Our Associate, Rishikaa discusses “The Nifty Affair of NFTs and Copyright”
If the last decade was all about blockchain technology and cryptocurrency, this decade has started with spotlight on another type of digital asset, namely NFTs a.k.a Non-Fungible Tokens. NFTs sent ripples through the art, legal, and technology worlds, when a graphic designer sold a digital collage named ?Everyday: The First 500 Days? for over $69 million.
Non-Fungible Token is metadata or code, which is minted on a blockchain and stored in the form of a link, that represents digital work on the Internet. In economics, non-fungible means something that has unique qualities that cannot be replaced or interchanged with anything else. Tokens, on the other hand, are like certificates of ownership for virtual assets. Essentially, NFT is a digitized token that represents real-life objects, such as art, videos, music etc., and is recorded on a blockchain. Due to their characteristic of being one-of-a-kind, unlike other digital assets that are available in abundance, NFTs tend to create a digital shortage. Essentially, NFTs are like digital collectibles. Interestingly, NFTs are capable of representing almost anything, including tweets.
Today NFTs are being seen as a mechanism to authenticate ownership of not only the asset they represent, but also physical assets. For instance, the luxury watch company, Breitling, issues digital certificates, that is encoded in an NFT, to authenticate its luxury watches.
NFTs have opened new channels for discussion in the legal world, particularly, with respect to copyright, ownership, and moral rights of artists.
Firstly, it is essential for a person who is minting an NFT, based on a copyrighted work, to seek permission from the owner of such work. This is because copyright law only grants the owner of the copyright with the rights to reproduce, distribute copies, created derivatives, etc.
Generally speaking, an NFT only grants ownership of a particular copy of the work that NFT represents and does not give rights over every copy or version of the work or the underlying work itself, that the NFT represents, unless the original copyright holder transfers such rights, in the underlying work, along with the NFT.
Creators can use NFTs for expanding their business opportunities as NFTs can be used for selling unique copies of their works and for tracking ownership. The idea is to track and trace digital copies using blockchain technology, which will ultimately help in anti- counterfeiting efforts. A sale of an NFT would prove both creation and copyright ownership. Creators may also use NFTs to provide certain benefits such as early access or merchandise to fans/buyers who may purchase the work distributed on an NFT blockchain network.
But where does it leave the buyer of the NFT? As noted above, NFTs are like digital collectibles with very limited rights. At most, an NFT holder can display a purchased work in a limited capacity or transfer the NFT by way of sale. However, given the non-fungible nature, the NFT holder cannot produce additional copies of the work. A purchaser of an NFT can utilize the copyrighted work if he/she obtains a license from the creator or the copyright owner of the work. Such use of the copyrighted work may be extensively governed by the terms of the NFT license as has been seen in the cases of CryptoKitties license or the NBA Top Shop license.
While NFTs are in vogue these days, many skeptics believe that its popularity will eventually fade away. One of the reasons for such skepticism is that no one knows how sustainable the NFT model is for protection and ownership of copyrighted work. Too many questions are yet to be answered. For example, what does an NFT represent if the original work gets destroyed, like in the case of a picture of Banksy?s artwork, burnt during live streaming, that was later attached to an NFT and sold during an auction? Would this infringe the moral rights of an artist? Another major concern that has been raised is in respect of piracy. While NFTs may help in controlling counterfeits, there are a number of risks involved with NFTs, such as forgery, false claims of ownership, uploading infringed copyrights on NFTs etc., primarily because there are no checks in place to ensure rightful creation and ownership.
Having said the above, there is no doubt that NFTs have opened a new world of possibilities for a large group of people. Only time will tell if NFTs are just a fad or are here to stay.