NFTs (Non-Fungible Tokens) are becoming an increasingly popular way for individuals and brands to cash in on their digital creativity.
And it’s easy to see why.
You create a unique digital asset, such as a piece of art, and then tokenize it to prove that you own it.
More and more creators are turning to NFTs to help verify authenticity and reduce fraud. Non-fungible tokens have become the currency of choice in the metaverse.
But what happens once the NFT is sold? Who owns the copyright – the original author or the new owner? How do copyright and intellectual property rights laws apply?
Understanding NFTs
To see where the inconsistencies and confusion lie in NFT copyrights, it helps to go back to basics to understand what NFTs are.
NFTs are digital assets that contain unique identification tokens that confirm ownership. These digital assets range from art, music, and photos to collectibles such as comic books, trading cards, and in-game items.
While fungible assets such as coins and cryptocurrencies can be traded, each NFT contains a unique digital signature.
This means that no two NFTs are the same, and therefore they cannot be exchanged or exchanged with each other. This is the difference between fungible and non-fungible.
Like cryptocurrencies, non-fungible tokens or NFTs are stored on blockchain technology – a public ledger that secures information in a way that makes it impossible to hack.
Thanks to the unique identification codes found on each NFT, they can be easily verified and authenticated to prove ownership.
Although NFTs have the technology proprietary, there is still confusion surrounding copyright law.
How does copyright legislation apply to NFTs?
Let’s take a look at the Hermes case.
In November 2021, Hermès sued artist Mason Rothschild (real name Sonny Estival) for creating a line of faux fur NFTs inspired by its most famous luxury bag: the Birkin.
Named MetaBirkins, the line competed directly with Hermès and its own plans for NFTs. According to the company’s lawsuit, this confused its customers and diluted its brand.
Rothschild defense? that his work was social commentary and thus protected by freedom of artistic expression.
The jury did not buy it and awarded the case in favor of Hermès. Their ruling was that the NFTs violated copyright law, including trademark dilution and infringement. It all ended up costing $133,000 in damages.
A costly lesson for Rothschild and an important legal precedent for NFTs and copyright law.
Who owns the intellectual property of the NFT?
Obviously, many brands, including such notable luxury brands as Dolce & Gabbana and Tiffany & Co. , Gucci, and more, I’m starting to explore the potential of non-fungible icons.
This means that it is important to understand where creativity ends, and copyright protection begins.
Because while buying an NFT gives the owner certain rights, full creative control is not one of them — not unless the copyright holder takes active steps to ensure this, which is rarely done.
Understanding copyright protection
As the copyright owner, you have the exclusive right to copy and display your work—unless you choose to transfer the copyright or grant a license to the buyer.
But do these same laws apply to NFTs? These are the questions that are currently being asked.
If creating a non-fungible symbol is defined as copying or reproducing the original work in any way, then under copyright law (at least in the US) the copyright holder is the only person who should be legally allowed to do so.
However, copying works is now much easier and cheaper than it was before the Internet existed. Today, all it takes is a simple right-click, whereas before, creating copies took time, money, and effort.
This is why copyright law was such a serious consideration that, today, it is hardly thought of again.
What do you own when you buy NFTs?
It’s a good question.
Just because you purchase a non-fungible token doesn’t mean you automatically own the copyright or even the license. Creator does.
This is because when you buy an NFT, you are actually buying a digital token – proof of ownership of something. And in some cases, you may even be a part-owner of that thing.
Take The Merge, for example — an NFT artwork of 312,686 tokens that was purchased by 28,983 collectors for a total price of $91.8 million.
Now imagine each of those 28,983 collectors going off separately and reproducing their share of the same piece of art: Nightmare.
While it can be difficult to understand the various intellectual property laws of trademark, patent, and copyright—particularly how they apply to NFTs—the rules are simple and grounded in common sense.
Don’t copy other people’s work, always keep your work safe, as Hermès has recently and powerfully demonstrated.
How licenses and NFTs work
Currently, copyright laws and guidelines are still being questioned and debated.
But if you’re thinking of buying non-fungible tokens or you’re already an NFT owner, there are a few workarounds when it comes to licensing:
personal licence
While you may not own the copyright yourself, if you are granted a personal license, you may use your NFT for non-commercial, non-profit means. This could include displaying your artwork in your home or using it as your profile picture on social media.
However, keep in mind that you will not be able to use the NFT for commercial gain in any way.
Commercial rights
Here you will have some commercial rights to your NFT as granted to you by the creator. It is important to remember that they will still own the copyright and IP ownership of the original work.
Depending on the specific rights transferred to you, you may be able to sell prints, create merchandise, or even create a TV show.
In the case of the Bored Ape Yacht Club, for example, the owners have unrestricted commercial use of their NFT art. (However, there seems to be some lingering confusion regarding the copyright registration, which we’ll leave for another time.)
Aside from personal and business licenses, there are other structures in which NFT buyers have to pay royalties to the original creator. So every time an NFT is sold, it generates passive income for its owner.
For example, William Shatner sold 125,000 digital photos on the WAX Blockchain in just 9 minutes and is now making secondary income from their trade.
On the other end of the spectrum, a royalty-free license can eliminate the need to pay royalties to a content creator. Other alternative licensing structures may grant or deny certain permissions to their owners.
So, while copyright laws may have strict guidelines, licenses can help grant certain creative freedoms.
Priority determination of NFTs trademarks and intellectual property rights
As we have discussed, the Hermès case sets an important legal precedent for luxury brands regarding the unauthorized sale of non-fungible tokens. It is more relevant now than ever.
Big brands like Gucci, Louis Vuitton, Burberry, and more are starting to get into the NFT space, partnering with NFT marketplaces and creating digital collections. And why don’t they?
NFTs allow them to endorse limited-edition products, extend the life cycle of their products, and build more sustainable business models.
It’s no wonder, then, that brands are optimistic about NFTs’ ability to transform the industry and create new opportunities for growth and innovation.
What does this mean for anyone creating an NFT?
While NFTs have the potential to change the market and make new opportunities possible, as a brand or creator, you still need to know your intellectual property rights.
You also need to know about NFTs and understand that just because you buy one, doesn’t mean you own the underlying IP address.
Unless, of course, you’re the original content creator.
Instead, non-fungible tokens represent ownership or rights to a particular underlying asset. This means that creators must avoid infringing on the intellectual property rights of others.
They also need to implement measures to protect their intellectual property at the same time.
Otherwise, what’s to stop someone from buying the copyright to an NFT artwork, and then suing the buyer for making the same artwork as their profile picture?
Or copy other businesses to create NFTs and then ensure that the buyer has the rights to the work? All while blurring the lines of copyright infringement.
There are a lot of gray areas to actually navigate without playing fast and miss with the copyright legislation already in place.
So while NFT copyright terms are still being worked out, play it safe.
Protect your copyrighted work as a creator or trademark.
Claim resale proceeds if applicable to you.
Do not use your NFTs for commercial gain without proper authorization.
And never go up against Hermes.
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Featured image: Crazy_Dark_Queen/Shutterstock
