NFTs: art meets crypto – traditional copyright issues in tokenised world – Commentary

Owning NFTs is not the same as owning underlying digital assets
Purchasing NFTs does not confer underlying copyright in digital works
Displaying, copying or minting digital artworks may constitute copyright infringement
Comment

Non-fungible tokens (NFTs) are the latest development in disruptive blockchain technology innovations, this time in the world of digital art, collectibles and even luxury goods. This article is part of a series exploring the evolving IP landscape in the internet, digital media and e-commerce industries.

Owning NFTs is not the same as owning underlying digital assets

Purchasers of NFTs should be aware that even though ownership of the authentic digital asset is established through ownership of the NFT, the digital asset itself may be viewed, downloaded and enjoyed by anyone (for example, the artwork sold on Christie’s can be found online). In fact, Christie’s conditions of sale clearly states as follows:

Your purchase of the lot does not provide any rights, express or implied, in (including, without limitation, any copyrights or other intellectual property rights in and to) the digital asset underlying the NFT.

Drawing parallels from the physical art world, owning an NFT is like owning a unique print of a piece of art signed by the artist, while multiple other individuals may simultaneously own identical unsigned prints. As discussed below, the artist retains the copyright in the underlying work.

Purchasing NFTs does not confer underlying copyright in digital works

In some jurisdictions, for copyright to be transferred to the purchaser, the copyright owner of the work must provide an express written assignment. Such an assignment could optionally be included in the smart contract executed to mint the NFT, but this has generally not been the case to date. If the purchaser desires the copyright, due diligence will have to be conducted to ensure the contract includes such rights. As noted above, the transfer of rights may also be clarified by the conditions of sale of the auction house, which are separate from the contract attached to the NFT. For example, Christie’s states the rights that a purchaser does not obtain:

you do not have the right to distribute, or otherwise commercialize the digital asset, or to represent or imply any sort of sponsorship, endorsement, affiliation, or other relationship with the seller and/or the creator of the digital asset without the prior authorization of the seller or the party(ies) that holds such rights.

Displaying, copying or minting digital artworks may constitute copyright infringement

The digital and accessible nature of NFTs creates a risk of inadvertently infringing the underlying copyright of the digital work. Like any online image, NFTs may be physically printed, displayed in digital frames or shared on online forums with ease, after accessing the digital work through the link specified in the NFT transaction (which is open to inspection on the Ethereum blockchain by anyone – for example, see the transaction for the artwork sold on Christie’s). It is an infringement to do with a work an act that only the copyright owner has the right to do unless such acts are authorised or fall within a fair dealing exception. Further, individuals may believe that a digital work that they possess (but did not author) can be minted and sold as an NFT. However, this would also likely infringe the copyright since by doing so they would be distributing the work and making it accessible to the public without authorisation.

Comment

NFTs are creating an emerging market for artists and collectors to sell their unique “signed” digital assets in a manner that also makes unsigned copies available to the public. Sellers and purchasers of NFTs should ensure that they understand the copyright implications of the transaction. In addition, any member of the public seeking to make any significant use of an NFT image (eg, sell, distribute or archive copies) should seek competent legal advice to ensure they have addressed any issues of copyright.

For further information on this topic please contact Daniel Anthony or Akiv Jhirad at Smart & Biggar by telephone (+1 613 232 2486) or email ([email protected] or [email protected]). The Smart & Biggar website can be accessed at www.smartbiggar.ca.