Artists have found a great deal of value in marketing their work on NFT markets owing to the ease of receiving royalties generated through their creations. That said, there are a number of intellectual property implications that have come forth as NFTs have climbed in popularity. We’ll discuss a few of those implications here.
Transfer of IP Rights – A Common Misconception
If you’re familiar with NFTs, you are likely already aware of how IP rights are handled. For everyone else, a common misconception is that an NFT represents the copyright to its underlying asset, be it artwork, music, videography, etc.
However, this is generally not the case. While an NFT does grant some access to the minted work, it doesn’t necessarily translate into owning the full copyright (i.e. the right to reproduce, transform, or adapt it). As such, it would be more analogous to providing a link to the work rather than rights to the work itself.
Some licenses may be granted through an NFT, and it’s important to keep in mind what rights those licenses actually grant. For instance, rights may be granted to display a piece of artwork, but not copy or commercialize it.
When purchasing a copy of creative work through an NFT, it’s important to look at what licenses are granted under the purchase agreement. Likewise, sellers must be explicit about what rights are actually being granted when structuring smart contracts.
Recent IP Issues Arising from NFTs
Some of the recent issues and questions arising from NFTs regarding intellectual property include the following:
Determining What Is Actually Being Sold
The first issue involves what is actually being sold when an NFT is purchased. As already stated, purchasing an NFT doesn’t necessarily translate into purchasing the copyright to that underlying asset. Buyers need to beware what they’re actually purchasing. Likewise, sellers should be careful to stipulate what is being transferred when they sell an NFT for a piece of their work. The contract should be clearly worded and explicit in terms of what is—and isn’t—being sold.
Where there is valuable artwork of any kind, there will be people trying to exploit it for their own financial gain. Counterfeit issues have cropped up in the NFT space, with counterfeiters trying to pass off their own NFTs as either their own work or that of the original artist. Disputes that arise between artists and counterfeiters can be drawn out and costly, making it an expensive issue to resolve.
Employing preventive measures such as watermarks can help prevent counterfeiting. Should it still occur, submitting a takedown request under the DMCA (Digital Millennium Copyright Act) can allow some legal recourse when it comes to protecting your work?
A circumstance where someone mints an NFT without authorization and markets it using the original owner’s registered trademarks could give rise to trademark infringement issues. For instance, counterfeit artwork might be sold by an unauthorized third party using branding similar to that of the original owner, leading to confusion in the market.
It is possible that using an artist’s marks to market something completely different could also constitute trademark infringement, but it remains to be seen how courts will rule on these particular cases.
There Is an Upside
The upside to all this is the fact that artists can have an easier time having their rights to royalties protected. The U.S. is notably poor when it comes to safeguarding artists’ rights to royalties. NFT platforms can ensure an artist gets paid for their own work without having to deal with the legal barriers posed by individual jurisdictions.
From a legal perspective, there are currently more questions than answers when it comes to how intellectual property rights will be handled on NFT platforms. The coming years will likely see more development in this area as court rulings set precedents for how existing policies will be applied.