Welcome to the world of NFTs and intellectual properties! NFTs have taken the art world by storm and have created new avenues for creators to monetize their work. But with this new frontier comes new challenges, particularly when it comes to intellectual property rights. In this blog, we’ll dive into the world of NFTs and explore the relationship between NFTs, intellectual property, and the rights of creators.
We’ll also take a closer look at some of the legal and ethical considerations surrounding NFTs, and discuss how creators can protect their work in the NFT space. Whether you’re a creator, an investor, or just curious, this blog will be demystifying NFTs and intellectual property for you.
What are NFTs?
NFTs are a uniquely identifiable concept in the digital world. They’re like digital butterflies, rare and unique, fluttering in the ether of the internet. Imagine owning a piece of digital art that no one else in the world has.
Something that’s yours, forever, with a certificate of authenticity to prove it. That’s what NFTs are all about.
Think of them as collectible stickers for the digital age, except instead of swapping them with your friends, you can trade them on the blockchain and potentially make a fortune. NFTs are changing the game for artists, musicians, and content creators by giving them a new way to monetize their work and reach a wider audience.
So, next time you’re browsing the internet, keep an eye out for these digital gems, you never know what you might find! Also, learn how to create your own NFT with our quick guide!
What is the link between NFTs and blockchain network?
NFTs and blockchain application are closely connected as NFTs are created and stored on a blockchain. A blockchain is a digital ledger that records transactions across a network of computers. It allows for the creation of unique digital assets, such as NFTs, that cannot be replicated or duplicated. The blockchain also allows for proof of ownership and scarcity of NFTs, as each NFT is assigned a unique digital signature that confirms its authenticity and rarity.
What are intellectual properties?
Intellectual property rights are legal rights that protect creators and owners of original works such as literature, music, art, and inventions. They include patents, copyrights, trademarks and trade secrets, and give the owner exclusive rights to use, reproduce, and sell the work. These rights are intended to encourage creativity and innovation by giving creators and inventors an incentive to produce new works.
In the world of NFTs however, the concept of Intellectual Property Rights (IP) is relatively new and buyers do not often hold a clear idea of the implications that would follow.
Do NFTs have an IP?
Simply speaking, NFTs can have an associated intellectual property protection (IP) right, such as a copyright in the underlying work depicted in the NFT. The specific IP rights that apply to an NFT will depend on the laws of the jurisdiction where the NFT is created and used, as well as the terms of any license agreements associated with the NFT.
Some NFT creators may explicitly outline an IP license for their NFTs, while others may not. In the absence of an explicit license, it is safest for a buyer to assume that they do not own the IP rights to the NFT and that their use of the NFT is restricted to personal use only.
What do Buyers need to know?
As a buyer of an NFT collection, you need to remember that the person or entity who creates the original work that is represented by an NFT holds the intellectual property rights to that work. This means that they have the exclusive right to reproduce, distribute, and display the work, as well as the right to create derivative works based on it.
When you purchases an NFT, you are purchasing a digital certificate of ownership, but not the intellectual property rights to the underlying work
In essence this means that the creator can continue to sell the rights to their work through NFTs or in other ways, while the buyer of an NFT can only use the digital artwork it represents in the way the original creator allows it to be used.
What can buyers do?
When purchasing an NFT, the brand owners and buyer should consider the intellectual property rights of the underlying work and the rules applicable to NFT. Moreover, limitations on how they can use the NFT should also be considered.
For example, if the NFT represents a digital artwork, as a buyer you should ensure that you have the right to display the artwork in your collection, whether that be online or in a physical location.
It’s also important to understand that copyright laws may vary depending on the jurisdiction, so it’s always best to consult a legal expert if you have any doubts. Also, learn more about the difference between traditional art and virtual NFT art to understand IP.
The emergence of NFTs presents various opportunities for businesses, but also raises the possibility of intellectual property rights infringement through unauthorized minting of NFTs. These issues have not yet been tested in an English court, so it’s a new territory. There are two main types of copyright infringement that may occur in the unauthorized minting of an NFT: infringement of the reproduction right, and infringement of the communication right.
Infringement of Reproduction Right
Infringement of Reproduction Right for NFTs refers to the unauthorized copying or reproducing of a copyrighted digital asset through the creation of an NFT. Under copyright law, the reproduction right restricts the copying or reproducing of a copyrighted work, and if an NFT includes a digital copy of the copyrighted asset, there may be potential for this to be considered an unauthorized reproduction, which could amount to infringement of copyright.
However, if the creation of the NFT does not involve reproducing the underlying asset, there may not be any infringement of the reproduction right. The interpretation and application of copyright law to NFTs is still an evolving area, and the exact circumstances in which infringement may occur will depend on the specific facts of each case.
Infringement of communication Right
Infringement of Communication Right refers to the unauthorized communication of a copyrighted digital asset to a new public through the creation of an NFT. Under copyright law, the communication right restricts the communication of a copyrighted work to a new public not originally intended by the copyright owner. The creation of an NFT linked to an underlying asset may be seen as a separate act from making the asset available in a new forum, and may not amount to infringement of the communication right.
However, if the NFT includes a digital copy of the asset, the act of minting the NFT may be considered a communication of the asset to a new audience, which could amount to infringement of the communication right. As with the infringement of reproduction right, the interpretation and application of copyright law to NFTs is still an evolving area, and the exact circumstances in which infringement may occur will depend on the specific facts of each case.
Depending on the circumstances, minting an NFT that includes a digital copy of an asset may be considered an unauthorized reproduction or communication to a new audience, both of which can be considered infringement.
BAYC and Crypto Punk Infringement
Additionally, the inability to easily modify the initial licensing language between the seller and buyer is a cause for concern.
Bored Ape Yacht Club successfully registered trademarks for their NFT project, but they are facing trademark infringers on other platforms. In contrast, Crypto Punks did not give enough attention to protecting their trademark and is also suffering from imitators and counterfeiters, which is impacting their brand value.
Trademark rights are crucial to protecting the name, logo, and slogans of NFT projects, as the senior rights holder has priority rights and can stop any identical brand name use or any similar names, words, or logos. Copyright protection for the artwork is also important, as any NFT project offering similar artwork to that of Bored Ape Yacht Club could potentially infringe on their copyrights.
The licensing language used by Bored Ape Yacht Club is inconsistent and limits the rights of NFT purchasers, and the listing agreement for BASIC project is internally inconsistent on the issue of ownership. On the other hand, Crypto Punks failed to include any license agreement with their NFT drop, and there does not appear to be any written license agreement associated with the initial NFT minting of Crypto Punks.
As a result, courts will have to rule on whether the ownership of the punks was part of the minting or if an implied license accompanies the digital art, which is the Crypto Punk image.
In summary, members of the Bored Ape Yacht Club and Crypto Punks projects made legal errors when launching their NFT projects, likely due to not seeking adequate legal advice. As a result, the legal rights of both the project owners and buyers remain unclear and may have to be litigated in the courts in the future.
Commercial Licensing for NFTs
A commercial license for an NFT is a legal agreement that grants the buyer of an NFT the right to use the underlying work for commercial purposes. This may include reproducing the work for resale, using it in advertising, or incorporating it into other products or services. A commercial license will typically include specific terms and conditions such as the duration of the license, the rights that are granted, and any restrictions on use.
For example, an artist may offer a commercial license for an NFT that includes the rights to reproduce the artwork as a physical print, but not the right to use the artwork in a commercial video.
The terms of the commercial license will be specific to the NFT and the creator of the underlying work, so it’s important for the buyer to review and understand the terms before purchasing an NFT with a commercial license. It is also important to note that commercial licenses may be exclusive or non-exclusive and the terms of the commercial license should be confirmed before making a purchase.
Alternative license structures
Alternative licensing structures for an NFT that can be used by creators and should be known by buyers, include;
- Non-exclusive license: A non-exclusive license allows multiple buyers to purchase and use the same NFT, but each buyer has their own unique copy of the NFT.
- Exclusive license: An exclusive license grants the buyer the exclusive right to use the NFT, meaning that the NFT can only be owned and used by one person at a time.
- Time-limited license: A time-limited license grants the buyer the right to use the NFT for a specific period of time, after which the license expires and the NFT may be resold or relisted.
- Royalties-based license: A royalties-based license allows the buyer to use the NFT in exchange for ongoing payments to the creator of the underlying work.
- Limited edition license: A limited edition license grants the buyer the right to use an NFT that is part of a limited series, and the limited series may have a specific number of NFTs.
These are some examples, but it’s also possible for creators to come up with their own licensing structures or combinations of them. It’s important for the buyer to carefully review and understand the terms and conditions of the license before purchasing an NFT, so they can make an informed decision.
Creative Commons (CC) is a non-profit organization that provides a set of licenses that creators can use to share their work with others while retaining some control over how their work is used.
Here are some of the main licensing structures that Creative Commons offers to NFT creators:
- CC BY: Allows others to distribute, remix, tweak, and build upon your work, even commercially, as long as they credit you for the original creation.
- CC BY-SA: Allows others to distribute, remix, tweak, and build upon your work, even commercially, as long as they credit you and license their new creations under the identical terms.
- CC BY-ND: Allows others to use your work for any purpose, including commercially, as long as they credit you and don’t change your work in any way.
- CC BY-NC: Allows others to distribute, remix, tweak, and build upon your work non-commercially, as long as they credit you.
- CC BY-NC-SA: Allows others to distribute, remix, tweak, and build upon your work non-commercially, as long as they credit you and license their new creations under the identical terms.
- CC BY-NC-ND: Allows others to use your work for non-commercial purposes, as long as they credit you and don’t change your work in any way.
Each of these licenses provides different levels of control and flexibility to the NFT creator, and they allow them to specify how they want their work to be used and shared.
It’s important to note that, even if the NFT creator uses a Creative Commons license, the NFT itself can still be sold or traded as a unique digital asset. The license only applies to the underlying work, not the NFT.
Can NFTs be forged?
NFTs can technically be forged, but it is not an easy task as NFTs are stored on a blockchain which is a tamper-proof digital ledger. This means that once an NFT is created and stored on the blockchain, its authenticity and ownership can be verified by anyone using the blockchain.
Forging an NFT would involve creating a copy of the NFT and attempting to pass it off as the original. This could be done by copying the digital asset that the NFT represents, or by creating a new NFT with the same attributes as the original.
However, since NFTs are stored on a blockchain, the forger would need to change the blockchain itself to make the forgery appear legitimate. This is a highly complex and difficult process, and would require a high level of technical expertise and resources.
It’s also important to note that NFTs can have anti-counterfeiting measures such as a smart contract that holds the rules and rights of the NFT, which would make it harder to forge.
In short, while it’s possible to forge an NFT, the process would be extremely difficult and the forgery would be easy to detect, making it not a common occurrence.
How to protect your NFT from being counterfeited?
There are several ways to protect your NFT from being counterfeited:
- Use a reputable blockchain: Using a well-established blockchain such as Ethereum or Binance Smart Chain will provide a higher level of security and make it more difficult for someone to forge your NFT.
- Use smart contracts: Smart contracts can be used to hold the rules and rights of the NFT, making it more difficult to counterfeit. Smart contracts can also be used to automatically detect and reject counterfeit NFTs.
- Use a digital signature: A digital signature, such as a SHA-256 hash, can be used to verify the authenticity of the digital asset that the NFT represents.
- Use anti-counterfeiting measures: As NFT owners, you can include anti-counterfeiting measures such as a watermark, QR code, or hologram on the digital asset that the NFT represents, making it easy to detect a counterfeit.
- Register your NFT with a certificate of authenticity: You can register your NFT with a certificate of authenticity, which verifies the authenticity of the NFT and the underlying digital asset.
- Keep the original copy: of the digital asset or the metadata of the NFT in a safe place, and make sure to share only a copy of it.
- Educate yourself and your buyers: on how to spot a counterfeit NFT and how to verify the authenticity of an NFT.
It’s important to note that no system is completely foolproof and the best practice is to use multiple methods of protection to increase the level of security for your NFT.
NFTs are revolutionizing the way creators monetize their work and it’s crucial to understand the legal and ethical considerations surrounding intellectual property. As the NFT market continues to grow, it’s important for creators to protect their rights and understand their options. This blog aimed to provide a comprehensive overview of NFTs and intellectual property and we hope it has shed some light on this complex and exciting subject.