The explosion of Bitcoin and other cryptocurrencies has led to interest in related digital assets. Among the most popular – and volatile – of those digital assets are Non-Fungible Tokens, or NFTs. As more and more investors consider NFTs, questions are being asked about the legality of this technology. Specifically, people want to know about copyright law & NFTs. Is it possible to hold a copyright for an NFT? Are you allowed to create derivative copies of your NFT and reproduce it? If an NFT was created from an original work, what are the copyright implications for that original work? This is a murky area of the law that is still developing, and it has implications for a lot of people: NFT buyers, NFT sellers, and pretty much anyone who owns a copyright.
To learn more about NFTs and copyright law, keep reading this blog.
What Are NFTs?
On a superficial level, Non-Fungible Tokens (NFTs) are just digital works of art. Some of the most well-known NFTs are digital copies of original works that exist in the real world, such as paintings, music, collectibles, and even tweets. Other NFTs were created exclusively as digital artworks.
Of course, NFTs are significant for reasons that go beyond art appreciation. NFTs are non-traditional assets with a unique quality to them: they are not interchangeable and cannot be divided. By contrast, a Fungible Token like Bitcoin can be broken down into fractional values, so that the owner of a Bitcoin can sell 50% of it and keep the other 50%. The uniqueness of each NFT is what generates a great deal of interest in them, since they are perceived to be incredibly scarce.
Another interesting aspect of NFTs is that they exist entirely on something known as the blockchain, which is a kind of technology that allows information to be permanently stored on a computer network. When someone purchases an NFT, they are purchasing a link to the Token on the blockchain. NFTs essentially function as certificates of ownership. Importantly, the Tokens are entirely digital, with the transaction records traceable online. In one sense, this makes NFTs similar to both real property and intellectual property in that their ownership history is recorded. Additionally, NFTs and Bitcoin are assets that can be traded on certain digital platforms.
Is an NFT Copyright Protected?
NFTs have been in the news lately because the cryptocurrency market has seen sharp declines in value, with many observers wondering if the bottom has fallen out on the NFT market as well. The fact remains, however, that NFTs still have a great deal of value, especially as some owners look to sell their digital assets. This makes it vital to understand how copyright law might impact NFT owners.
First, anyone who buys an NFT should understand that the sale typically does not involve the copyright for the original work that exists outside the blockchain. That’s because an NFT is a derivate of that real-world work, even if the NFT itself is unique. As set forth by the Copyright Act of 1976, only the copyright holder has the right to reproduce the work, distribute copies of the work, and publicly display or perform the work for commercial benefit. The bottom line is that when you buy an NFT, you don’t own it. You cannot create derivative works and sell copies because doing so will impact the intellectual property rights of the person or entity who holds the copyright to the original work.
Given that many NFTs are based on original works, there is also some question about copyright enforcement. Since only the copyright holder has the authority to use their original work commercially, and since NFTs are by definition “reproductions” made for commercial purposes, the NFT market has created a need for copyright holders to monitor social media platforms, websites, message boards, and other areas of the internet for copyright violations. In some instances, NFT copyright violations are so flagrant that it may be necessary to speak with an attorney about sending a copyright demand letter or DMCA notice to the offending party.
Contact the California Copyright Lawyers at Tauler Smith LLP
If you are an artist, business owner, website operator, or other individual whose copyright has been infringed, the Los Angeles copyright lawyers at Tauler Smith LLP can help you. Our legal team understands federal intellectual property law, and we know how to win these types of disputes. Call 310-590-3927 or submit an online contact form to schedule a free consultation.