Interface between NFTs and Copyright Law

The sudden boom of non-fungible tokens (NFTs) this year has raised many questions on the rights associated with its ownership. Questions regarding its implications on intellectual property rights have caught particular attention. This short  piece examines the legal conundrum surrounding NFTs and copyright law and explores the remedies (if any) available to the authors/creators under different jurisdictions.

The confusion around the relationship between NFTs and copyright stems from the lack of clarity on what NFTs actually mean. Contrary to popular belief, NFTs arent assets. They are exclusive digital tokens that represent assets such as arts, music, photographs, etc. One defining feature of NFTs is that they are coded on blockchains which makes them unique, this characteristic is often confused with the uniqueness of the original work itself. Many think that owning an NFT is similar to owning the copyright to the work, however, that is not the case. Owning an NFT means owning a particular digital copy of the work and it is a digital certificate registered in a blockchain that authenticates ownership of only the digital version. The property itself, in this case, creative work, is not transferred. This entails that generally the underlying copyright still remains with the author of the actual work, unless that is also transferred along with the NFT.

NFTs and Protected Works

NFTs seem to pose a threat to the rights of copyright holders. It isn’t a mere speculation but a fact that the works of the authors are already being misappropriated and minted into an NFT without the author’s permission. Many artists throughout the globe have reported that digital copies of their works have been sold through scam accounts without their knowledge. In this background, it becomes relevant to consider the potential remedies available to copyright holders.

In most jurisdictions, cryptocurrencies aren’t illegal per se. They generally operate in a legal vacuum. This allows bad-faith actors to appropriate or steal the creative works of others. Thus, in the absence of any specific law dealing with NFTs, remedies are only available to copyright holders under their respective Copyright Acts. Those remedies are mainly twofold: interlocutory injunction or damages. However, one impediment to accessing these remedies is that the NFTs have the potential to be completely anonymous; people engaging in buying and selling of NFTs usually have pseudonyms, and tracking them becomes a very difficult, if not impossible task. Thus, without the knowledge of the infringer’s identity, it gets tricky to enforce copyright against unauthorized minting and trading of NFTs. This issue can be resolved by creating a regulatory mechanism to identify actual authors.

It can be made possible if the Copyright Commissions/Boards of the respective countries work in tandem with NFT platforms, however, this will require copyright holders to register their copyrights with the Copyright Commissions/Boards. The database so collected can be shared with the NFT platforms who can verify the sellers and in case the seller is infringing any copyright, NFT platforms can serve them a notice. In fact, most NFT platforms anyway have a notice-takedown policy whereby after the issue of a notice by the copyright holder, the intermediary platform is required to take down the content within the stipulated number of hours. Furthermore, an interesting way that platforms are dealing with copyright infringement is through a refund policy. In case sellers fail to present a DMCA Counter-notification after a DMCA notice, NFT platforms refund the amount to the buyer suo moto post which they cannot be held liable for the same.

NFTs and Public Domain Works

NFTs raise concerns not only for protected works but also for works in the public domain. The question that arises for consideration is whether the moral rights of authors in their works whose copyright has expired can be extended to their NFTs. Moral rights are rights given to authors to protect the integrity of their work. It includes the right to be attribution and the right to restrain any modification or distortion of the work that questions the integrity of the author or the work and depending on the jurisdiction, these rights may extend few years after the lifetime of the author to forever. One other argument that can be posed is when NFTs are minted on works that are already in the public domain, it can be asserted that the moral rights of the author are being violated. Now in most countries, especially those who have signed the Berne Convention, the author can either restrain or claim damages and can also get the rights to share the proceeds of sales. Thus, even though NFTs raise copyright concerns, they can be tackled within the existing laws. What is required is an administrative strengthening of all countries around the globe to effectively protect the rights of copyright holders while also encouraging NFTs as a mechanism to commercialize creative works.

 

 

by

Anshita Agarwal

guided by Jothsna Chikkodi