The emerging crypto-art market is reinventing the way in which unique works of art can be marketed.
We are facing the challenge of differentiating what is original from what is a copy or plagiarism. In the digital art world, this practice has become commonplace, since it is so easy to reproduce a drawing, a photo, music, a painting, a game, among other creations produced digitally or digitalized from the physical medium. However, a new technology, known as NFT (non-fungible token), intends to solve this problem by registering the origin of digital artworks with the guarantee of blockchain technology.
April 26 is World Intellectual Property (IP Rights) Day. The IP law or copyright law is an important legal abstraction that comprises a series of rights related to the creations of the human intellect, copyrights, and their protection through rules that ensure the protection of, for example, trademarks, proprietary copyrights, patents of invention, and geographical indications, among others.
In summary, NFTs or non-fungible tokens are like digital authenticity seals or digital certificates, which emerged with blockchain technology — the same technology used by cryptocurrencies — generating a digital technical scarcity. However, while cryptocurrencies are fungible, i.e. they can be replaced by other currencies of identical value, NFTs are like “non-fungible crypto-art”, i.e. unique, exclusive, and irreplaceable.
Several artists, influencers, and investors have taken the opportunity to create works in NFT format recently, reaching staggering figures. Artist WhIsBe sold a 16-second animation of a golden bear in NFT form for $1 million on Nifty Gateway. Jack Dorsey, CEO of Twitter, sold his first tweet as an NFT for $2.9 million.
The famous Nyan Cat art, known as the flying kitten meme, was sold as an NFT for ETH 300, today the equivalent of over $700,000. Artist Beeple sold his image collage artwork called Everydays: the First 5000 Days on NFT for $69.3 million at Christie’s, with it making the ranking of the most expensive artworks by a living artist ever sold.
The New York Stock Exchange itself launched a collection of NFTs to commemorate landmark IPOs, and the New York Times newspaper turned one of its columns into an NFT.
NFTs support both the registration of immaterial assets, such as GIFs, tweets, memes, digital artworks, and music, among others, and the representation of tangible assets, such as paintings, cars, real estate, etc., making the assets digitally unique and securely stored with preserved integrity and originality.
From the point of view of the IP law or IP rights, NFTs emerge as a new possibility for artists to increase their financial gains through the controlled sale of digital copies of their works. NFTs allow better management power over the works made available and traded in the virtual environment through smart contracts.
What is blockchain?
In brief, blockchain is a system that allows tracking the sending and receiving of certain types of information over the internet. It works like a code generated online that carries connected information — like blocks of data that form a chain — hence the name.
It is this process or system that allows the operation and transaction of so-called cryptocurrencies, or digital currencies.
NFTs, an acronym that stands for non-fungible tokens, are digital securities that represent rights to a certain material or digital asset. They are assets related to any goods, as long as they are unique, exclusive, and cannot be replaced by another of the same kind.
Basically, any asset has the potential to be tokenized and traded as NFTs: patents and licenses to use, articles, collectible cars, certificates, music, physical and digital works of art, and even real estate rights.
NFTs are registered on platforms that make use of blockchain technology, such as Etherum, Nifty Gateway, MakersPlace, Rarible, OpenSea, and it is essential to use cryptocurrencies as a payment for the digital asset.
These NFT marketplaces function as a large ledger where all transactions are recorded using a cryptographic sequence, which is made available for public access.
The cryptographic mechanism of the blockchain ensures that each registered NFT receives a unique and unmodifiable code, i.e. it is not possible to register the same assets on the platform twice and it is not possible to undo the registrations of their origin and the subsequent transfers, everything being registered in the blockchain.
NFT, copyright law, and copyright ownership
The first point to note is the relationship between NFTs and the copyright holder. Owning an NFT does not grant you intellectual property rights over the work. If we think about copyrights, the owner of the NFT is only the owner of a certificate that confirms that you have a version of a work.
It does not attest that you are the copyright owner of the NFT. That is, you cannot be listed as the author of the work, nor can you economically exploit that work, or distribute it for free. NFTs do not provide licenses or assignment of copyrights.
It is the same logic that would be used if you bought a work of art, a painting. You would own the painting, you could decorate your house with it, but you would not be the owner of the copyrights on the art. That is, you could not, for example, take pictures of the painting and distribute or sell it to people.
Besides the copyrightable work, some other questions arise. For example: what are the limits of the rights transferred through NFTs? How should NFTs be taxed? How to control whether NFTs are linked to an original work? How to prevent copyright infringement?
Like most technologies that come to change the status quo, NFT is still viewed with some caution and suspicion. This is normal because it is a new technology and we still do not know how to measure its long-term impacts. However, we must point out that the current impacts are great, as it is significantly moving the market. We will see how much NFTs will change our lives in the future.
Do NFT owners have copyright?
Ownership of an NFT does not entitle the owner to ownership of the digital assets, the underlying asset, or any other object. In other words, the owner of an NFT has no right to the intellectual property of the asset to which it relates.
So who owns the copyright to the work from which an NFT is generated?
That is the big question. The short answer: the author. The author will retain his copyright in his work unless he makes copyright transfers to others. to others. Thus, except in cases where NFT includes in the sale the transfer of copyrights relating to the asset (painting, music, video), the author will retain his rights to the work.
One point to be clarified: the NFT itself may not be protected by copyright. NFTs usually consist of a record in a database and just a link to the asset to which the transaction refers. These elements alone are not sufficient to constitute a work of original authorship that would qualify for copyright protection. With this in mind, so-called “on-chain assets” – NFTs that incorporate the very asset on which the transaction is based – may qualify for copyright protection under copyright law.
It is important, therefore, that before entering this new market you study and seek support from the experts of an art institute, in the technological and legal area, and then work out the best strategy for your assets, understanding whether you are an artist, investor, or end consumer, and defining how you should position, protect, and invest in the area.
How does NFT prove ownership?
This depends on the terms agreed upon when issuing an NFT, which can vary widely. For example, NFTs issued by NBA Top Shot makes the holder the owner of a “moment”, with a non-exclusive license to use, copy and display a shot for personal, non-commercial use in the gallery of a sales and trading website or third party sites that allow the inclusion of this media format.
Determining the scope of rights that will accompany an NFT requires a lot of analysis, considering a good Intellectual Property strategy.
Who exactly is the author of a digital asset connected to an NFT?
If we talk about an individual who, acting independently, creates an artistic or musical work in digital form, this would be the author.
But the answer becomes a bit more complex if we deal with other scenarios, such as works created with contributions from multiple people, works created by employees or commissioned artists, derivative works of other works, and creations conceived with the aid of Artificial Intelligence or technologies developed by third parties. These are some of the complications that investors and enthusiasts should note before venturing into this field, which may also receive some attention from legal issues such as the Judiciary, art law, and copyright law.
Is NFT trademarked?
The short answer is no. NFT is not a trademark. An NFT functions like a deed, receipt, or certificate of authenticity. That is, it verifies that the owner of the NFT possesses the “original” of the work that may have an infinite number of digital copy scattered all over the Internet. Learn more about NFTS at https://weplaycollectibles.com/
In these recent examples, NFTs have made it possible to put impressive power in the hands of artists and create true “virtual museums”. For art enthusiasts, these crypto-actives are a new way to accumulate exclusive collectibles. For digital content creators, this is a new way to make money and earn due recognition for the linked content. For speculators and early adopters, a great opportunity. And for the majority of the population, a fantastic but still unknown world.