10 March, 2021

Non-Fungible Tokens (NFTs) are All the Rage - It Is Not Copyright and is Ripe for Misunderstanding and Misuse

Anyone who works in the sphere of intellectual property in the law will have come accustomed to misunderstandings in how various IP rights work, what they mean in real terms and how they can be utilized by both people and businesses. Recently I have come across a new world of "copyright" (even though it is not copyright in any form) that seems to be speculated over, which is Non-Fungible Tokens or NFTs that are used to sell "rights" in digital art. 

For the uninitiated, NFTs are a part of the Ethereum cryptocurrency blockchain, allowing for the distribution and/or sale of unique (i.e. non-fungible) tokens that are separate from the cryptocurrency itself. NFTs themselves can be anything that is digital, and identified as unique through the token (proving that the piece is indeed the original), and can be sold much like a physical piece of art, but in the digital world. What has made things surprising to this writer is the misunderstanding and mixing up of NFTs with copyright, so it might be worth discussing the differences between these and the implications of copyright on the sale of NFTs. 

As a brief primer, copyright is an IP rights that protects the expression of ideas, but not the ideas themselves. This means that you will have copyright in e.g. a piece of art you draw, a photo you take or a video you create, and can utilize copyright to prevent others from copying that work. This also enables the licensing of these rights to others, allowing them to copy the works under the terms of the license; however, copyright does not really impact the sale of a physical item such as a painting. Often the latter point leads to confusion as to the application of copyright to the sale of works, but it undoubtedly will impact the sale of digital copies of works. 

The potential problem with how NFTs are portrayed seems to equate them to the world of copyright, meaning the NFT gives you some sort of rights over the digital art you've purchased the token for. In fact, this is not the case, since NFTs don't give anyone any rights over the digital art, but simply act as provenance to the fact that you "own" the original digital piece. Even though you "own" the art, the ultimate copyright holder retains the rights over the distribution of the art piece. 

With that in mind, do you actually own anything? Yes and no. You own the 'receipt' for the digital art piece in the form of the NFT, but this doesn't give you any further rights, especially under copyright. The artist keeps those rights unless they sell it to you along with the NFT (and in most instances they will not do so). 

One issue that can be overlooked here is individuals or companies could conceivably claim an NFT on works that are not their own and take away monetary gains from artists who don't know, or haven't cared to, do so themselves. This could then lead to a wider sharing of works through these "authenticated" copies that negatively impacts the artist, including the aforementioned monetary loss through a missed opportunity to sell a genuine NFT to your works. Artists will have claims under copyright to challenge the sale of any NFTs (and the potential distribution of their works). 

It seems that NFTs are riding the craze of cryptocurrency, and one should be careful and understand what NFTs actually mean in terms of ownership, and what implications there are in the light of copyright. There will be issues that artists, sellers and purchasers will have to keep in mind, and while it might be cool to "own" a 'signed' copy of a piece of digital art when you buy an NFT, its limits are simply that; it's a way to prove that you have potentially purchased the genuine article, but that's it. 

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