Whether you are a crypto guru or not, you have likely heard about NFTs. The three-letter acronym, NFT, stands for "Non-Fungible Token". NFTs are the centre of attention right now because of high-profile sales, such as $70 million for digital artwork, $2.5 million for Jack Dorsey's first tweet, and more than $230 million spent buying and trading digital collectibles of NBA highlights. Copyright issues are emerging as some artwork and tweets are being tokenized into NFTs without the copyright owner's consent. To explore copyright in the digital space of NFTs, a basic understanding of NFTs is first required.
What is an NFT?
An NFT is a digital asset (token) that is minted, recorded, and available for trade on blockchain. Like cryptocurrency, blockchain enables an NFT to be authenticated and the ownership verified by public metadata kept in a digital ledger. An NFT is dissimilar to cryptocurrency because NFTs are non-fungible, meaning they are unique and not mutually interchangeable. NFTs can digitally represent just about anything you want and commonly represent art, GIFs, music, tweets, sports moments, sneakers, and even digital real estate on host sites. NFTs are bought and sold on various digital marketplaces.
Simply put, buying an NFT gives verified ownership of a URL to a host site that holds the digital item (for example a video of your favourite sports moment).
Who owns the NFT?
Buying an NFT from a digital marketplace confers ownership to the buyer. The most basic ownership allows you to own the underlying NFT, giving you the right to trade, sell, or give away your NFT.
The terms governing the NFT outline the scope of your ownership and what you can do with the NFT and underlying asset. Absent terms stating otherwise, ownership does not equate to owning the copyright or grant you any rights to the intellectual property underlying the NFT. For example, some agreements (such as when purchasing NBA Top Shot Moments or a Kings of Leon album) grant a licence to use, copy, and display the digital asset solely for personal, non-commercial use; whereas other licenses allow an NFT owner to use, copy, and display the digital asset for commercializing merchandise up to $100,000 in gross revenue each year. Using the NFT's underlying asset contrary to the terms may expose the user to, inter alia, copyright infringement issues. Understanding the bounds of the licence is crucial to understanding what can be done with the purchased NFT and its underlying asset.
Who owns the copyright underlying the NFT?
The copyright owner is often the one who minted the NFT, assuming that person also owns the copyright in underlying the asset. The copyright owner is free to transfer the copyright, grant a licence for certain uses, or even limit the asset's use. The copyright owner retains the right to the underlying asset and could create another NFT with the same asset.
Copyright issues arise when someone mints a digital asset but does not actually hold the underlying copyright, including in the context of social media. For example, there are reports of minters creating NFTs of tweets with embedded artwork to which they allegedly do not own the copyright. These copyrighted NFTs are then sold and bought among other legitimate NFTs in the marketplace.
The scenario of unauthorized NFT minting is problematic for both copyright owners and NFT buyers. Copyright owners have their asset used without their permission and do not receive any profit. This result forces the rightful copyright owners to pursue legal action and put the marketplace on notice of copyrighted NFTs. Meanwhile, unsuspecting NFT buyers may purchase worthless NFTs with the added risk that their NFT will be removed by the marketplace due to copyright.
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