NFTs and Copyright

NFTs and Copyright Image

If you’ve spent much time online these past few days or weeks, it’s very likely you’ve at least seen the initials NFT.

The most likely reason is in context to a series of high-profile NFT sales that have taken place over the past week. Those include the artist Beeple selling a work of digital art with NFT for nearly $70 million, Twitter CEO Jack Dorsey putting his first tweet up for auction and watching it reach $2.5 million and even the Associated Press putting up a work of election-based artwork and getting $180,000 for it.

Then there have been some of the negative stories too. Those include artists being upset that indie developer Jason Rohrer is offering NFTs based on their commissioned work and artists reporting their work turning up on NFT websites without their permission, much of it being done by bots.

All of this seemed to have come out of nowhere and has raised a lot of questions about what NFTs are, why they are seen as being so valuable and what, if anything that can be done about.

To answer those questions, we have to first look at what an NFT is, as we’ll see, even that is not a simple question.

What Are NFTs?

NFT stands for “Non-Fungible Token”. What this means is that it is a unique token to the person who bought it, acquired it or made it. That said, it is a digital token, so it can be copied. However, the ownership of that token is marked in a ledger, usually the Ethereum blockchain, so the owner has a record that they own that token.

NFTs can represent about anything but they are most commonly made using the URL of a piece of digital content, whether it’s a painting, a tweet or an article. The idea is that, while anyone can read the article or view the tweet, this gives one person (or a small group of people) “ownership” in that work.

However, that ownership is not very practical. Other than purchasing the token, buying an NFT doesn’t confer copyright ownership. Owning an NFT, by itself, doesn’t grant on the right to print or distribute the work without the copyright holder’s permission. This is doubly so if the artist didn’t authorize the NFT in the first place.

This means that those who don’t own the NFT are still able to access it and the rightsholder is free to continue providing it, selling it or otherwise distributing it to the public.

In many ways, buying an NFT is far more akin to buying a limited-edition poster or an autographed copy of a book. It is special and (more) unique to you but doesn’t mean that the original work is now yours. It confers to you no rights that others have, you just have a slightly more unique connection to it.

The NFT gold rush has, predictably, brought with it spammers and infringers. They are simply grabbing digital URLs and other digital content and releasing NFTs based upon them. This is possible because anyone can create an NFT for anything. The only practical downside is that an NFT not from the original artist is worth less money.

That and doing so is almost certainly a copyright infringement.

The Copyright Issue

Making and selling NFTs based upon artwork that you don’t hold the rights to is almost certainly an infringement, especially considering auction sites that sell NFTs use the original artwork.

This is why NFT auction sites have rushed to create DMCA processes for removing unauthorized NFTs. However, it’s unclear if that will be enough as many sites are actively encouraging people to tokenize content that they don’t own. Other markets are only allowing verified works, making them less worrisome in this area.

To be clear, NFTs are not new. They’ve been around since at least 2017 when a company named Dapper Labs experimented with selling NFTs for digital cartoons. However, this most recent boom is only weeks old and the courts have not even begun to address the issues this raises.

And, with the original NFTs purchases, there wasn’t much of an issue to consider. Artists are allowed to create derivative works based on their creations and sell them. As long as buyers were fully aware of how practically useless the NFTs are, there’s not much of a reason for the courts to get involved.

However, it’s clear that the focus on NFTs have caused a drastic change in the marketplace. Where once the headlines were dominated by artists making big bucks from next to nothing, now we’re seeing far more concerns over infringement and abuse of the system.

William Shatner is an interesting example. Back in July 2020, the actor offered a series of trading card NFTs based upon his career. The sale netted him an estimated 125,000 dollars, roughly one dollar for each token he put out there. However, by March 2021 his tone has changed.

But it will likely be years before the courts significantly address the issue of NFT infringement. By then, the fad may already be over and done with.

Could NFTs Help Creators?

One of the common threads about blockchain technology is that many espouse its usefulness for tracking copyright ownership and maintaining records of creation. So this raises a question: Can NFTs be useful to rightsholders and creators?

The answer is yes. In addition to giving artists a new potential revenue stream by selling unique copies of their work, it can also keep track of copyright ownership.

Theoretically, an artist could create a work, tokenize it and keep that token both as proof of creation and proof of copyright ownership. They could then transfer that token as part of any copyright transfer.

However, that’s not how it’s actively being used.

Instead, it’s being used to create “special” copies of a work and then sell those copies. Unfortunately, far too often aren’t very special and it’s not the artist that is reaping those rewards.

For right now, this is something that creators need to explore both as a potential business opportunity and as a potential piracy threat. It pays to monitor your work and file notices to get it removed when and if it appears on NFT sites.

Bottom Line

Every time I find myself speaking with someone into cryptocurrency or blockchain technology, they always get excited when I say I work in copyright. According to many of them, blockchain is the perfect tool for resolving questions of copyright ownership and providing proof of creation.

While it certainly could, that’s never been how it was used, at least not broadly. Instead, through NFTs, blockchain technology has provided creators with a fresh new piracy concern. Though there is also a new business opportunity in NFTs, it’s unclear how sustainable that model really is, especially at its current level of hype.

The simple truth is this, when you have a system where anyone can make and sell tokens of anything, it’s going to be widely abused. That is exactly what we’re seeing.

Even Rohrer himself acknowledges this, calling it a “half-scam” in his interview with Kotaku.

In the end, NFTs are an attempt for digital creators to try and capture some of the uniqueness and scarcity that producers of physical works have naturally.

Artists can sell original paintings that are one of a kind; authors can sign books to make them more valuable and so forth. Digital creators don’t have those options as any digital copy is exactly as good as any other digital copy.

However, until there are checks in place to ensure that NFTs were created by the artist or rightsholder, it’s going to serve as a much bigger piracy threat than opportunity. If NFTs want to create artificial scarcity, the too need to be scarce and not just something anyone can conjure up.

Unfortunately, the system just isn’t built for that and it’s unlikely that it will change any time soon.