How are NFTs and intellectual property related?
Forbes describes NFTs or non-fungible tokens as “a digital asset that represents real-world objects like art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and are generally encoded with the same underlying software as many cryptos.”
Why are NFTs so popular right now?
Over the last few months, NFTs have sparked interest as sales exceeded $2 billion in the first quarter of 2021. Like pieces of art, an NFT can be sold and the token’s asset transfer is recorded in the blockchain; just like cryptocurrency.
Most NFTs are apart of the Ethereum blockchain. Like Bitcoin, Ethereum is a crypto however, it also supports NFT transactions.
Many believe that NFTs or minted digital versions of collectables are the future. What is minting you may ask? Minting an NFT is how a digital work of art becomes part of the blockchain- rendering it unchangeable and tamper-proof. Minting platforms have started profiting off of this new marketplace, allowing customers to create NFTs without technical complexity. Unlike a painting hanging in a museum, the blockchain allows storage of transaction records and makes it nearly impossible for a thief to “steal and flip” a work of art.
A tweet…. sold for 2.9 million?
A notable example includes the sale of Jock Dorsey’s first tweet- the first tweet ever- for over 2.9 million dollars as an NFT, according to a recent Reuters article.
In this case, he essentially cashed in on the virality that particular work produced.
Many don’t ever financially benefit from art… according to popular lore, Vincent van Gogh sold only one painting in his entire life. NFTs make it so artists are more likely to earn money and less likely to be ripped off.
So how is IP related?
This is where IP comes in.
While NFTs actually have a lot to do with intellectual property, the implications of NFT transactions on copyright ownership are still somewhat unclear.
Of course, NFT owners will own the original copy, but will not have the right to copy or reproduce the work; almost like owning a signed baseball card. However, royalty downstream allows original rights owners to collect a portion each time the work is resold. The basic answer is NFTs are not IP, but the underlying artwork behind them is copyrightable.
Here are some insights about IP in relation to NFTs:
- The unique aspects of NFTs should prompt IP owners need to rethink their IP protection and licensing strategies.
- IP protection strategies should include specific protection relating to NFTs.
- NFT creators need to be mindful of potential infringement issues when using third party IP.
IP owners, whose content is being used in NFTs without permission are taking note and ramping up their due diligence efforts so it will be interesting to see the infringement cases that arise as a result.
Stanton IP Law Firm’s attorneys can assist clients in identifying protectable content and subject matter, recommending best practices, and proper safeguards to prevent improper use.REQUEST A FREE CONSULTATION