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InContext / An inside look at the business of digital content

The rise of NFTs comes with unanswered copyright questions

February 22, 2022 | By Charlotte Ricca – Independent Media Reporter @Charlotte_Ricca

Non-fungible tokens (NFTs) have dominated the headlines of late. Whether Kanye West is dissing NFTs, or Jimmy Fallon is hyping them, hardly a day goes by without a big news story related to virtual property.  While the splashy headlines are fun, there is increasing attention on the copyright implications of NFTs. With a growing number of digital publishers looking to cash in, it has become evident that there is misunderstanding around ownership and copyright issues of this burgeoning technology.  

“The whole premise of NFTs is that they are unique. But while the token might be unique, it doesn’t mean the item attached to it is,” explains Andres Guadamuz, a Reader in Intellectual Property Law at the University of Sussex in the UK, who wrote a paper on NFTs and copyright.  

“Blockchain is public, so anyone can download and view the item for free,” Guadamuz adds. “But these issues are nothing new; they already exist online. You can easily copy and paste an image on the internet.” With this in mind, it is important for publishers to be cautious, and consider the same digital rights management issues that have been a part of digital publishing since its inception. 

“The digital rights management aspect might prove to be an important part of NFTs,” says Guadamuz. “But the potential for copyright infringement could have a more immediate effect on the development of NFTs. Given the hype that exists about the technology, as well as the prices that are being paid for NFTs, there is considerable scope for legal action in this area.” 

So, while Doug Shapiro claims “NFTs represent a massive financial and strategic opportunity for traditional media companies,” they may also represent a massive headache.  

What does it mean to own an NFT?  

Each NFT has a unique identifier, with metadata recorded in a public ledger, including who originally minted the NFT and who owns it. The NFT can only have one official owner at a time, and no-one can modify the record of ownership or copy and paste a new NFT into existence.  

However, the blockchain is unable to store the actual underlying digital asset. That means when you buy an NFT, you are only buying a link to the item – not the item itself. Aram Sinnreich, professor and chair of the communication studies division at American University, explains, “Mostly, what you ‘own’ is the exclusive right to transact that little entry in the ledger.”  

He adds, “For instance, owning an NFT of a song doesn’t mean you own the song — unless the prior owner of a song also wrote a contract saying ‘whoever buys the NFT also owns the song itself.’ In which case, why not just buy the song, and skip the NFT part?” 

He does have a point. According to Sinnreich there are two kinds of people buying NFTs: “gullible people and scam artists.” One of the key drivers behind the NFT phenomena is scarcity, because each one is supposed to be unique.  

“A creator can write a song, and everyone can listen to it, but the NFT is sold as a unique version of the work, digitally signed by the author,” explains Guadamuz. “NFTs are therefore seen as collectors’ items and not property of the original itself. However, there is practically no ownership transfer involved in NFTs.” 

NFT copyrights and wrongs

Confusion about what you own when buying an NFT is further muddied by the aforementioned copyright concerns. The buyer of an NFT doesn’t necessarily acquire its copyright. Similarly, if you already own an original work of art, photo, or song “off chain,” it doesn’t mean you have the right to sell it as an NFT.  

This confusion has led to a number of high-profile disputes. An NFT of a Jean-Michel Basquiat drawing was withdrawn from auction on the platform OpenSea, after the late artist’s estate confirmed the seller did not own the license or rights to the work – even if they did own the original piece of art.  

Miramax accused Quentin Tarantino of violating the company’s copyright and trademark, when he minted NFTs based on “Pulp Fiction.” More recently, a website called HitPiece was accused of selling iconic songs as NFTs without the artists’ permission.

The sellers of the NFT of Basquiat’s “Free Comb with Pagoda” claimed the transaction would “memorialise ownership” of the physical drawing, as well as “reproduction and IP rights that will be sold to the highest bidder in perpetuity.” While some parts of the law surrounding NFTs remain uncertain, there is no question that NFTs do not have the power to overrule existing copyright protection. Only the lawful copyright holder can transfer the reproduction rights.  

“NFT is a smart contract, but it doesn’t include copyright,” says Guadamuz. “So, you can claim you own the original link, but not the original artwork – unless the copyright transfer is explicitly stipulated.” 

According to Sinnreich, one of the reasons NFTs don’t include copyright is because “they are not creative works, and don’t warrant copyright. They’re also not derivative works, so they don’t infringe on copyright.”  

Guadamuz adds, “The issue is that an NFT is just code with a link; I don’t even need to have a copy of the work.”   

But to confuse matters more, Guadamuz says, “However, most NFTs actually do link to a copy of a work, and that copy could be infringing. So, I could mint an NFT of a picture I don’t own, and I would upload a copy of it to the intermediary, say OpenSea. In this case I am infringing, not by the minting of the NFT, but by uploading an infringing copy to a website, where it is publicly available.” 

The bottom line is: The same copyright laws apply to digital art as to physical works of art. The fact that the work has an ownership certificate in the form of an NFT doesn’t change the rules. In publishing, this means ensuring you have permission from the creator of the original content before minting an NFT of their work.  

Publishers may be keen to get a piece of this very profitable NFT pie, while the market is booming, but it pays to be cautious and careful when it comes to copyright. 

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