Since early 2021, we have seen a boom in non-fungible tokens (NFTs) because they offer opportunities for artists and the digital art market. This phenomenon has attracted the attention of various sectors seeking to monetize their works and exploit their intellectual property rights, as NFTs represent any type of digital creation, including works of art, music, videos, sports collectibles, among other types of content. This market is in full development, so it is necessary to study the legal consequences from the point of view of intellectual property and how copyright applies to this new technology.
Non-fungible tokens “are digital collectibles, verified by means of a blockchain, so that an image, song, URL, or any other data can be authenticated as ‘original’”[1]. NFTs have two main characteristics: 1) they are cryptographic tokens, and 2) they are non-fungible tokens. Similar to cryptocurrencies such as Bitcoin, NFTs are created using blockchain-based technology, which means that all information relating to the token and its transaction history is recorded and stored on the blockchain. In contrast to standard cryptocurrencies, NFTs are non-fungible, which means they represent unique and distinguishable assets. Currently, most NFTs are found on the Ethereum platform, where, once the token is created, it must be minted so that it can be registered on the blockchain and be the subject of transactions.
Given that NFTs have become a million-dollar market, many artists, public figures, and companies are taking advantage of this new technology to monetize their digital content and sell it for millions of dollars. For example, the founder of Twitter sold his first tweet as an NFT for $2.9 million. Similarly, digital artist Beeple has sold multiple digital artworks as NFTs, including his piece “Everydays – The First 5000 Days,” for $69 million, the highest price for an NFT to date and among the most expensive works of art by a living artist.
But what are we buying when we purchase an NFT? There is a misconception that the NFT gives the buyer ownership of the original work. However, there is no transfer of ownership, and the rights remain with the creator. In reality, what you are buying is a digital version of the work, not the work itself. It is similar to buying a collectible item or an autographed book, something special and unique, but the original work remains the property of the author. In this sense, when Jack Dorsey sold his tweet as an NFT, what he was actually selling was a digital certificate verified and signed by the creator, as well as the metadata files related to the post. The tweet continues to be available on his platform and Dorsey retains the copyright.
It is therefore clear that when an NFT is created and sold, the author of the work remains the copyright holder of the work incorporated as an NFT in the blockchain. The purchaser of an NFT may not reproduce, adapt, exhibit, communicate to the public, or distribute the work without the author’s authorization, unless the author has specified that all or some of these exclusive rights are transferred as part of the sale of the NFT. However, they may transfer the NFT through resale. In effect, the purchase of an NFT will only grant them an interest in the set of information or metadata linked to the digital content that is protected by copyright, so third parties will be able to continue enjoying that content, either by downloading it or through social media, without infringing the rights of the NFT owner.
On the other hand, we must consider the possibility that an NFT creator may infringe on the copyrights of third parties by incorporating the artistic creations of other artists into an NFT without their consent and profiting from its sale. These creators of tokenized content must be aware and cautious and take the necessary measures (e.g., obtaining a license for use) to safeguard any intellectual property rights that may be infringed upon. Otherwise, the legitimate owner of the trademark or work used in the content may take legal action to protect their rights. However, due to the nature of blockchain and NFT transactions, enforcing intellectual property rights is a real challenge.
NFTs have proven to be a product that has revolutionized the art market, adding value to virtually any content that can be traded on digital platforms. However, this phenomenon is still in its infancy and will continue to evolve, including its nature and legal implications. Currently, NFTs do not fit perfectly with intellectual property laws, both internationally and in the Dominican Republic. As these new technologies expand and gain ground in the market for transactions of this type of work, it will be necessary to reevaluate international treaties and legislation on the subject to find effective solutions to the legal risks and gray areas of copyright.
[1] Roberts, Molly. Opinion: What NFTs are and what their dark side is. The Washington Post: April 8, 2021. Found at: https://www.washingtonpost.com/es/post-opinion/2021/04/08/nft-crypto-token-no-fungible-que-son-peligros/
[2] Giannopoulou, A.; Quintais, J.P.; Mezei, P., and Bodó, B. The Rise of Non-Fungible Tokens (NFTs) and the Role of Copyright Law – Part I. Wolters Kluwer, Kluwer Copyright Blog: April 14, 2021. Found at: http://copyrightblog.kluweriplaw.com/2021/04/14/the-rise-of-non-fungible-tokens-nfts-and-the-role-of-copyright-law-part-i/
[3] Ibid.
[4] Andrés Guadamuz. Creative Commons, commercial use, and NFTs. TechnoLlama Blog: May 9, 2021. Found at: https://www.technollama.co.uk/creative-commons-commercial-use-and-nfts
[5] Giannopoulou, A.; Quintais, J.P.; Mezei, P., and Bodó, B. The Rise of Non-Fungible Tokens (NFTs) and the Role of Copyright Law – Part II. Wolters Kluwer, Kluwer Copyright Blog: April 22, 2021. Found at: http://copyrightblog.kluweriplaw.com/2021/04/22/the-rise-of-non-fungible-tokens-nfts-and-the-role-of-copyright-law-part-ii/
[6] Ibid.
[7] Gatto, J.; Chapman, L. & Parsafar, Y. NFTs and Intellectual Property: What IP Owners and NFT Creators Need to Know. Sheppard Mullin Richter & Hampton, LLP, 2021. Found at: https://www.jdsupra.com/legalnews/nfts-and-intellectual-property-what-ip-5945088/
Available at: https://acento.com.do/opinion/el-impacto-de-los-nft-en-la-industria-creativa-8994731.html