Nfts And Copyright: Who Owns What?

Non-fungible tokens (NFTs) have become increasingly popular since their inception in 2014, with some NFTs selling for millions of dollars. However, there is a lot of confusion surrounding the rights that buyers acquire when purchasing an NFT. This paragraph aims to explore the topic of whether copyright laws apply to NFTs and the potential legal implications of NFT sales and purchases.

What rights do NFT buyers have?

As NFTs are a new phenomenon, the laws surrounding them are still evolving. NFT buyers should be aware that they are purchasing a cryptographically signed version of the artwork, not all rights to the artwork itself. This means that they will never literally own the art, but a link to the artist's signed file.

In most cases, NFT buyers have a few limited rights by default, such as the right to sell the NFT to someone else or to display the NFT for "personal use". This may mean that they can display the NFT privately on a monitor inside their home, but they do not have the right to copy, distribute, or display that NFT publicly. For example, they cannot display the NFT on a social media account unless those rights are mentioned in the sale terms.

The rights of the NFT buyer will depend on the terms and conditions of the platform where the NFT is purchased, and any terms of the sale set by the creator(s) of that NFT. It is important to read the full terms and conditions before making a purchase to understand the rights that the buyer does and does not have.

In some cases, NFT buyers may be granted commercial rights to the artwork they own, meaning they have the right to make and sell products like T-shirts, mugs, and posters using the artwork. However, these commercial rights may be limited in scope and there may be restrictions on how much money can be earned from commercialisation.

It is worth noting that the original artist of an NFT will often retain the copyright of the work even after it has been sold, unless they transfer the rights to the buyer. This means that if someone copies or sells the NFT as their own, they are breaching the artist's rights, not the rights of the buyer.

Can NFT creators use third-party IP?

NFT creators need to be cautious about incorporating third-party intellectual property (IP) into their NFT content. Despite any misconceptions that traditional law does not apply to decentralised blockchain technology, third-party IP rights, including trademark, copyright, and design patent, can be asserted against NFT creators who have not obtained a license or other legal rights to IP included in their NFTs.

Many NFTs have incorporated third-party IP without permission. In some cases, NFTs have included third-party IP as part of the content, and in other cases, third-party IP alone has been the content. IP owners whose content is being used in NFTs without permission are taking note and increasing their enforcement efforts. For example, DC Comics sent a stern warning to its creative teams and freelancers that unlicensed use of NFTs is prohibited. This followed an artist making $1.85 million by selling NFTs, including characters he used to draw for DC Comics, such as Wonder Woman.

Creators of tokenised content should think twice about using a brand name, logo, famous character, picture, video, music, or other third-party IP without permission. Creators would be wise to seek legal counsel before using third-party IP in their NFTs. Just because an IP owner has not yet enforced their IP against creators in the blockchain space does not mean that they will not do so in the future, especially as more money enters this space. Seeking advice early can help save significant expense and hassle in the future.

It is also important to note that copyright in NFTs is not automatically assigned. A buyer owns the tokens/NFTs in their digital wallet, but not necessarily the artwork associated with the NFT. When purchasing an NFT, it is crucial to pay close attention to the selling platform's material terms relating to NFTs, as these vary from platform to platform and even from NFT to NFT.

Can NFTs be used for digital rights management?

The use of NFTs for digital rights management is an emerging concept, with companies like RAIR aiming to use NFTs to manage digital rights. The primary use case of NFTs includes verifiable and secure digital rights and ownership tracking, which helps reduce piracy, theft, and copying. NFTs can be used to verify unique items such as digital art and digital ownership certifications.

RAIR, a digital rights management platform, wants creators to upload media content such as videos, books, music, source code, or art to their platform, stored inside an NFT. This enables creators to authorize, possess, and control the distribution of their work worldwide, allowing them to generate revenue from sales and royalties.

The functioning of an NFT Digital Rights Management platform involves content owners uploading their work, which is then stored inside an NFT. A new token is created for each piece of uploaded content. This allows content creators to license and distribute their work via a streaming link accessible from all browsers. Content owners have control over the distribution of their work and can earn money through sales, royalties, and resales.

The advantages of using NFTs for digital rights management include:

• Uniqueness and Non-Fungibility: NFTs are unique, irreplaceable, and cannot be replicated, providing a permanent and unchangeable record of ownership for digital assets.
• Verifiable Rights and Ownership: NFTs provide verifiable and secure digital rights and ownership tracking, reducing piracy, theft, and copying.
• Monetization: NFTs allow creators to monetize their assets by selling or upgrading their possessions, giving them more control over their creations.
• Transparency: Blockchain technology enables secure and transparent transactions, reducing the risk of fraud and theft.
• Enhanced User Experience: NFTs give users a greater sense of ownership and investment in digital assets, creating a more immersive and engaging experience.
• Decentralization: Blockchain's decentralized nature ensures no third-party involvement, making NFT assets less susceptible to censorship and control by other entities.
• Interoperability: NFTs can be used across different platforms and applications, allowing users to efficiently create, trade, and manage digital assets.

In conclusion, NFTs can be used for digital rights management by providing verifiable ownership and distribution control to creators, reducing piracy and theft, and enabling new monetization opportunities.

What is the impact of NFTs on copyright owners?

The impact of NFTs on copyright owners is a complex and evolving issue. One of the key challenges for copyright owners is the widespread confusion surrounding the rights that buyers acquire when purchasing an NFT. In reality, buyers only acquire the metadata associated with the work, not the work itself or its accompanying rights. This confusion may be fuelled by the high prices that NFTs can command, leading to the assumption that the purchaser has acquired more than just a string of code.

Another issue for copyright owners is the potential for infringement and counterfeit issues. While most NFTs do not involve a transfer of rights, there have been instances of artists' works being minted as NFTs without their permission. This has resulted in legal disputes and lawsuits, with copyright owners taking action to protect their rights.

The decentralised and unregulated nature of NFTs also presents challenges for copyright owners. The international accessibility of NFTs means that copyright owners may need to monitor a growing number of platforms to identify potential unauthorised reproductions or derivative works.

Additionally, the creation of an NFT can be categorised as a copy or derivative of the original work, which under copyright law, should only be done by the copyright holder or with their permission. This raises questions about the transfer of underlying copyright when an NFT is sold, as this is typically retained by the creator or most recent copyright owner.

Finally, the use of NFTs in digital rights management and licensing could also impact copyright owners. While it is possible to code agreements into smart contracts, the terms and conditions of these agreements can be contradictory and difficult to enforce.

Overall, while the impact of NFTs on copyright owners is still evolving, it is clear that NFTs present both challenges and opportunities for copyright owners in terms of ownership, enforcement, and potential new revenue streams.

What are the international implications of NFTs?

As NFTs are a new phenomenon, the laws surrounding them are still evolving, and the international tax implications of NFTs are complex. When selling NFTs to buyers in other countries, creators may be subject to foreign tax laws and reporting requirements. For example, some states in the US, such as New York and California, have specific laws regarding the taxation of digital goods, including NFTs.

The impact of NFTs on cultural preservation is another international implication. NFTs enable the digitisation of cultural artefacts, transforming physical objects into digital assets, and transcending geographical boundaries. This ensures the longevity of artefacts that may be susceptible to wear and tear over time. However, critics argue that the commercialisation of cultural heritage through NFTs may lead to the commodification of sacred or culturally sensitive artefacts.

NFTs are also starting to enter the enterprise segments of various industries, including supply chain and logistics. Companies in these sectors are using blockchain and NFT technology to reduce costs, eliminate bottlenecks, and provide transparency to consumers. For example, NFTs can be used to track the movement of perishable products and obtain real-time visibility to better manage inventories.

In addition, NFTs are the fundamental building blocks of the metaverse, providing a certificate of authenticity for all digital assets within it. This includes ownership of any digital asset in the metaverse, such as real estate, vehicles, clothing, and artwork.

Frequently asked questions