A Guide to Intellectual Property Law and NFTs

With entertainment shifting to content and currency shifting to crypto, the tokenization of content was an inevitable seismic rupture. Nonfungible Tokens, or NFTs, shook the crypto market by taking art and content and turning it into a one-of-a-kind digital file that is not replaceable (nonfungible).

Purchasing an NFT is akin to purchasing an original painting. While prints may be available, only you own the original. These tokens range from visual art, music, videos, and collectibles, and their uniqueness is the source of their value.

Digital art collecting integrates technology and content in unprecedented ways. Like the physical art market, NFTs are bought and sold in auctions and marketplaces, except these transactions are conducted exclusively online. Most NFTs operate on the cryptocurrency Ethereum’s (ETH) blockchain; however, any cryptocurrency could theoretically integrate NFTs and others, like Flow by Dapper Labs, have. Beyond their investment value, NFTs are pieces of intellectual property that are particularly vulnerable to infringement.

How does Copyright Apply to NFTs?

Copyrights allow you to distribute, make copies, derivatives, and reproduce pieces of intellectual property. The creator of a work owns its copyrights, and these rights can only be transferred with the creator’s signature. For more information on Intellectual Property (IP) Laws, read our guide on digital assets and IP.

Intellectual Property Laws in the United States generally dictate that an artist retains the copyrights to their works after the sale. If you buy a traditional painting, the buyer owns that physical copy and possesses related display rights, but they do not own the copyrights to the painting.

While there is no legal precedent regarding NFTs, the law still applies: the author of the NFT retains the copyrights unless otherwise specified in the terms of sale. Purchasers of NFTs should not assume the transference of copyrights.

 

How does Trademark Apply to NFTs?

For trademark owners, it can be unclear if their protections apply to an NFT. Brand owners should review their trademark protections and apply for additional trademarks if their rights don’t cover brand usage in NFTs.

For NFT creators, it is a good rule of thumb to steer clear of utilizing any trademarks you do not own.

 

How do Patents Apply to NFTs?

Patents are concerned with protecting the new and the novel. So, blockchain developers inventing new mechanisms and expanding the functionality of cryptocurrencies should be leveraging patents to protect their work.

Currently, Bank of America is the owner of the most blockchain patents, accruing 444 patents in 2020, and at least 36 of these are focused on the blockchain. But they are not alone. Blockchain patents have been exploding as crypto becomes more mainstream.

 

Licensing NFTs

Brands also have the option of licensing their IP to blockchain developers. This allows artists and companies to get involved with the increasingly lucrative world of NFTs while benefiting from the expertise of developers.

To protect your brand, however, the owner of the IP should ensure the licensing is limited to NFTs. Additionally, creators should consider other limitations to protect their brand from infringement and other legal liabilities.

 

Developers and creators should understand their rights and limits within intellectual property law; contact us today for more information on how to protect your IP.