”

There are examples of projects providing such guidance, they note, including the CryptoPunks License Agreement from Yuga Labs, which “expressly permits Yuga Labs to ‘designate’ which NFT on which chain holds the license agreement,” an approach that has since been adopted by the a16z Can’t Be Evil template licenses.

Chances are, most NFT creators will “only seek to grant rights to holders of tokens on the most widely adopted, ‘mainstream’ version of the chain post-fork,” per Cieplak, Fovent, Mahmood, Tzeng, Valdez, and Wink, as granting rights to all versions of the tokens across forked chains “could reduce the uniqueness and corresponding value of such rights, or simply make it untenable for the project to allow redemptions of a single off-chain asset for duplicate tokens.” Concerns on this front are particularly pronounced for tokens that can be redeemed for items of value, such as the USDC stablecoin, thereby, prompting fintech firm Circle, for instance, to announce pre-Merge that the USD Coin “can only exist as a single valid ‘version’ and … our sole plan is to fully support the upgraded ETHPOS chain.”

Such concerns can extend to content-linked NFTs, especially in the event that such tokens come with robust usage rights, and as such, Cieplak, Fovent, Mahmood, Tzeng, Valdez, and Wink assert that creators would benefit from making similar clarifications. “If any holder of an NFT on ‘an Ethereum chain’ could sell merchandise using the underlying NFT art,” they hypothesize, “the value of such a commercial right could be significantly diminished if two sets of tokens now hold the same rights to the same artwork.” As such, limiting rights to the most widely adopted chain could not only “preserve such uniqueness,” but could also “provide assurance to partners that might be sensitive to the degree of influence they can exert over tokens featuring their IP.”

In order to actually implement this, they contend that “projects could state that rights associated with a particular token will only be granted to owners as recorded on the Mainnet recognized as the legitimate successor of the original chain.”

As for platforms, Radcliffe, Fluhr, Ara, and Hodson point to precedent that allows blockchain service providers to establish their responsibilities in the event of a fork. “In Archer v. Coinbase, a California appellate court affirmed summary judgment in favor of [the Defendant] cryptocurrency exchange against a user who had claimed that the exchange was obligated to provide him access to all forked versions of the Bitcoin he had in his exchange account.” Siding with Coinbase, the court determined that its user agreement “contained no term obligating [it] to support all forks.” Following Archer, they note that “blockchain asset trading platforms (including NFT trading platforms) often expressly provide in their terms of service that they retain the right to determine which of any blockchain forks they may support.”

But even still, the results will of a hard fork will inevitably vary. While OpenSea, for instance, says that it will be “solely supporting NFTs on the upgraded [ETHPOS] chain,” Rarible’s Standard Collectibles Sale and License Agreement specifically states that in the event of an “Ethereum Persistent Fork” that it will recognize the authenticity of copies of NFTs created in the same wallet address when they were held on Ethereum. The likely purpose of this approach, according to Cieplak, Fovent, Mahmood, Tzeng, Valdez, and Wink? It “may be beneficial to reduce consumer confusion, promote an open and inclusive ethos, and avoid forcing the project to take a stance on a contentious issue regarding what is the ‘true’ blockchain upon a fork.”

While hard forks are not without precedent in the mark, it is, nonetheless, “impossible to predict what the actual outcome will be,” Rarible’s chief strategy officer and co-founder Alex Salnikov said in a statement to Forkcast this week. “Especially for less experienced NFT collectors.”