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What, exactly, is a non-fungible token? Is it like a copyright?

On Behalf of | Jun 21, 2021 | Intellectual Property |

In many ways, non-fungible tokens (NFTs) represent an entirely new type of intellectual property. While the things that are eligible for NFT treatment overlap a great deal with what can be copyrighted, buying an NFT does not actually confer copyright ownership. NFTs are crypto assets whose value exists entirely in the buyer’s trust in time-stamped blockchain transactions.

You may have heard of pieces of artwork or even internet memes being sold to a single buyer as an NFT. For example, the photographer of the so-called “Disaster Girl” meme sold the meme for $500,000. It took place in an encrypted blockchain transaction. The artist’s signature is permanently attached to the NFT, making it unique and verifying ownership of the NFT.

Many people hope that NFTs can serve as an alternative to copyright. Others assume that buying an NFT buys you the copyright to the asset. The truth is that NFTs merely represent the asset, they are not the actual asset. NFTs can’t be duplicated, but that doesn’t appear to translate into ownership of the asset itself.

Most assets that can be purchased as NFTs are already subject to copyright law

The kinds of things that can be recorded on blockchains as NFTs are similar to what can be copyrighted. This includes visual works of art like memes and photographs, dramatic, literary and musical works, and performances and recordings of those works.

In most cases, these are protected by copyright merely by having been created. The copyright is inherent to the creator. Absent an agreement with the artist, it is not entirely clear that the owner of an NFT even owns the exclusive right to use the asset.

In other words, if the artist were to continue to use the asset even after selling it as an NFT, there might be little the NFT holder could do about it.

Little legal infrastructure available, especially internationally

An NFT becomes an NFT in two steps: it must be signed (“minted”) by the artist and then it must be added to the blockchain. Unfortunately, some platforms allow people other than the artist to mint the asset. That has meant that many artists have seen their art minted by outsiders and even sold as NFTs without their consent. In the traditional art marketplace, that would be a clear copyright violation.

For example, earlier this year, a Twitter bot called @tokenizedtweets began minting viral tweets that it had not itself tweeted and creating NFTs out of them. This provoked a outcry from artists and creators, but the ultimate effect was only that @tokenizedtweets got banned from Twitter.

In other words, buyer beware.

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