Does Copyright Protection Apply to NFTs - PrimaFelicitas

Does Copyright Protection Apply to NFTs – PrimaFelicitas

Time Stamp: April 3, 2024 4:35 AM

NFTs have undoubtedly become one of the biggest tech standouts of recent years. Since the first NFT was minted several years ago by artist Kevin McCoy and coder Anil Dash, the NFT sector has become a 41-billion-dollar industry. CryptoPunk #2338, the most expensive NFT, sold for $4.4 million. NFTs have opened up a vast window of possibilities in the digital world, including trade and commerce. They are used as art pieces and as stores of value. They have powered games such as Chainers and have even been used to raise digital communities. However, amidst the boom of NFT, one crucial question arises. Does copyright protection apply to NFTs? Do intellectual property laws offer NFT protection? In this article, we will answer all these questions and more.

The Concept of NFT and Blockchain Explained

NFTs are more than just a fancy acronym. Some people say it’s just “digital art,” but it’s more than that. First, you might wonder, “What does NFT stand for?” NFT stands for non-fungible token.

NFTs are non-interchangeable assets encoded with unique identification codes that distinguish them from other NFTs, no matter how similar they may look. An NFT cannot be replaced or duplicated. There is only one possible copy of each NFT, and that’s why they are non-fungible, which is the true NFT meaning.

Underneath the glamour of the art, NFTs are made up of data pieces existing on a blockchain, where all the transaction records of the NFT throughout its entire history are kept and made publicly available.

On the other hand, the blockchain is just a decentralized digital ledger where transactions are recorded across a network of interconnected computers. Transactions are grouped in a “block” and then added to the “chain” in a linear, chronological order. This design is highly secure and practically impossible to alter. As great as it seems, the blockchain has some limitations, at least in the sense of copyright. Since the blockchain cannot store large files like MP3s, images, gifs, and others, other platforms, including IPFS, Arweave, and NFT.storage, have come up in recent times to facilitate linking NFTs to media like sound files, images, and artwork. This is a more efficient and productive alternative to storing the image or audio files on the blockchain.

But it also raises a problem; if this is the case, it appears that purchasing an NFT does not mean you are buying the digital asset, i.e., the image or audio file. In reality, you might only be purchasing the digital link connected to that particular file.

This creates an issue in copyright law concerning all the participants in purchasing an NFT.

What Is Copyright?

In simple terms, copyright is the legal right of an intellectual property owner. In the literal sense, copyright is the right to reproduce or copy an original work. This right usually belongs to the creators of the work or intellectual property, but it can be transferred to anyone the owner or author authorizes to use, reproduce, or copy the work.

Copyright can be transferred as a gift, an assignment, or purchased by sale. However, rights such as the right to mint through a minting license can also be partly assigned.

How Does Copyright Work?

NFT art may not be the same as conventional art, such as paintings and sculptures, but the law also protects it. The general rule in copyright law is that an artist who creates an original work will automatically have a copyright over that work. The copyright of the owner includes the rights to:

  • Reproducing the materials
  • Prepare Derivative works (these are works similar to the original)
  • Distribute copies to the public

Copyright can be illustrated in the following examples;

  1. If Nick creates a painting and sells it to John, John has the right to:
  2. Make more copies of the painting
  3. Own his copy of the painting

On the other hand, Nick only has the right to approve derivative works.

If John just wants to adapt the concept of the painting into another work, he can buy the copyright for the painting or purchase a license from Nick.

  • When John bought the painting from Nick, ownership was transferred to John. Therefore, John now has all the rights Nick once had. John will acquire the right to:
  • Make more copies of the painting.
  • Approve any adaptation of the painting.
  • If John chooses to acquire only a license, he will only get a handful of rights, while Nick owns the copyright. If person B decides to purchase a license, he will get specific rights, but person A will still keep the copyright.

This exact scenario also applies to NFT works. The owner always retains the copyright except where he assigns or transfers it.

Ownership of an NFT

Interestingly, NFTs technically don’t classify as original or derivative works, which ordinarily would enjoy copyright protection. However, the works on which the NFT is created may enjoy copyright.

Regarding NFTs, the rights in the works are held by the author/assignee.

The author is the person who creates the work. In most copyright laws, the author will be the sole owner of the works, except where;

  1. There is a co-author who jointly owns the work.
  2. The work was commissioned by the author’s employer, in which case the employer owns the work.

As earlier established, authorship and ownership of the works on which the NFT is created is not the same as having actual ownership of the NFT itself. The true owner is the person who mints it. Therefore, in practice, the author of the works of an NFT is not necessarily the owner. However, minting an NFT of works over which you have no rights constitutes copyright infringement or theft of another person’s work. So before minting, make sure you have the right to do so to avoid a lawsuit. This means you have to be either the author or have assigned rights to mint.

Conclusion

NFTs are more than digital works; they are also works of intellectual property, and as such, they retain the protection afforded all other works of IP. Copyright laws for NFTs may differ from place to place, but the basics are the same everywhere. We hope more will be done to protect NFTs.

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