NFTs (Non-Fungible Tokens), the latest cryptographic buzz, has blown into the entertainment and media world, creating new opportunities and markets for investors, brands, musicians, artists, innovators, and consumers. As this once masked technology gets massive appeal and quickly transforms into a major popular economic attempt, individuals and companies worldwide are jumping on the NFT journey, exploring if and how to leverage its gains.
Like other technological innovations, NFTs embody a great promise and have the potential for complexity, abuse, consumer protection, and legal issues. Consequently, this post will expound on the problems with Copyright in the NFTs Space.
What is a Non-Fungible Token (NFT)?
NFTs are unique crypto assets connected to objects; a piece of music, digital art, in-game item, or collectible. Like cryptocurrencies, such as Ethereum and Bitcoin, NFTs utilize blockchain technology in recording ownership and validating authenticity. And unlike cryptocurrencies, each token in NFTs is unique, which is non-fungible. NFTs are purchased and sold in different marketplaces with cryptocurrency.
It is vital to add that for the past few weeks, NFTs sales linked to digital artworks and creations, such as unique sports, music albums, moments clips, and Twitter CEO’s first tweet, has skyrocketed. Though NFTs aren’t new in the world of blockchain.
The Copyright Problem in NFTs
Selling and making NFTs based on artworks you don’t have rights to is certainly infringements, particularly when you consider that the auction sites selling NFTs utilize original artworks. That’s the reason the NFT auction site has quickly created DMCA processes to remove the unauthorized NFTs. Meanwhile, this is not clear if it would be enough as several sites are majorly encouraging investors to tokenize contents that they do not own. Other firms and markets are just permitting verified works; this makes them not worry much in this regard.
The late boom in NFTs is just weeks old, and courts have not started to address the problems this raises. With original NFTs buys, there was no big problem to consider. Artists or investors are permitted to do derivative works according to their products or creations and market them. Provided that buyers were abreast of how unuseful the NFTs are, there won’t be much reason for courts to be involved.
Be that as it may, it opens that the aim of NFTs has created a dramatic change around the market. Where hitherto the news was dominated by brands making big gains from nothing, now we are witnessing more concerns on infringement and system abuse. It might take years before courts would majorly address this infringement problem in NFT. By then, it would have caused more harm.
Ideally, an artwork copyright owner should equally be the creator of her NFT. However, infringers have found their means in the digital area, thus creating more IP-related issues. What’s more, other than the unauthorized copying of files of an artwork, a new set of alleged infringers emerged that mint NFTs based artworks without authorization, which they put for sale. This could be a major issue as the encryption, decentralization, and anonymity characteristics in blockchain ecosystems might make it hard to know the copyright holder.
In another development, some commentators have argued that when accessing the main tenets of NFT creation, an NFT isn’t the actual original creation of a working copy. It is only a tokenized version that doesn’t incorporate the entire work into a blockchain but has only a URL connected to it. Consequently, NFT minting doesn’t concern copyright infringement.
How to Protect Yourself as a Creator?
Creators need to understand the marketplace terms they are working on and ensure their rights are practically reserved to prevent ambiguity later on. Most marketplaces need creators to give or grant them, that is, to reproduce, use, publish, modify, distribute, and display contents on a global, royalty-free, and non-exclusive basis. Normally, these marketplaces can post the NFT on their platform to sell, utilize creations as advertising and marketing to promote its marketplace, and often place the creation around indexes for ease of search and greater user experience.
While several marketplaces restrict the use of these aims, some marketplaces don’t even permit them to sublicense more of these rights to the third party. This shows that while creators majorly retain IP rights with their NFTs collectors, they specifically grant the rights to the marketplace they sell their arts.
Significantly, when you see or notice any unauthorized usage of your creation or infringements of your rights in another person’s work, several platforms now possess a process on the Digital Millennium Copyright Act where you could demand the infringing work or content to be removed.
What Do you Have if you Purchase an NFT?
If you purchase an NFT, you have the right to claim the ownership of NFT and the right to exempt others from declaring ownership of NFT. Apart from that, it would depend on any terms that govern the NFT.
As a case of property law, NFT can be characterized as incorporeal or intangible personal property. It is a property that can’t be held or touched but contains some values. Like other sets of personal items, they can be sold, bought, levied, mortgaged, bequeathed, and used as collateral.
What Don’t you Have if you Purchase an NFT?
Ownership of NFT doesn’t grant you the ownership of underlying artwork, digital assets, or other objects. In other words, NFT ownership doesn’t grant you by default any right to intellectual properties of an underlying asset.
Who is the Owner of Copyright in the Underlying Work of an NFT?
The author initially has the ownership of the copyright in their creation until the author transfers the copyright ownership to someone else. Thus, unless NFT adds a copyright transfer in the underlying asset (this is not always the case by default), the author, and not the NFT holder, has the copyright owner.
Can the Author of an NFT Underlying Work Transfer Copyright Ownership?
Yes, it’s possible, though the process might be tricky following blockchain contexts. As stated, copyright ownership initially rests in the author of the work. The author has the freedom to transfer copyright ownership, but the transfer needs to be written and signed by the copyright owner. Until it happens, the author still retains or has the copyright. This same regulation applies to subsequent owners of the copyright.
Can the NFT Owner Get a License to Use an Underlying Work?
Yes, it’s true. However, the mechanics might be a bit tricky. The copyright owner has the right to transfer its complete work copyright to an NFT holder. The expected scenario to see frequently is for the copyright owner to grant the NFT owner a right or license to use the work. Often, copyright is seen as an exclusive rights bundle whereby the copyright owner has the freedom to reject or grant others as he or she pleases. Nothing prevents a copyright owner from utilizing that power in the NFT mechanism. More so, NFT issuer might want to limit certain usages, for instance, eliminating unsavory usage of brand protection.
It’s no use that NFTs (Non-fungible tokens) have taken economies by storm, influenced by new digital artists, and transformed several into household names and millionaires. Beyond that, NFTs have the nerve of opening new ways of transactions, expression, and information dissemination.
As NFTs valuations continue to rise and already established rights owners join the fray, IP (intellectual property) considerations would certainly take the central stage. Collectors and creators will inadvertently surrender their rights when they aren’t familiar with fundamental IP laws. They could equally get in trouble when they unintentionally break other people’s rights. NFT is a bid for a digital creator to attempt and get some scarcities and uniqueness that physical works producers have naturally. Until there are some checks to make sure that NFTs are made by the rightsholder or artist, it will serve as a higher piracy threat than opportunities. If NFTs wish to establish artificial scarcity, they need to be scarce themselves and not anything someone can make. Sadly, the system isn’t created for that, and it’s not likely it would change soon.
Finally, it is vital to add that even though NFT owners don’t actually own digital artworks, it hasn’t ended big investments from actualizing their acquisition.