What is NFT Ownership?

This question is more difficult than it appears, owing to the nature of an NFT. As previously stated, most tokens represent metadata of the work rather than the work itself, thus creating such a token may not infringe copyright. This is where having a clear and accurate grasp of what a non-fungible token is in technical terms becomes important.

Who determines the rights in an NFT?

• Owner/Creator of NFT determines the rights transferrable after the acquisition.
  • Depending on the nature of the asset the owner may choose to transfer absolute rights of ownership, occupation, and copyright to the buyer.
• On most popular NFT marketplaces, each item displayed for sale has an attached NFT licence that clearly describes the rights you own when you buy.
• Terms and conditions are predetermined by the creator and can include benefits for buyer such as:
  • Outright ownership of the asset 
  • Exclusive access to the digital location where it is hosted – creative works like poems pictures and audio
  • Resale right 
  • Access to receive a percentage of bounty from further sales 

It’s harder to decipher how the minting of an NFT, even without authorisation, could be considered copyright infringement from a copyright standpoint. The resulting file could not be regarded as a reproduction or even an adaptation of the work because the NFT is not the work, but rather a string of numbers formed in relation to a work.

When someone buys an NFT from the creator, they get ownership of it insofar as it is their property. After all, an NFT is a blockchain-traceable digital certificate of ownership that represents the acquisition of a digital asset.

However, the NFT holder has no further rights to the work. This covers copyright-related rights such as the right of public communication (i.e., making the asset available to the general public) and the rights of adaptation and reproduction. Simultaneously, if you buy physical memorabilia, the scenario is the same. You do not automatically have the right to display a painting in public just because you own it. It also doesn’t give you the legal right to sue for copyright infringement if someone copies the picture in the artwork without your consent. To gain such rights, you must either be the copyright owner of the work or have the creator assign the copyright to you (in writing and signed).

NFT buyers should be aware that if they engage in such activities without the authorization of the right holder, they are infringing on the copyright. Only through the provisions included in the NFT, in the form of a licence, can such rights be transferred.

You may be forgiven for not thinking about copyright after reading the previous description of NFTs above. The majority of non-fungible tokens are metadata files encoded with a composition that may or may not be protected by copyright (you could theoretically build an NFT of a trademark, for instance), or even a work in the public domain. Anything that can be digitised can be converted to an NFT; the original effort is only required in the first step of the process to establish the unique tokenID and contract address pair. As a result, NFTs have very little to do with copyright in principle.

Nevertheless, there is surging interest in NFTs from a copyright standpoint, partly because many of the works being exchanged as NFTs, such as works of art, are copyright protected, but also because there is an ambiguity about what you get when you buy an NFT.

Mass Confusion? Is an NFT Consubstantial With the Original Creation?

It’s not everyday that an arcane word such as consubstantial becomes a moot topic in the Roman Catholic Church, but this was the case when The New York Times reported that the use of the word in liturgy was bringing mass confusion, introduced in a bid to be as close as possible to the original intent of the Latin Mass. The argument being that it would confound the average Roman catholic and lead to “pastoral disaster”.

The translation then said that Jesus Christ is “one in Being with the Father,” but the new translation offered that Jesus is “consubstantial with the Father” (translating the Latin phrase consubstantiálem Patri).

A fitting corollary to the current confusion in the liturgy of all things blockchain. Thus, the question begs, is an NFT consubstantial with the Creation? We have mentioned that there are several angles in which this DLT-liturgical obscurity can be understood.  Of course, the amount of money spent on the tokens may have contributed to some of the confusion. When pixelated art sells for millions of dollars, it’s not farfetched to think the buyer got more than just a piece of code.

When reporting on the sale of NFTs, the mainstream press is increasingly perplexed; reporters frequently think that the work has been sold, which is not the case. It’s understandable that buyers of NFTs would pay such a high price for what amounts to a metadata file and a tiny sequence of numbers and letters with questionable artistic merit, but that’s essentially what most NFTs are.

Copyright may, therefore, come into play, at least in some NFTs. While most NFTs do not entail a transfer of rights, the seller may offer to convert the token into a copyright ownership transfer of the original work in select cases. However, determining whether this complies with the legal requirements for copyright transfer is problematic. For instance, the Copyright Designs and Patents Act 1988 (CDPA) in the United Kingdom requires a copyright assignment that is “in writing signed by or on behalf of the assignor.” A legal concept akin to the aforementioned is the Principle of Exhaustion (US) – implies that once a work protected by copyright has been placed in circulation with copyrights holders consent, the copyright holder can no longer object to that copy residing with the person who owns it. It’s tough to imagine how an NFT might meet those criteria.

In the same way that blockchain might work as an immutable record of ownership claims, operating as a means of confirming or assessing authenticity, all NFTs could be considered as a type of registration in some ways. Yet, this concept immediately runs into practical issues, not least the fact that anyone with enough technical expertise and the right tools may create their own token, which can contain any information entered by the author. This means that anyone can create false ownership rights and have them recorded in the blockchain.

Licence and registration? Any sort of agreement can theoretically be coded into a smart contract. If we define a licence as a legal document that authorises a user to conduct an action that is otherwise prohibited by copyright, then an NFT can accomplish the same thing. Nevertheless, NFT platforms could offer a cryptographic smart contract licence in the form of an NFT. Many platforms and collection projects do not provide any kind of licence, and those that do frequently have inconsistent terms and restrictions. In the case of the Lens Protocol, social media content and its copyright upshots provide a scintillating study into the dynamics of Web2 and Web3 social media.

Then, there’s the question of copyright infringement to consider. Is it possible for someone to create an NFT that does not belong to them? This isn’t simply wishful thinking. Several cases of alleged copyright violation have already been discovered. A quick scan of NFT markets reveals a plethora of infringing entries. Some artists have gone to social media to express their dissatisfaction with their works being minted as NFTs without their consent.

The majority of alleged infringement cases have been resolved outside of the courts, with the token being removed from the auction platform in most cases. Undoubtedly, one of these cases will be litigated at some point, and the question of whether the NFT is infringing on a copyright holder’s rights will be raised.

Global Implications

When it comes to the current international situation of artists’ resale rights, the minting of an NFT by the author of a creative work may have broader ramifications. The production and selling of NFTs is mostly uncontrolled, although they are widely available to a global audience.

While there have been decades of litigation in the United States over artists’ resale royalty rights, usually known as droit de suite, NFTs provide artists with viable remedies in this regard. The United States as a whole has long opposed the idea. NFT platforms, on the other extreme, allow artists to claim resale royalties on subsequent sales of their work that aren’t normally available in specific regions. Even though it is unclear what impact NFTs may have in the long run on both domestic and international copyright rules, it appears that the traditional barriers to copyright owners still persist, albeit with some extra benefits.