NFTs and Copyright: How to Protect Yourself

NFTs and copyright represent a recurrent dilemma in the digital art ownership debate. 

While NFTs confer some rights on their owners, are NFTs copyrighted? 

What intellectual property rights, if any, may the owner or developer of an NFT assert legally? 

Let’s explore NFTs and copyright law below.

What Are NFTs?

NFTs are digital assets such as photos, videos, and music or audio tracks that are stored on the blockchain and distinguished by their unique identification codes and information or meta data — kind of like what a caption card is for a traditional piece of artwork.

Unlike cryptocurrencies, they cannot be bought or swapped on an equal footing. This is in contrast to fungible tokens such as cryptocurrencies, which are interchangeable and so may be used as a medium of commerce. 

By rendering each token unique and irreplaceable, NFTs fundamentally alter the cryptographic paradigm, making it impossible for one non-fungible token to be identical to another. 

They are digital representations of assets that have been compared to digital passports since each token carries a unique, non-transferable identity that allows it to be distinguished from other tokens. 

Additionally, they are extendable, which means that you may "breed" a third, unique NFT by combining two. 

Throughout 2021, NFTs & art became intertwined, with many speculating on their breakthrough impact on the art sector.

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What Does Copyright Mean?

Copyright is intellectual property that protects the author's original works as soon as they are fixed in a tangible form of expression. 

The copyright framework has already been built by the 1886 Berne Convention, an international agreement that ensures consistent copyright protection for works generated in any of its 179 member nations.

The 1996 World Intellectual Property Organization Copyright Treaty legally extended Berne principles to digital art, however, many Berne Convention members did not sign it. 

With no new accords imminent, the private sector may be forced to take up the slack left by global governments. 

Notably, copyright normally resides in the work's author or creator (unless employment contracts prohibit this) and lasts for the author's lifetime plus 70 years. 

If a work is protected by copyright, making a copy of it, performing it in public, or adapting it constitutes copyright infringement.

Intellectual property confers ownership on creators in the same way physical property confers ownership. 

Several works are protected by copyright law, including paintings, pictures, drawings, musical compositions, sound recordings, computer programs, novels, poetry, blog entries, films, architectural works, and plays.

Are NFTs Copyrighted?

Ownership of NFTs is far more complicated than one would assume. 

As a novel kind of cryptocurrency, NFTs seem to operate virtually independently of existing regulatory frameworks. However, when art is included, there are certain overlaps to consider. 

Recognizing the legal problems inherent in today's NFT environment is the first step toward realizing its full potential. 

Regardless of their growing popularity, it is important to remember that NFTs, like conventional artwork, are subject to copyright and other intellectual property rules. 

Being a pioneer in a new technology field is an exciting prospect, and artists/companies may choose to develop NFTs while the industry is blooming. 

IP infringement is the act of using the intellectual property without the owner's consent, for which an NFT author may be prosecuted. 

Unless the copyright holder grants permission, selling artwork that incorporates copyrighted characters is also an infringement. 

Because many NFTs integrate third-party material (logos, art, music, and gaming characters), exploiting such third-party intellectual property (IP) without the owner's consent may be difficult for an NFT maker. 

Our first inquiry to artists interested in generating NFTs is if they really control the intellectual property included in the NFT's digital artwork. 

The reality is that NFTs are just tokens that represent an asset, apart from the assets themselves. 

Because each NFT represents a distinct asset, a single NFT cannot be reproduced while retaining the original's worth. 

Many people conflate this exclusive type of ownership with ownership of the work itself, but this is an important distinction to make. 

The spectrum of options for what constitutes an NFT corresponds remarkably closely to the range of works protected by copyright. While each country defines "work" differently, none deviates much from the fundamentals. 

Thus, unless an external agreement between the artist and the buyer is reached, the bundle of copyrights associated with an NFT remains the property of the original artist. 

The purchaser of an NFT owns nothing more than a unique hash on the blockchain containing a transactional record and a link to the artwork's file.

DC Comics is an excellent example, having written a letter to all of their authors (even freelancers) advising that the unauthorised use of their characters and IP in NFTs is forbidden. 

This follows nearly $2 million earned by one artist from the sale of NFTs with characters he previously drew for DC Comics.

NFTs and Copyright Challenges and Opportunities

When considering the possibility of theft and fraud, the problem of NFT copyright monitoring becomes considerably difficult. 

NFTs must be "signed" by the uploader in a process known as "minting" before they can be put on the blockchain. 

While this does not directly answer the question: “are nfts copyright protected?”, this element, similar to the signature on a painting, is designed to connect the NFT to its author. 

Things may go awry when minters fabricate their identities, which is typical in many NFT systems. 

Notwithstanding the consistency established by international treaties, the NFT world continues to disregard the variety of copyright laws found around the globe. International copyright compliance must be integrated into this new ecosystem to move the industry away from conjecture and into global functionality.

Hence, the problem arises due to the NFT market's absence of a robust regulatory structure. 

On various sites, it is possible to mint a tweet, an artwork, or even a gif of a Nyan Cat without being the original author. 

Consequently, several artists have reported having their work stolen and sold in NFT format without their agreement, which would plainly constitute a copyright infringement in the conventional art market. 

Among other problems, there is now a lack of copyright trading infrastructure that conforms with international law, which makes the trade of NFT copyright impossible for the time being.

Overall, there are two instances when copyrights might be transferred:

  1. the transaction is accompanied by contractual provisions relating to the transfer of the work attached to the NFT that is valid under applicable national law;
  2. the applicable national law treats an NFT transaction (in the absence of other contractual provisions) as a transfer of the linked-to work.

Otherwise, the buyer of an NFT obtains only a right over the metadata pointer to a digital object. 

Customers must understand that copyright is not automatically transferred to NFTs. 

A purchaser owns the tokens/NFTs in their digital wallet, but not always the artwork linked with the NFT. It is essential to pay special attention to the selling platform's material terms pertaining to NFTs while acquiring one. 

These differences exist across platforms and even between NFTs. 

Purchasing an NFT does not entitle you to commercially replicate, resell, or utilize it. Buyers should also carefully read the digital contract governing the sale of the NFT to understand precisely what they are purchasing after an NFT transaction, since the contract defines the buyer's rights concerning the digital copy of the creative work connected with the NFT. 

Consider the license conditions carefully before licensing, assigning, or transferring NFT intellectual property rights. A license may be as wide or as specific as the owner desires; thus, it is critical to understand what is and is not licensed. 

For instance, a creator may grant rights to create a limited number of NFTs based on a copyrighted work to preserve the work's scarcity and increase the value of the NFT based on the work.

Minting NFTs is critical since it establishes ownership of the work and aids with artist protection. NFTs enable producers to create unique and finite tokenized copies of digital creative works and monetize them while assuring that the digital creative work cannot be counterfeited and stays rare online. 

NFT artists can specify both the selling price and the maximum number of their digital creative works that may be sold. This allows the NFT designer to maintain the asset's scarcity and artificially inflate its value in both the original and resale markets, similar to how a lithograph's value increases due to its exclusivity and restricted number of prints. 

Additionally, since NFTs cannot be duplicated, they protect producers from piracy-related damages. Finally, NFTs facilitate the transfer of digital creative assets more than conventional sales models, since NFTs may be sold on any NFT market or peer-to-peer, without an intermediary, rather than being confined to third-party platforms.

Bottom Line

Overall, NFTs do not appear to integrate well within the confines of copyright law. 

Ultimately, two prevalent options should be considered by artists and buyers to protect themselves from copyright infringement: either the transaction is accompanied by valid contractual arrangements pertaining to the transfer of the linked-to work; or the relevant national law considers an NFT transaction as a transfer of the linked-to work in the absence of additional contractual requirements.

As with every cutting-edge manifestation of technology that gains widespread public acceptance, they provide a chance to re-examine fundamental copyright principles such as ownership, dissemination, exhaustion, resale, and collective rights administration.