Recently, visual artists and other content creators have increasingly minted non-fungible tokens (NFTs) of their artwork and other creative property and offered the NFTs for sale. With more clients purchasing and collecting NFTs, which then become part of those clients’ asset portfolios, practitioners need to be able to spot potential copyright issues that may arise. Here are some copyright considerations in connection with such NFT sales.
Minting an NFT
What does it mean to “mint” an NFT? An NFT is a unique, digital certificate that’s stored on a blockchain and provides a digital record of ownership rights. The associated asset can be either physical or digital, such as a digital artwork. Typically, a blockchain doesn’t store the actual digital asset; the NFT points to the location of the digital artwork.
“Minting” an NFT refers to the act of generating an NFT for the digital asset on a blockchain. The minter may be the author of the work (the artist) or someone else with the rights to mint. Several platforms allow artists and other rights holders to mint NFTs, and some also act as an NFT marketplace. NFTs also are sold by those who’ve historically sold physical artworks, such as auction houses and galleries.
Digital Artwork
What can the purchaser of an NFT do with the digital artwork associated with the NFT? It depends on what intellectual property rights, if any, were conveyed to the purchaser. As general background, ownership of a copyright is distinct from ownership of a physical artwork, and therefore the sale of a physical artwork doesn’t itself give the buyer any rights in the copyright to the artwork.1 Typically, artists retain their copyright interests in the artwork they create and don’t sell the copyright along with the artwork.
Some savvy art purchasers, however, are sometimes able to negotiate a limited non-exclusive copyright license from the artist or the artist’s gallery when commissioning or otherwise purchasing a significant artwork. For example, an individual collector may wish to negotiate a license to create, display and distribute images of the artwork on their website, in social media, in shelter magazines and for other non-commercial purposes. Typically, with auction sales of physical artwork, no copyright interest is conveyed to the buyer.
For many NFTs available today, the digital asset underlying the NFT is created by the artist, who decides what rights to grant the NFT buyer—for example, the right to use, copy, display and modify the content. Generally speaking, it’s fairly common for the artist either not to grant any intellectual property rights or only grant a limited, non-exclusive license for certain non-commercial purposes.2
Here are some examples of things an NFT buyer ordinarily can’t do with the underlying digital artwork without the artist’s permission:
- Create prints of the digital asset
- Create merchandise
- Edit or modify the digital asset
Having said that, some NFT projects such as the well-known “profile pic” Bored Ape Yacht Club NFT series come with certain commercial usage rights.3
Issues for Collectors
It’s easy to create NFT “fakes”—digital images of artists’ works are widely available online and can be easily copied and minted (copyminted) and offered for sale as though they were authored and authorized by the artist. To avoid purchasing these infringing NFTs, purchasers should conduct research on the artist, their NFT projects (if any) and the platform on which they’re sold to confirm that the NFT project is authorized and associated with the artist.
Additionally, those who purchase profile pic NFTs must understand that others can “rightclick” their avatar and use it online, making it seem as if they’re the owner of the NFT.4 Twitter, for its part, has developed a feature that displays the verified owner of a profile pic NFT in a hexagonal shape through connecting the owner’s Twitter account with their wallet address.5
Takeaway Points
Given that NFTs are selling for significant sums, if your clients are interested in acquiring them, make sure they review the terms of sale and information disclosed about the NFT carefully to understand what, if any, intellectual property rights are being conferred along with the sale, and consult with an attorney specializing in this area regarding any legal questions, especially if the potential purchaser plans on using the NFT for a particular purpose other than personal enjoyment. Purchasers should also conduct due diligence on the NFTs to avoid purchasing a plagiarized NFT.
Endnotes
1. See 17 U.S.C. Section 202.
2. For example, the applicable non-fungible token (NFT) user license may grant to a purchaser the following rights to the art linked to their NFT: (1) for the NFT owner’s personal and non-commercial use, (2) “as part of a marketplace that permits the purchase and sale of [the purchased NFT], provided that the marketplace cryptographically verifies each [NFT] owner’s rights to display the [linked digital artwork] to ensure that only the actual owner can display the [NFT artwork]”; and (3) for purpose of display of the NFT artwork associated with the NFT, provided that the website or application cryptographically verifies each NFT owner’s right to display the art for their purchased NFT to “ensure that only the actual owner can display the [a]rt, and provided that the [a]rt is no longer visible once the owner of the [purchased NFT] leaves the website/application.” See, e.g., Bored Ape Yacht Club Terms & Conditions, BAYC, boredapeyachtclub.com.
3. A “profile pic” NFT is an NFT associated with an avatar image that the purchaser can use as their profile picture on social media. For example, Bored Ape Yacht Club permits NFT purchasers to use the Bored Ape imagery to produce and sell merchandise displaying copies of the art. See“Bored Ape Yacht Club Terms & Conditions,” supra note 2. Cryptokitties allows NFT owners to commercialize merchandise based on the purchased kitty NFT so long as the merchandising doesn’t generate more than $100,000 in annual gross revenue. See “CryptoKitties Terms of Use, CryptoKitties | Terms of Use.”
4. See Aaron Mak, “How to Troll an NFT Owner,” Slate (Nov. 18, 2021), slate.com.
5. See Twitter, About NFT Profile Pictures on Twitter, twitter.com; Valentina Di Liscia, “Twitter’s New NFT Feature is an Annoying Show-off of Crypto Wealth,” Hyperallergic (Jan. 23, 2022), hyperallergic.com.