NFTs and copyright law: What you need to know
What copyright issues arise in the NFT space
In the wake of the Hermes lawsuit, copyright questions when it comes to NFTs are at the forefront of people’s minds. With NFTs and Web3 becoming more popular and mainstream, everybody must avoid any copyright issues — so what are some of the most common copyright issues in the NFT landscape?
We’ve compiled some of the most typical copyright issues, and hopefully how you can avoid landing in a lawsuit.
Before you begin with your own NFTs, it’s important to ask yourself “do I have everything I need to create an NFT regarding ownership rights?” If the answer is no (or even don’t know), then it’s best to halt your production and make sure you have ownership rights.
It can all get super complicated and convoluted, especially in terms of IP content. This we saw during the Hermes trial, which landed in favour of the brand. Brands can, of course, license certain materials which you can then purchase, but this often comes at a rather hefty price.
It’s integral that you have a team around you that is clued up on copyright licensing in the NFT and Web3 landscape.
Ownership rights work both ways — you have to also decide what you want to license when you sell your digital assets. For example, you can give up a tiny bit of the rights to the purchaser meaning they can just display it on social media, etc. Alternatively, you can give up all the rights to the piece of content, meaning they own it fully.
Linking to the point about ownership rights, there is so much confusion surrounding these rights. When a buyer acquires an NFT, they often believe they are buying all its accompanying rights, but that is very rarely true.
The mainstream media reporting on NFTs doesn’t help with this mass confusion, at all. Reporters also often assume that the work has been sold and not just a metadata file — leading to many people finding their news from these sources to be misled.
Securities or Commodities?
One of the major questions in the NFT space at the moment is whether or not an NFT is a security or a commodity.
A commodity is commonly defined as an article of commerce or interchangeable services, goods, and rights. Cryptocurrencies are defined as commodities, and NFTS undeniably have some similarities here, especially in reference to blockchain technology. However, they also differ in terms of exchanges and price manipulations.
For NFTs to be considered security, it needs to pass the Howey Test.
If NFTs are agreed to be securities, only licensed brokers and exchanges will be able to trade NFTs and all the markets will have strict regulations.
This unclear labelling of NFTs is a major issue for NFTs and any following copyright issues/lawsuits.
NFTs are extremely sensitive to copyfraud and the infringement of copyright. The moral rights of artists and authors have been brought to the forefront of the NFT copyright argument, and as we saw with the Hermes trial, the law could very much favour the artist.
Copyfraud often occurs when a person mints an NFT, falsely claiming to own the copyright. Such issues are so prevalent with NFTs mainly due to the anonymity features of the blockchain. Of course, it is problematic to not easily be able to verify the creator of specific work, but regulations could be changing this.
NFT platforms such as OpenSea have to consider liability when problems with NFTs occur. When it is found that an NFT infringes the rights of copyright owners, assess whether platforms assisted in this breach of copyright (with minting and selling) and if they should be held accountable for copyright infringement, too.
Liabilities of intermediaries are considered by 3 factors: if they were aware if they took down the work when they realised, and if they played an active role in the issue.
NFTs have been incredibly disruptive in the creative sphere, and are beginning to be more popular in the mainstream. As such a new concept, however, there continue to be many legal and regulatory uncertainties, that are causing multiple problems in the sphere.
Copyright law is a major one of these issues, and while blockchain continues to deliver exciting possibilities, laws, and regulations will have to evolve with them. Being aware of copyright issues before diving into NFTs could make a world of difference.