The History of NFTs and Intellectual Property
Non-fungible tokens, or NFTs, have been around since 2012 but only started gaining recognition in the crypto space between 2017–2018. This was when a small operation going by the name of Dapper Labs began offering NFTs linked to unique digital cats called CryptoKitties. This seemingly innocuous way of utilizing NFTs was just the beginning and fueled an unprecedented increase in their popularity. Recently, record prices were paid for NFTs linked to underlying assets, with some notable examples being,
- Jack Dorsey’s first ever tweet on Twitter.
- Beeple’s “The First 5000 days” which sold for a staggering $69 million.
- Paks “The Merge,” which sold for an incredible $91 million, and remains the most expensive NFT sold to date.
As the above examples show, any asset can be tokenized into an NFT. But what are the implications of NFTs when it comes to intellectual property? This article will look to provide some answers to some of the questions about NFTs and Intellectual Property (IP).
Understanding NFTs And Intellectual Property
Before getting started, it is essential to understand NFTs and intellectual property. NFTs or non-fungible tokens are unique, blockchain-based assets representing a digital record of ownership and authenticity of any real-world asset, such as art, media files, documents, and even property records. NFTs are primarily based on the Ethereum blockchain, with all transactions recorded similarly. Each NFT has its identifying information stored in smart contracts, and it is this information that makes each NFT unique.
Now, let’s get to intellectual property rights. To offer a simple explanation, intellectual property refers to something that is created through your or the creator’s mind. By this definition, intellectual property applies to several categories, such as artwork, literature, writings, and even inventions. Now, a key point to remember is that intellectual property protections were relatively easy to implement during the analog era. However, the world is changing as millions create content, and accessibility increases exponentially, making implementing intellectual property rights significantly more challenging.
The History Of NFTs And Intellectual Property Rights
There is no doubt that NFTs have the potential to revolutionize a vast array of things ranging from movie merchandise and music albums to collectible cards and art. However, several issues need urgent addressing, one of them being the rights afforded to NFT owners. For example, what are the rights that an NFT owner possesses, and if any malicious entity steals an NFT, does the victim still have access to the intellectual property rights of that particular asset, and how can the risk of copycat NFTs be mitigated?
What Happens When You Buy An NFT?
Looking at NFTs, intellectual property, and copyrights would perhaps not even cross your mind. Most NFTs are metadata files that have been encoded and may or may not be subject to copyright or intellectual property rights. But when you purchase an NFT, do you also get access to IP rights? To give you the short answer, no. Let’s understand how this works through a simple example. When Jack Dorsey decided to sell his first ever tweet as an NFT for a whopping $2.9 million, the individual who purchased it does not own the IP for the tweet. All copyrights still rest with the author, in this case, Dorsey.
Another example can be cited in the New York Times, when it published an article about crypto collectibles, giving readers the chance to win a tokenized version of the published story. The story ended up selling for a staggering 350 ETH, which was worth $560,000 at the time. While the NFT offered the purchaser a chance to be featured and photographed in a subsequent piece, the buyer did not receive any reproduction or syndication rights. The confusion around IP rights does not end here. During the peak of the NFT boom, MetaBerkins became extremely popular. MetaBerkins were essentially a recreation of Hermes’ bags. However, the artist behind these pieces was at the receiving end of legal action taken by the designer brand.
So Has Any NFT Given IP Rights To Owners?
This is not to say that NFT owners do not have any access to IP rights. Major collections such as Bored Ape Yacht Club have given exclusive IP rights to purchasers. This means owners of Bored Ape NFTs also have the potential to profit from their collection. An example of this is Snoop Dogg and Eminem teaming up for a new music video, in which they transform into their respective bored Ape characters. The terms of the Bored Ape Yacht Club NFT state that those who purchase the NFTs own the underlying Bored Ape NFT and the art as well. However, there is no clarity on what happens if the NFT is stolen.
The lack of clarity around what happens when an NFT is stolen prevented actor Seth Green from releasing a TV show based on his Bored Ape NFT. Green’s entire collection ended up being stolen in a phishing scam, and he ended up paying significantly over the odds to get it back. Legal experts believed that Green would have been in the clear in a legal sense if he had just released the series without featuring the NFT.
NFTs have significant potential when it comes to opportunities for individual users and businesses. However, they also come with their fair share of pitfalls. To iron out issues pertaining to NFTs and IP there needs to be significantly more clarity around what is permitted and what is not concerning IP rights. This should be clearly stated in the terms of sale of the NFT and encoded in the accompanying smart contract. There must also be appropriate oversight of the use of IP rights by any third parties, such as the buyers of a particular NFT. Clearly, there remain significant issues around IP and NFTs, and it remains to be seen how the law evolves to keep track.