The growing market for non-fungible tokens has caused confusion about their relationship to copyright law. This is partly due to the inexperience and misunderstandings of people minting NFTs, but a lot of it is also due to the limitations of current copyright law and existing licenses.
A possible solution would be the creation of a special license for NFTs. For now, the lack of clarity will likely expose creators and marketers to costly lawsuits.
NFT and Copyright: Common Misconceptions
Many people, whether minting or trading NFTs, believe that the owner of the NFT has a copyright to the image that was minted, but that’s Incorrect. In law, two types of rights are concerned: the possession of a physical object and the representation of it.
For example, if you own a coffee mug, you can sell it to anyone, but once sold, it leaves your possession and you no longer have any rights. But you can also take a picture of it and make as many copies as you want and sell those copies without selling the mug. You can also authorize someone else to make copies of your photo. This is what copyright is: a set of limited rights relating to the reproducibility of a good.
The copyright holder can license the rights to one person or everyone or for specific purposes only and set the terms of the license. There are also derived rights.
For example, the author of a book will usually sell the right to self-publish the book while retaining the rights to make film or television adaptations for later resale. There are also rights derived from derivatives, for example the rights to broadcast a film adaptation of a novel on television or the right to show the film in a cinema, to make DVDs of it or to download it to a streaming service.
It is important to note that the sale of a physical item does not include copyright, unless it is specifically included in the transaction. This is particularly evident in the case of a novel, where an author can sell his manuscript without selling the copyright. Or if you sell your coffee mug, the new owner won’t automatically get the right to make it and sell your photo.
How US Copyright Law Affects NFTs
The Internet makes the situation much more complex.
Under US copyright law, according James Grimmelmann and Yan Ji of Cornell Law School and Tyler Kell of the Initiative for CryptoCurrencies and Contracts, if you photograph your mug and scan it into a computer, that makes a separate copy.
If you upload it to the web, the server it’s stored on has a separate copy, then every time someone accesses your website and views the image, it creates another copy. So you may be in the position of buying an NFT of the image and not being legally allowed to see it.
Before NFTs, this was not seen as a problem. After all, even a hyper-litigious music company sending out takedown notices on a short snippet of a song playing in the background of a video filmed in public will have a hard time suing people for listening to a preview of the song. on iTunes that they downloaded.
Now, however, NFT owners feel like they own the copyrights to the works they mint or buy and are trying to sue or license their non-existent rights.
About 20 years ago, Barbara Streisand unsuccessfully sued a photographer and a website he worked on in an attempt to remove a photo of her home from the internet (a photo taken to document coastal erosion in California). Still, if she had made an NFT of the image and sued the people who uploaded or shared it for copyright infringement, she wouldn’t have had more success.
International copyright considerations for NFTs
The copyright confusion extends internationally as copyright law varies by country. The work transformed into NFT could be protected by copyright in one and in the public domain in another. Different countries also have other laws governing things like royalty rights.
While it’s nothing that lawyers and companies working in copyright haven’t dealt with, confusion over the status of NFT copyright could affect the market value of tokens. With the NFT market potentially worth billions, this could be a substantial cloud hanging over them.
Who owns the art?
A similar problem is that if the ownership of NFTs is on the blockchain, the minted digital art has no such provenance. The legal owner of a copyrighted work can sue for damages. An additional complication can come from AI-generated works.
Currently, the United States Copyright Office asserts that AI works are not protected by copyrightbut we don’t know what rights creators have whether their work is used to train AIs or sampled by them.
Propose a special license for NFTs
A possible solution to the confusion would be for copyright holders to create a special NFT license tied to the tokens so that the license is automatically transferred along with the token. The license could not be alienated from the NFT and could be registered as part of the blockchain upon minting the token.
This license could be automatic (a compulsory license) if the copyright holder does not make special arrangements. This could help protect their rights and avoid confusion and conflict. This is the approach taken by Dapper Labs NFT license, granting certain rights to buyers of its NFTs. However, the NFT license does not follow ownership of the NFT.
Conclusion
New legislation is unlikely to solve these problems. The current intellectual property rights regime is very entrenched and major interests such as record labels and movie studios will fight tooth and nail to keep things as they are.
In light of these complexities, NFT creators and merchants should educate themselves about copyright and ensure they stay within its bounds to avoid legal complications. While it won’t tarnish the industry like cryptocurrency’s unfair association with money laundering and other crimes, lawsuits and damages resulting from violations will be costly and limit investment.
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