Imagine That IP Law Blog

NFTs, or “non-fungible tokens”, are a quickly growing space for artists and investors alike. The rapidly growing interest in NFTs is likely due to the shocking value an NFT can attain and the incorporation of blockchain technology. One piece of NFT artwork, Everydays: The First 5000 Days, sold for a whopping $69 million. $69 million is a lot of money to spend on anything, but this is just one example of many NFTs fetching massive price tags.

In one sentence, an NFT is a non-interchangeable, digital asset that is backed by a certificate of authenticity stored in the blockchain. The name “non-fungible token” simply means that, in contrast to a traditional currency, an NFT cannot be interchanged. To illustrate this, consider that when you go to the coffee shop on the corner and buy coffee and a donut for $5, the cashier doesn’t care whether you pay with five $1 bills, a $5 bill, or even a $20 with expected change – the dollar is fungible. On the other hand, an NFT cannot be swapped for another NFT because it is singular and non-interchangeable – it is a non-fungible token. The singularity and ensured authenticity of an NFT adds to the astronomical value they can accrue, similar to traditional art sales.

NFTs can take various forms, such as artwork, sports highlights, and even digital bricks. It's crucial to understand that the NFT itself is the asset, not the media it represents. When you buy an NFT, you're not purchasing the artwork itself, nor acquiring any rights in the original work. It is a common first reaction to have trouble grasping the value when learning about NFTs. After all, an NFT is just a picture you could download for free – why would anyone spend money on it? This thought process fails to consider the final component of an NFT: incorporation into the blockchain. The blockchain is a digital ledger that records authentication and transaction data (and more). The ability to store and verify this type of data creates legitimacy in owning cryptocurrencies or NFTs, as purchasers and sellers know exactly what they are getting, who they are getting it from, and the relevant history. Blockchain was popularized by cryptocurrencies like Bitcoin and Ethereum, and the technology is the same in the context of NFTs. In fact, most NFTs are stored within the Ethereum blockchain. The digital authentication created by the blockchain, in conjunction with the non-fungibility of NFTs creates assets that are in a way similar to traditional high-end art, such that they accrue value based on scarcity and authenticity. Just as it’s not crazy to see famous art pieces sell for millions of dollars, it’s not surprising that NFTs have become an alluring investment.

"Minting" is the process of transforming digital artwork or media into an NFT. While there are many platforms and marketplaces for minting NFTs, it's generally wise to use only one platform to avoid potential bans or deletion of the NFT. With a basic understanding of NFTs, it's essential to consider the intellectual property concerns associated with minting a piece of art.

Copyright Law
For a work to be copyrightable, it must be an original work of authorship fixed in a tangible medium of expression. Copyright protection applies to various subject matters, such as music, architecture, or artwork. The owner of copyright protection is entitled to exclusive rights, including the ability to produce derivative works, distribute copies, and publicly perform the work.

Copyright Principles: Fair Use, Public Domain, and the First Sale Doctrine
Several notable principles surround copyright law in the context of NFTs. First is the doctrine of fair use, which allows limited use of copyrighted work as long as it is "transformative." Fair use can include educational use, criticism, or parody. Second, some works are in the public domain, meaning they are not protected by copyright laws. Finally, the first sale doctrine (FSD) is a limitation on the exclusive rights held by copyright owners. It allows legitimate purchasers of a copyrighted work to treat that work as they see fit, such as reselling the artwork.

NFTs, Copyright Laws, and Art: Things to Consider Before Minting Your Artwork
Before minting artwork, ensure that the art is original and not vulnerable to a copyright infringement dispute. If the work being minted was created with significant inspiration from another piece of art or directly copies it, obtain written permission, or consult an attorney for guidance on fair use or public domain.

Do you own the intellectual property rights to your artwork?
In some situations, the sole author of a piece of art may not own the copyright rights, such as in the case of commissioned work or work created within the scope of employment. Attempting to mint an NFT of this kind could result in massive copyright infringement liability.

Can I transfer my copyright rights to someone else?
Yes, you can. Intellectual property attorneys facilitate copyright assignments and licensing agreements regularly. Remember that minting and selling an NFT does not assign the copyright rights to the buyer unless the sales contract states otherwise.

Why should I even consider minting a piece of art?
Artists are increasingly viewing NFTs as a modern and advantageous way to sell and market their art. NFTs enable more favorable monetization strategies for artists, such as royalty payments on future sales. Leveraging NFT royalties is an excellent way for artists to benefit from their hard work, but navigating the unfamiliar space of NFTs, potential copyright complications, and licensing contracts can be challenging. Consulting an attorney is the best way to address these concerns while pursuing the advantages offered by NFTs. Failure to do so could result in the removal of the NFT from the platform, a ban from minting future NFTs, and even copyright infringement liability.

Conclusion
NFTs offer artists and creators a new and exciting way to monetize their work, reach new audiences, and participate in the growing digital economy. As the world becomes more interconnected and digital, NFTs are likely to play an increasingly important role in the art market and the broader creative landscape.
However, as with any new technology, NFTs bring their own unique set of challenges and legal issues. Intellectual property concerns, such as copyright and licensing, are critical areas to navigate carefully when minting and selling NFTs. To ensure that your NFT is compliant with the law and respects the rights of all parties involved, it's essential to consult with an intellectual property attorney before minting and selling your NFT.

By staying informed about the legal landscape surrounding NFTs, creators can take full advantage of this innovative technology while minimizing their risks. As the world of NFTs continues to evolve, artists and creators who proactively address legal issues will be better positioned to thrive in this rapidly changing environment.

Ultimately, NFTs offer a wealth of opportunities for creators to share their work, connect with new audiences, and secure their financial futures. With careful planning and expert guidance, NFTs can be a transformative force for artists and the creative community at large.