Non-fungible tokens, or NFTs, are becoming increasingly popular across a range of industries, including real estate, games, insurance, and the arts and antiques. Technological improvements frequently surpass legal frameworks, resulting in the emergence of case law that makes it necessary for buyers and sellers to carefully evaluate the specifics of NFT transactions.
NFTs May Be Minted by Whom?
Although anyone can technically mint an NFT, only the owners of the underlying intellectual property (IP), such as trademarks or copyrights, should be able to do so legally. Ownership and usage rights issues between authors and customers are common sources of intellectual property disputes. Fraud is also common, with gullible consumers occasionally buying fictitious or false NFTs.
Recognizing Copyright Concerns
It’s a frequent misperception that full ownership of the intellectual property (IP) connected to an NFT is granted by ownership. Frequently, purchasers make the mistake of believing they are getting more than just a digital item. Nevertheless, acquiring an NFT typically does not grant ownership of the underlying information; rather, it merely grants a restricted license to utilize the intellectual property associated with the NFT.
The Lawfulness of NFTs
Like a certificate that comes with a physical artwork, NFTs frequently serve as digital certificates of authenticity. For example, when a consumer buys a digital artwork as an NFT, they often just obtain the NFT and not the digital work’s copyrights. Unless specifically transferred as part of the sale, copyright ownership stays with the creator.
The Function of Contract Law in NFTs
In problems pertaining to NFTs, contract law may occasionally take precedent over copyright concerns. One well-known instance is the Miramax v. Tarantino lawsuit, in which director Quentin Tarantino faced legal action for trying to market NFTs that were based on his screenplay for Pulp Fiction. The lawsuit, which resulted in a settlement, brought to light the difficulties associated with IP rights and NFTs.
Copyright Violations in the NFT Era
The case of Hermès International v. Rothschild demonstrates the substantial legal risk associated with trademark infringement in the NFT sector. The selling of “MetaBirkins” NFTs, which included imitation fur renditions of Hermès’s well-known Birkin purses, sparked accusations of cybersquatting and trademark infringement. This case highlights how crucial it is to confirm authenticity and make sure that the people who create NFTs have the right to use the trademarks connected to their NFTs.
Providing Security and Authenticity in NFT Sales
Prior to buying an NFT, consumers should verify the token’s legitimacy by examining the contract and token tracker details, verifying the digital signature with blockchain technology, and making sure the NFT was issued by an authorized party. Conversely, in order to prevent legal challenges, sellers need to be clear about what the NFT covers and excludes.
Do NFTs Qualify as Securities?
Another area that NFTs are concerned about now is securities legislation. NFTs might occasionally be categorized as securities, in which case they would need to abide by Securities and Exchange Commission (SEC) regulations. To prevent future legal issues, creators and sellers need to know if their NFTs fit the legal definition of securities.
Managing Legal Difficulties Outside of IP
NFT developers have additional legal duties to manage in addition to intellectual property legislation, such as securities, tax, advertising, and privacy laws. Respecting these rules is essential to stay out of legal hot water, particularly when gathering personal data from purchasers.
Royalties and NFTs’ Place in the Media Future
Through NFTs, creators can also profit from downstream sales and receive royalties from subsequent transactions. This creates new opportunities for the entertainment industry. Some speculate that, similar to how streaming did in earlier decades, NFTs may take over as the main method of distributing films, music, and TV series.
