Author: Mr. Charalambos Papasavvas Advocate – Legal Consultant
Managing Partner of PAPASAVVAS & LISKAVIDOU LLC
Founder of RELOTECH EXPERTS
Founder of NEOCOURSES INNOVATION CENTER
Though NFTs have been around for a while and revolutionized areas like merchandise and art, it is essential to explore how intellectual property (IP) rights interact with this emerging asset class. This article breaks down NFTs into their individual components to clarify how IP laws, particularly copyright and trademarks, apply.
What is an NFT?
An NFT, or non-fungible token, is a digital asset with a distinct identifier recorded on a blockchain. To understand how IP rights relate to NFTs, it’s helpful to break them down into three core parts: (1) the unique metadata, (2) any associated digital creative work, and (3) the smart contract.
Metadata: One part of an NFT is its metadata, which is stored as a data block on a distributed ledger (DL), often on a blockchain. Metadata typically includes details like the file’s name, the creator’s identity (or pseudonym), and the unique identifier or link to the digital asset it represents (such as the token ID).
Creative Output: A common misunderstanding is that an NFT’s uniqueness comes from the digital creative work it is tied to, like digital art, game skins, or event access. However, the non-fungibility of an NFT is primarily determined by its identifier on the DL. For instance, an NFT might represent a photo, but identical copies of the photo may exist elsewhere, whether digitally or in print. An analogy often made is that of fine art, where an NFT functions as a digital certificate of authenticity for an asset, just as an artist’s signature proves the provenance of a painting.
Smart Contract: When an NFT is created or “minted,” a smart contract is written to regulate the rights and restrictions associated with owning that NFT. Once in place, the smart contract executes automatically when predefined conditions are met. For example, if an NFT is sold, a smart contract might ensure that the original creator receives automatic royalties.
What is Copyright?
In the UK, copyright arises automatically upon the creation of certain types of original works, provided they meet conditions of originality and are recorded in a fixed form. Works protected under copyright include literary, dramatic, musical, and artistic creations, as well as sound recordings, films, and broadcasts. Computer programs, including their source code and object code, may also be protected as literary works.
Copyright typically lasts for 70 years after the creator’s death, or 50 years for sound recordings and broadcasts. The copyright holder holds the exclusive right to prevent others from copying their work.
NFTs and Copyright
Copyright applies to the creative content (such as art, literature, or music) linked to an NFT. It may also extend to the metadata or smart contract code, though this is yet to be fully tested in court.
One notable example involves Spice DAO, a decentralized autonomous organization that purchased an unpublished manuscript of Alejandro Jodorowsky’s version of “Dune” for €2.66 million. Spice DAO aimed to create an animated series based on the manuscript, but owning it did not transfer the copyright from Frank Herbert’s estate, which had already licensed film rights to Legendary Entertainment for the 2021 “Dune” film. Simply possessing the manuscript didn’t give Spice DAO the rights to create derivative works from it. This case illustrates how NFT creators must ensure they have the copyright holder’s explicit consent, or they risk legal complications.
In most cases, buying an NFT does not automatically transfer the copyright of the associated digital work. For instance, when someone buys an original Banksy artwork, they don’t gain the right to reproduce and sell copies of it. Similarly, unless there’s an explicit copyright transfer agreement, creating new digital versions of the work could infringe the original creator’s copyright.
To legally transfer copyright, a written assignment is required, and it should either be integrated into the smart contract or documented separately. Without this, any attempt to copy or commercialize the underlying digital asset could result in copyright infringement.
What is a Trade Mark?
A trade mark identifies the origin of specific goods or services. Trade marks can take various forms, including words, logos, and sometimes slogans, sounds, or shapes.
In the UK, registering a trade mark grants the owner the exclusive right to use it for the goods or services it is registered for. Trade mark owners can take legal action against those who use an identical or similar mark in a way that could confuse consumers or undermine the brand.
NFTs and Trade Marks
Some NFT creators have incorporated registered trade marks into their work without obtaining permission, which can lead to trade mark infringement.
A well-known case in the U.S. involved the luxury brand Hermès. Artist Mason Rothschild created and sold NFTs under the “Metabirkins” project, using Hermès’ trademarked Birkin handbag design without permission. The court ruled that Rothschild had infringed on Hermès’ trade mark, marking the first legal case of trade mark infringement linked to NFTs.
In Europe, Juventus FC also won a case against NFT producer Blockeras s.r.l. for selling NFTs featuring the club’s word marks and its iconic black-and-white jersey design. The court ruled that Blockeras had infringed Juventus’ trade mark and issued an injunction to stop the production and sale of those NFTs.
Both these cases show a growing trend where courts are recognizing that using registered trade marks without permission in NFTs constitutes trade mark infringement.
Concluding Thoughts
As digital assets continue to evolve, the legal framework surrounding them is also changing. The UK Law Commission has proposed reforms to regulate digital assets, furthering the Government’s goal of making England and Wales a global hub for such innovations, particularly regarding crypto-tokens. Similarly, the European Union Intellectual Property Office (EUIPO) has issued guidelines on registering trade marks for NFTs and virtual goods, though the UK’s intellectual property office (UKIPO) has yet to issue specific guidance. However, the UK has started accepting the term “downloadable digital files authenticated by NFTs” for goods in Class 9. We will continue to monitor legal developments in this space and update clients accordingly.
Contact our legal expertise, Mr. Charalambos Papasavvas who specialized on Technology information cases for a professional advice.
