Intellectual property issues of non-fungible tokens

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Introduction

On 11 March 2021, Everydays: the First 5000 Days, a non-fungible token (“NFT”) made with a combination of 5000 digital images created by a digital artist known as Beeple was sold for US$69.3 million in an auction house. As with everything related to blockchain technology and cryptocurrency, NFTs have gained huge popularity in recent years, especially among art collectors, graphic artists and musicians. In this article, we will explore possible intellectual property rights issues in NFTs, focusing on the difference between the ownership of NFTs and the copyright ownership of the in the underlying asset in which copyright subsists.

What are NFTs?

NFTs are digital assets that can be traded on blockchain. While cryptocurrencies are minted to be fungible, like fiat currencies, each NFT is minted with a distinct, unique identifier. Therefore, while two pieces of digital art in the form of NFT may look the same, they are distinguishable by their identifier which is non-fungible.

Some benefits of NFTs include providing ease in the verification process on authenticity and trading. As ownership of an NFT is passed on, each record is documented on the ledger which cannot be altered. Therefore, there is transparency as to the whole history of ownership of an NFT and subsequent buyers can easily verify whether an NFT is authentic or not. Unlike previously where replica copies of digital arts are identical, now an owner of an NFT is able to point to a specific copy of the digital art that he owns since each and every NFT is distinct and unique. Moreover, NFTs can be stored in digital wallets and traded through online auction sites or sites which facilitate the exchange of digital assets. As the use of NFTs becomes more accessible and popular among art enthusiasts, digital arts rise in value. The use of NFTs exclusivity on digital arts which in turn may secure growth in resale value over time.

Does buying an NFT equates to acquiring copyright of the underlying digital art?

The simple answer is no. Generally, a creator of an art piece retains copyright to the art piece he or she creates even when the art piece is sold. When a person purchases a painting in a gallery, he or she is only acquiring the right to ownership of that piece of painting but not the copyright to that art piece. Similarly, when a person buys an NFT, he or she is only acquiring the right to ownership of that piece of digital art but not the copyright to that art. Most artists expressly retained the copyright to the artwork and most digital art trading platforms expressly stated that the copyright remains with the creator of the art piece.

Interested buyers of NFTs should seek legal advice as to what kind of rights are transferred with the NFTs (whether through a sale and purchase agreement or a licence for use of the NFT). If the creator of a digital art retains the copyright, investors looking to buy NFTs as an investment vehicle may need to beware that similar NFTs may be minted by the creator in the future, taking away the exclusivity in ownership of that art piece and potentially decreasing the resale value of the NFT.

Is there an obligation to get a permission to create or distribute the NFTs?

In general, the creator of an NFT using someone else’s work should ensure they have permission from the copyright owner. When a person who is not the author or copyright owner in the underlying asset in which copyright subsists, mints an NFT and misrepresents that they are the author or copyright owner of the work can amount to copyright infringement. Similarly, when an NFT is made without authorization of the copyright owner, the resale of such an NFT could constitute copyright infringement, as analogous to reselling a counterfeit good. Therefore, generally speaking, the creation of the NFTs should acquire prior consent of the copyright owner, and such consent for patent(s) contained or applied therein may also need to be acquired.

As such, it would be wise for the creators to seek legal advice before using a brand name, logo, technology, famous character, picture, video, music, artworks or any other intellectual property of a third party in their NFTs, while the sellers should also do the same before selling NFTs to ensure authorization from the author, copyright owner or inventor has been properly obtained.

Conclusion

While the world figures out how to make widespread use of NFTs, how copyright law will apply to NFTs in different scenarios is yet to be clarified. No matter you are the author or copyright owner of an underlying asset that is to be used in NFTs, a creator of NFTs, or a distributor of NFTs, early legal advice will be quite useful to make sure the concerned copyright is properly protected and licensed, and the risk of facing an infringement lawsuit is well managed.

ETH Whale Spends $6 Million on CryptoPunk NFT Limited Collection—Nonfungible Tokens as Game Changer for Independent Artists

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An Ethereum whale decided to spend around $6 million just to buy 1% of the popular CryptoPunk NFT limited collection. If you don’t know the definition of a whale in the cryptocurrency industry, it is a person or an agency holding a large amount of their preferred digital coin.

In this case, the anonymous individual focuses on ETH, one of the rising cryptos in the market. The unnamed millionaire doesn’t only show how rich he is. But, he also serves as proof that the NFTs or nonfungible tokens are really becoming a game-changer for many people, especially independent artists, such as musicians.

After the popular buyer spent millions of dollars on the limited NFT collection edition, he now owns more than 1% of the digital artwork. The founders of Larva Labs, Matt Hall, and John Watkinsons decided to offer their CrypptoPunk NFTs for free back in 2017.

Those who received them without any fee are currently lucky since they can sell them for millions of dollars, as reported by CNBC.

ETH Whale Now Owns More Than 1% of CryptoPunk NFTs

According to HypeBeast’s latest report, those who acquired the so-called CryptoPunk NFT can sell the nonfungible token limited collections for around 232,000 ETH.

Also Read: Gaming Portal Kongregate to Launch NFT Games Platform Kongregate.io This Year

This means that the total value of all the art pieces could reach around almost $600 million. For the past few years, CryptoPunk has had an average value of 22 ETH or $54,000 for each digital artwork.

The latest NFT purchase shows that a nonfungible token could suddenly increase its value. This is great news for those independent artists who are working on creating digital masterpieces.

Aside from them, musicians, painters, and other kinds of artists could also make their own NFT. They can even sell their works and put their signature on them to increase their value. Remember, NFT and crypto differ when it comes to their actual values.

One crypto will always be equivalent to one crypto token. On the other hand, an NFT art based on a popular basket player or other celebrities could have greater value compared to those newly designed nonfungible tokens.

In other news, NFT coins are also changing the gaming industry. New titles, such as “Axie Infinity,” “My DeFi Pet,” and other popular brands are now appearing. On the other hand, you can also check these top 10 most expensive NFTs in the sports industry.

NFT as Game Change For Artists

Coin Telegraph reported that NFTs are now helping more and more artists earn money, especially since they can’t conduct huge events because of the ongoing pandemic.

Popular musicians now earn millions of dollars by selling their nonfungible masterpieces. However, their revenue would still depend on their popularity.

For more news updates about NFT and other related digital artworks, always keep your tabs open here at TechTimes.

Related Article: Top 5 NFT Platforms to Buy and Sell-Axie Infinity, NBA Top Shot, and MORE!

This article is owned by TechTimes

Written by: Griffin Davis

NFT sales hit record highs in July as the broader crypto market recovered from a slump earlier in the month

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Sales volumes for non-fungible tokens hit record highs in July, according to nonfungible.com.

The last week of the month noted the largest ever sales volume in dollars, according to the data.

The NFT market had cooled down in recent months after surging in popularity and prices earlier this year.

Sales of non-fungible tokens soared to record highs in July, as buyers flocked once more to the digital collectibles market in line with a broad recovery in cryptocurrency prices last month, according to data on Monday from nonfungible com.

In the thirty days to August 1, a record $363.8 million was spent on 157,801 NFT sales, compared with a total of just under $60 million, or 111,030 sales, in the 30 days to July 1, the data showed.

The cryptocurrency market came under intense pressure early on in July, knocking bitcoin below $30,000 for the first time a month. But a late rush of buying saw the digital token close out the month above $40,000 and a gain of over 18%.

In the week ending August 1, total sales of NFTs reached $208.01 million - the highest ever, according to the nonfungible.com data. The money was spent on a total of 40,097 NFTs and purchases were made by 15,840 unique wallets, the data showed.

NFTs, short for non-fungible tokens, are digital assets such as videos, audio or images that are built on blockchain technology. They are unique, not exchangeable and often anyone online can view them - however, only one person can ever own them, making them especially appealing to collectors.

Eight of the ten biggest sales of the week to August 1 were part of the CryptoPunks collection - a series of 10,000 24x24 pixel, 8-bit virtual characters inspired by London’s punk scene. They were launched by Larva Labs in 2017 as some of the first digital art NFTs. The top sale netted over $5.5 million.

Earlier in the year, Christie’s - the world’s largest auction house - sold a set of nine CryptoPunks for $17 million. Rare CryptoPunks are especially valuable - in June, luxury auction house Sotheby’s sold a single figure called ‘Covid Alien’ for $11.8 million.

NFT markets gained significant traction and attention in January this year, and were booming in March, when digital artist Beeple sold one of his pieces as an NFT for a record-breaking $69 million. A series of high-profile celebrities and organisations have since auctioned off NFTs - from Katy Perry, to Twitter creator Jack Dorsey and the US Space Force.

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