Harris Bricken attorneys Jonathan Bench and Fred Rocafort sat down again to discuss Non-fungible Tokens (NFTs) and the legal issues common to their creation and transfer. Check out the last conversations HERE and HERE. A transcription of this talk can be found below.
NFTs inherently contain some copyright rights in digital information, but they do not automatically confer IP in the associated works.
However, someone might create an artwork in connection with an NFT minting – that person would own copyright in the artwork. IP rights in NFTs can be modified by contract. As part of NFT acquisition, there can be an assignment of IP rights, but you cannot assume that the recipient receives plenary IP rights.
NFTs represent data on a blockchain, which would not constitute an original work of authorship under intellectual property law.
As part of the NFT transaction, the creator might license or potentially assign ownership of the underlying artwork – but in that sense, the NFT vehicle is no different than a regular license or assignment agreement.
It is possible to protect your NFT-related invention with a patent; however, you will still need to satisfy the basic requirements for obtaining an issued patent. The invention must be patent-eligible subject matter, novel or new, useful, and non-obvious.
NFT businesses have trademarks, both traditional trademarks and NFT-related trademarks. The subject matter of the NFT might be a trademark itself.
Jonathan Bench 0:05
So Fred, let’s pick up where we left off, we just got done talking about what an NFT actually is, or maybe what it isn’t. Let’s talk now about what IP rights are present in NFTs.
Fred Rocafort 0:16
Sure. So, first of all, I think it’s important to point out that this is very much an evolving area of the law. I mean, this is the definition of an evolving legal field. And in pretty much in all jurisdictions around the world, we are seeing legal systems responding to things that are happening, right. So so it’s important to to keep that in mind that we are going to be most likely we are going to be seeing developments in the way that NFT’s are approached from an IP angle and from other angles as well. And also, it’s important, it’s important to stress that jurisdictional issues are also very important. different jurisdictions are going to be approaching the issue of entities differently at different speeds. So that’s important to keep in mind as well, what might be true for for the US might not be true for Europe, and so on. So first of all, and we will we’ve already discussed this today, but I think it’s a fundamental point that people should understand if me if there’s only one takeaway, that from from today for the audience’s NFT’s by themselves are not going to grant you ownership in whatever it is that the NFT’s are connected to, if the NFT is connected to digital artwork, you know, cats, you know, what do they call them the kitties, or, you know, care, special characters, whatever it is, it’s not it’s not granting ownership over that there’s separate ownership rights over that separate intellectual property rights. And those are not going to be implicated merely by issuing a token right by minting a token for for in connection to that asset. So if you’re looking at the at the technical aspects of the the NFC minting, there is going to be some copyright that is implicated there, right, there’s going to be some original work similar to that, which is present when one code is written. Right. So so there is copyright in that, but that has to be distinguished, it’s in fact, it’s essential to distinguish that from copyright, in what assets that are that are connected to the to this entity. So So to put that in plain language, if you’re purchasing an NFT, that gives you that Act gives you access to that unique copy of let’s say, a very popular meme. That is not at all, impacting the copyright over that meme. However, as the creator of that NFT, you, you would have copyright over that or over over the metadata that is being included in in that as part of that, of that MFT. This all said, depending on the particularities of the NFT transaction, there might be a transfer of intellectual property rights. So I could I could sell Jonathan an NFT with a particular image that maybe a photograph that I took, right, it doesn’t have to be something created on a computer, right? It could be a photograph that I’ve that I’ve saved on my computer. And I could say as part of the NFT transaction, I could say that I’m assigning copyright. So the conditions are specific contractual terms or if you’re working with with a platform, the specific terms and conditions can be drafted up in a way that does bring about a transfer of intellectual property rights, but it’s not happening automatically. Right? Look at it look at an ESA as a tool that can be used in in different ways. And as you were saying earlier, Jonathan, right. There’s there’s a potential for for licenses, right? It’s not just direct transfers of intellectual property rights, that there might be more more nuanced arrangements where I maintain copyright in the artwork that I’ve produced, but give you a license right to use it in certain conditions.
In addition to copyright, there could very well be some interplay between trademark rights and And then fts. To give one basic example of this if I could potentially create an NFT that involves the use of a trademark, right? It could be a famous trademark, or it could be a trademark, that’s, that’s not famous that but that I have created for for use in connection with my own goods and services. So there can potentially be issues there of both from the point of view of making sure that your trademarks are protected, but also, from the point of view of infringement upon the trademarks of others. This is again, we’re we’re talking about something at the at the leading edge of law at the moment. But it is something to flag if you are minting an NFC that is connected to a an image of any sort that includes a registered trademark, or doesn’t even have to be registered for that matter. So as long as it’s somebody else’s trademark, you have to proceed carefully, because there could be an infringement of trademark rights. And of course, when we talk about trademarks, it’s not just about the NFT itself, right? If you have a, if you’re if you’re selling NFT’s and connection to to a business, right, maybe you want to use the NFT to promote your your business, it’s important to keep those trademark considerations in mind. Just because NFT’s are something new and cool, it doesn’t mean that you should neglect the fundamentals right. And trademark protection is something that businesses should look at generally, right, that includes that includes obviously, if you’re operating in, in this space, and finally patents Patents are not. In general, they could do the limiting of an NFT is not going to give rights to to patent rights. But however, if if in the process of minting the NFT that you’ve developed some new technique or created a new platform with with some novel elements, that there could be there could be there could be it’s not impossible for for there to be some patent rights implicated. But the most critical, I think the the development of NFT IP law is probably going to be mainly focused on copyright issues.
Jonathan Bench 7:38
And maybe if I could talk in simple terms, because that’s how my brain works on this read, it calls to mind that you and I were in China in the early 2000s. And all of the of those shops as pop up shops with DVDs were for sale, right, and you could buy them for for pennies. And so when you are in the NFT space, you need to think about which part of this transaction chain are you in? Right? Are you the one that actually created the movie? Maybe? Are you the one that is at the table selling? Maybe? Are you a friend who’s helping to hawk farther down the sidewalk? Right? I mean, that’s, that’s kind of how I think about this, what I’m thinking, right, so what, how far down the value chain are you in in terms of the actual creation of the IP within the NFT? You know, if we’re talking about actual physical artwork, that’s then reflected in the digital world, right, you can actually be the owner all the way down. And I’d say a lot of companies aspire to be at that point, right? They want to take some of their existing content, they want to NFT it and then they want to maybe tokenize it or at least just sell the NFT’s. So that’s how I think about this is where you actually fitting into the value chain, and figuring and that’s that that’s step one, and then you can figure out, like, What rights do I actually have in the NFT?
Fred Rocafort 8:50
That’s right. And I should add that the comparisons to other products to to other to other media, if you will, are generally useful. Right. I think that even though NFT’s are are relatively novel, there is still when you’re trying to understand the fundamentals that actually make sense to do some comparisons. And I like the way you did that with the the DVD right? If you’re in China, right? Are you are you the the artist who has that legitimate copyright? Are you the person copying it? Right? And it’s the same thing with you know, there’s a lot of different analogies out there a lot of comparisons that that can be very helpful, right? If for example, you know, for people who are having a hard time understanding the concept, just getting their heads around this concept of a unique copy. Well, if you take let’s say, you buy a genuine CD, you know, maybe 20 years ago, right when we were in China, I don’t know. Backstreet Boys,
Jonathan Bench 9:57
a comic book right comic book with With specific conditions.
Fred Rocafort 10:01
Exactly, exactly. So there could be multiple copies. And there are ways of basically formalizing that uniqueness. Now the thing is, if you’re buying a, you know, a counterfeit CD, it’s going to be very difficult for the person selling that to you to extract value from, you know, saying, Look, this is the 1,000,000th copy of, you know, the, you know, Bob Marley CD that we that we burn here. However, even within even without jumping over to two NFT’s, let’s just say that somebody told you well, actually, you know, this is the, this is the copy that she, you know, she’s in pain burned. You know, one time when he was born, you know, you know, by when he was governor of Fujian, well, all of a sudden, it’s like, well, that’s, you know, that that has value that exceeds the the actual, you know, there’s there’s there’s a million other burn CVDs with that one, right has has that, that, that extra value and if I can certify that, right, and in the case of an FDA, that’s exactly what you’re doing, it’s just that you’re doing it using a blockchain