Everyone loves non-fungible tokens (NFTs). The first half of 2021 alone saw Andy Warhol’s NFTs, World Wide Web Code NFTs, the very first Tweet and, of course, Beeple’s famous $ 69 million NFT sale of “Everydays”. . Whether this explosive rise of NFTs is a flash in the pan or the future of art and beyond is a hot topic of conversation. One theme emerging from this conversation is whether NFTs have a copyright issue. Copyright is engaged throughout the NFT process, but there is nothing inherent in the NFT itself to ensure that copyright rules are observed (or even taken into account).

The history of blockchain development in the cryptocurrency space is a struggle against centralization and regulation. Cryptocurrency maximalists envision a “democratized” financial system free from legislative control. The DSFs were born from this space and share part of this tendency to decouple from established institutions. With this decoupling of DTV and copyright, significant issues arise that affect both buyers of DTV and the artists who create them.

Related: Legal non-fungible tokens

Copyright issues

The first problem is ownership. The transfer of a DTV does not, by itself, convey any ownership rights to the digital file linked in the DTV or any intangible rights associated with the work of art. Just as owning a painting does not give the owner the right to make copies of the painting, the owner of an NFT does not share any of the exclusive rights that belong to the owner of the copyright in the associated work.

In many cases, owning the NFT does not even guarantee ownership of the digital file covered by the NFT (like Beeple’s “Everydays” JPG), which is usually not contained in the NFT. Instead, the NFT contains a link to the location where the digital file resides on an Internet server. To create an NFT, the minter stores a copy of the digital file on a server and then creates a blockchain token that contains a link to that file. If the hosting service closes, the NFT will report a dead link.

Second, the NFT minting process presents copyright issues for both copyright owners and purchasers of NFTs. Buyers see the NFT as an imprimatur of authenticity, but anyone can create an NFT of any digital file. Typing an NFT typically involves storing a copy of the digital file on a server, but only the owner of the copyright in the underlying work can make copies of that work. So, unless an NFT is issued by the copyright owner (or someone operating with their permission), the act of hitting the NFT is copyright infringement. The promotion and sale of this TVN would likely result in additional infringements.

Unauthorized NFT keystroke is also not just the result of malicious actors. A misunderstanding about copyright can lead to the creation of NFT without the proper permissions. As an example, the owners of a physical design by Jean-Michel Basquiat intended to strike an NFT of the design until the Basquiat estate intervened to point out that the owners of the design were not the owners. of the underlying copyright.

Large auction houses, such as Christie’s and Sotheby’s, will offer assurance of provenance for an NFT that draws on their history and expertise. But most people don’t buy their NFTs from established auction houses. Online NFT marketplaces like Rarible and OpenSea cannot verify that every NFT offered for sale has been issued with the appropriate authorization.

Related: Hot July at Christie’s: Over $ 93 Million in NFT Sales and Art + Tech Summit 2021

The widespread dissemination of unauthorized DTVs also weakens confidence in them in general. If NFTs are to realize their potential as a new vehicle for building and exchanging the inherent value of creative works, the worlds of NFTs and copyright will need to start working together.

Potential solutions

The solution to these problems lies in the combination of non-crypto expertise and NFT development. The combination of copyright knowledge and NFT development will lead to NFT solutions that understand, respect and exploit copyright law. One of the long-term potentials of NFTs is some form of copyright ownership, and some companies are striving to marry the worlds of copyright and cryptography.

Related: Non-fungible tokens: a new paradigm for intellectual property assets?

One solution is to limit sales of NFTs to specialized auctions that process a limited number of NFTs. Companies operating under this model limit the sales of TVN to auctions that they control. These NFTs are organized and checked by experts in advance. This solution solves the problem of provenance with in-depth expertise, but to the detriment of accessibility for both artists and buyers.

Validating and verifying copyright ownership should be part of the NFT typing process – for example, involving humans in the typing process to gather evidence and support that serves as proof that the person who hits the NFT has the necessary permissions to do so. This package of evidence is then stored online, and the NFT provides a link to the supporting documents. NFTs struck in this manner are portable and can be sold and traded in any Ethereum compatible NFT marketplace. This way, artists are protected from unauthorized typing and buyers can be sure that they are acquiring a DTV that has been responsibly struck by the authorized copyright owner.

Related: NFTs are a game-changer for independent artists and musicians

Bring NFTs and Copyright Law

NFTs were designed as digital assets, unique pieces of code that could be of value due to their scarcity. As the uses of TVN have spread to the world of art and creativity, the ambitions of TVN have moved beyond considerations of legal consequences.

The technical process of minting, distributing and selling DTVs involves copyright implications which have not been fully addressed. Without proper consideration of how copyright law applies, DTVs become problematic for both creators and consumers. In response, new companies are already emerging with solutions. Bringing copyright law expertise to the creation and sale of NFT will begin to resolve these copyright issues and pave the way for NFTs to reach their full potential.

This article does not contain any investment advice or recommendations. Every investment and trading move involves risk, and readers should do their research before making a decision.

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