Comprehending the Dilemma of Copyright Law in Relation to Non-Fungible Tokens
The emergence of non-fungible tokens (NFTs) has introduced a novel layer of complexity to the realm of copyright law, challenging traditional notions of ownership and intellectual property rights. This abstract delves into the intricate interplay between copyright law and NFTs, investigating the multifaceted dilemmas and legal ambiguities that have arisen as a consequence.
Non-fungible tokens, based on blockchain technology, represent unique digital assets, enabling the ownership and authentication of various digital creations, including art, music, and collectibles. As NFTs gain traction, the established copyright framework encounters unprecedented challenges. Central to the issue is the question of whether copyright law’s conventional principles can effectively encompass the intricate nature of NFT ownership and usage.
At the crux of this exploration is the concept of tokenization, wherein tangible and intangible assets are converted into digital tokens that are then traded or sold on various platforms. The intricate relationship between the digital asset itself and the NFT representing it gives rise to a complex web of legal considerations. The principle of exhaustion, which traditionally dictates the extent of a copyright holder’s control over their work post-sale, is strained in the context of NFTs. As NFTs are resold, creators do not necessarily participate in these subsequent transactions, raising concerns about the erosion of their ability to benefit from the commercial success of their creations.
Moreover, the decentralized and borderless nature of blockchain technology presents jurisdictional challenges, making it unclear which legal framework should govern NFT-related disputes. Copyright laws and their interpretations vary across jurisdictions, leading to potential conflicts over ownership, licensing, and fair use. In this context, the traditional territorial scope of copyright protection encounters friction with the global nature of NFT transactions.
Contract Law and Copyright Law in Perspective
The laws of contract and copyright are interdependent.It is common knowledge that intellectual property rights can be assigned, distributed, and licenced in accordance with contract principles. A contract may be used by the owner of a copyright to freely transfer all of the or some specific rights for particular uses. It is crucial to have a good interplay between contract law and copyright in ‘NFT’ transaction.
The agreement between the artist and the specific buyer will outline the rights, if any, the buyer may have to the record in the event that a creator wants to provide a “full music album” to customers ‘NFT’.For instance, the creator could put a clause in the contract allowing the buyer to exercise a specific right, such as the ability to publicly exhibit the record, if the artist desires to grant the customer this specific right. The terms and conditions of the market will probably apply if the artiste does not create a specific formal relationship about the selling of the ‘NFT’ linked with the music record.
Implementing the Principles of Copyright Law to ‘NFT’s
An ‘NFT’ is primarily metadata on a blockchain, which does not meet the requirements for copyright protection, hence it is unlikely that it is eligible to copyright protection in and of itself. The ‘NFT’-represented work is protected, though. Some contend that with each new distribution channel created by new technology, people who own copyright do not necessarily preserve copyright protections on their creations. The unauthorized dissemination of copyrighted works, however, has historically been acknowledged by courts and Congress as limiting the artist’s ability to use new marketplace for distribution. “Congress granted copyright owners control over their decision to enter new markets in order to encourage authors to take part in new modes of exploitation and foster wide diffusion.”The unauthorized dissemination of protected content as ‘NFT’s will presumably be taken into account by courts as impacting negatively the creator’s ability to distribute his work in this modern electronic marketplace.
The prevalence of copyright infringement in the ‘NFT’ sector is scarcely surprising. It may not follow that the vendor is the item’s first creator when an ‘NFT’ is issued. Furthermore, due to the hysteria generated by the ‘NFT’s’ absurdly high selling prices, “a new breed of exploiters who have since resorted to translating others people’s ideas into ‘NFT’s” have been produced.
Legal Difficulties Posed By ‘NFT’s
A summary of three legal issues pertaining to copyright law that are brought up by ‘NFT’s, including: (1) who has the authority to transform an existing work that is protected by copyright into an ‘NFT’; (2) how to mandate copyright protection; & (3) how much, if any, of these rights can indeed be transferred.
‘NFT’s bring up two major legal issues: which laws should apply as well as how they mandated? Although the majority of this Piece’s attention is given to copyright law, ‘NFT’s give rise to a variety of legal difficulties that cross over into other legal fields, such as contract law, securities law, trademark law, and right of publicity. In addition to advertising legal issues raised by copyright law—which would be covered in the following sections—’NFT’s also provide a plethora of ethical challenges regarding the extent to which oversight must exist online.
NFTs: Who has the right to create one out of Copyright Protected Work?
Particularly when the product is tangible or visual art, ownership & rights to produce and trade works as ‘NFT’s are easier to specify for the creator who still maintains its exclusive right to their creation. The authors of a work frequently have the right to produce their original work as ‘NFT’s, trade the ‘NFT’s in a market, and earn royalties.
In cases where a creator has licenced certain applications of their works or when an artist has surrendered their rights but kept a licence for specific uses, it can be difficult to determine who has the authority to convert a copyrighted material into an ‘NFT’. The question arises in both cases as to whether minting the artwork into such an ‘NFT’ is covered by the artist’s licencing contract clause or the organisation to whom the creator assigned the rights. Prior to the rise of ‘NFT’s, it’s probable that so few, if there are any, contracts that were signed contained clear clauses about using a piece for ‘NFT’s. As a result, a lot of disagreements over this matter will probably hinge on how the contract’s provisions are understood.
It is also uncertain whether licencing agreements made before ‘NFT’s existed will be deemed to extend to the naming of ‘NFT’ rights. When an author did not reasonably expect agreeing to sign away this specific usage there at time the deal was formed, would accords stretch to releasing new works into ‘NFT’s? Additionally, joint writers could neither own nor inherently have the right until the courts decide who may convert a composition into an ‘NFT’, indicating a necessity for dialogue among the creators. These queries highlight the difficulties in determining which rights holders have the right to mint a copyright material into an ‘NFT’. However, it would be advisable to save the examination of this subject for a later, in-depth debate.
It is easier to decide who is not permitted to stamp and market a work protected by copyright as only ‘NFT’: those who do not hold copyrights to artistic content. This is in comparison to the complexity involved in deciding who is permitted to do so.Therefore, an individual who holds an original physical work of art but does not have copyrights to the work is not permitted to issue and market ‘NFT’ of work of art in original form.
Shifting of Ownership
The crypto community emphasised the issue concerning if a customer of an ‘NFT’ obtains sole rights to underpinning work when ‘NFT’s first gained popularity.The consensus now is that the answer is “no.”The creator, however, “retains the right to regulate replication and dissemination of the creative output, similar to what the author did prior to minting the ‘NFT’,” as the law states. Therefore, when someone purchases an ‘NFT’ of a created piece covered by copyright, the sole right belongs to the rights holder. Likewise, to when a person acquires a physical work of art, the artist retains the sole right to copy, modify, distribute, and display the work in public. The first sale doctrine is a long-standing legal principle that states that anyone who buys a physical piece of art also has the ability to sell, redistribute, and transfer it to a subsequent owner. However, it is still ambiguous if a purchaser of an ‘NFT’ falls within the 1stsale concept.
In order to secure and protect their rights in a legitimate ‘NFT’ transaction, a creator typically has to rely on the structure and language of the contract. Contract law is essential for enforcing copyright laws for ‘NFT’s. Using ‘NFT’s and the blockchain where the work is stored, artists can build a series of contracts that give the buyer power over how the work is used. By doing this, the artists are able to speak with the buyer directly about the terms of the transaction (as opposed to doing business through a middleman) and specify which right, if any, are given up with the sale. On international markets, ‘NFT’s can also be exchanged and bought, but there are guidelines that both buyers and sellers must abide by.
‘NFT’ exchanges today can be broadly divided into three groups. The first is the online platform, which enables consumers and merchants to interact and create communities without verifying the creator or the information included in an ‘NFT’. A certain amount of verification is done for artists and their works in the second sort of marketplace, which is similar. The third category presents a piece from a solitary rights holder.
Despite the fact that a lot of ‘NFT’ markets give artists the chance to receive profits from future revenue, in reality this is not an assurance. For instance, if an artiste offers her ‘NFT’ to a purchaser in one marketplace, the buyer can then transfer the ‘NFT’ to a different market. However, the original producer is unable to recuperate any royalties when that purchaser offers the ‘NFT’ just on resale market. Interoperability between marketplaces is required in this situation for creators to get royalties. The use of “smart contract standards” to include a uniform guideline for computing royalty fees is one remedy that is currently being thought about.
Non-Fungible Token & its interplay with the Copyright Act, 1957
The law around copyright has always undergone continuous change. To comply with different national and international criteria, the Act was revised in 1983, 84’, 85, 91, 92, 94, 99, and 2012.It’s interesting to note that every time the Copyright Act is changed, it means new concepts have been added to the law to recognise copyright holders’ rights, which are once more seen through the lenses of the writer’s moral, natural & economic interest. However, the legislation has recognised the entitlement of holders of one’s work as being protected from any exterior infringement in order to spur action and advancements in the crafts for the public’s intellectual stimulation, rather than awarding certain rights to creators who are traditionally viewed through the lens of copyright philosophies.
“A work in which copyright subsists includes literary, dramatic, musical, and artistic works”, according to section 2(y) of the Copyright Act. Both sound recordings and visuals are included in this. Since ‘NFT’s are nothing more than literary, musical, or artistic works that have been etched on a blockchain, the issue of copyright is extremely important.Given that ‘NFT’s have the highest valuation and are “distinctive,” which means that only one ‘NFT’ of a given object may be formed on a given blockchain, the question that matters if there is a legal right to create a”NFT.”. However, ownership of an ‘NFT’ does not automatically grant the owner ownership of the artwork or even a copyright to such works.
The Copyright Act’s Section 14 grants the authors of works protected by a copyright the right to perform or provide permission to perform the works’ replication, communication, adaptation, and translation. Determining if the privileges granted to proprietors under “Section 14 of the Copyright Act” also permit the production of “NFTs” is a difficult question to answer. Then would the creation of a”NFT” be separated from the underpinning creative activity, too?Additionally, is it possible to have the right to publish several ‘NFT’s of the same artwork?
Owning a “‘NFT’” versus owning a “work of copyright”
The holding of the “NFT” as a special token must be distinguished from the ownership of the substance to which it is tied.Many different purchasers and crypto aficionados believe that when you purchase an ‘NFT’ of a specific creative work, you automatically own it. This idea is false from the beginning. The truth is quite different. One does not instantly get the underpinning intellectual property ownership rights in a piece of material when they purchase an ‘NFT’ related to that piece of content.In this case, they have only bought the ‘NFT’ that goes along with it (without specific documentation).
Simply put, ‘NFT’ is a non-fungible, unique cryptographic tool. A copyright owner has a special right to reproduce, make derivative works of a piece, performance, show, and spread out copyrighted works in society, as was originally established by “Section 14 of the Copyright Act.” In most cases, when an art object is purchased, ownership does not immediately go to the buyer. On the other hand, when someone buys a painting from a place like that, they merely get the literal painting, that they are able display; they do not obtain the underlying rights to duplicate, alter, or may print and distribute copies of that image.
The underpinning copyright does not transfer until the owner expresses in writing their desire to convey those copyrights together with the authorship of the works to the buyer. Without first receiving the seller’s express written authorization, the owner of a”NFT” doesn’t really immediately acquire the rights to photograph the artistic work connected to the “NFT” and maintain duplicates of it for public distribution in just about any format.The ownership of the artwork follows the same rule. The buyer does not actually hold the work unless the seller of the initial asset sells it to them together with supporting documents describing the ‘NFT’ rights attached to it.This implies that, in the absence of particular paperwork, the purchaser of an ‘NFT’ gains a right to the ‘NFT’ alone through that purchase, together with the right to store the related-media in their credentials purse for personal use and to offload it to potential purchasers when necessary.As a result, consideration must be given to an ‘NFT’’s properties as listed in its smart contract. You are most likely purchasing nothing more than the ‘NFT’ itself if the smart contract doesn’t really grant the buyer ownership of the item itself or of the copyright.
Is Copyright Protection Possible for ‘NFT’s?
As more participants enter the market daily, ‘NFT’s are currently overrunning cryptocurrency exchanges. Wazir X, an Indian cryptocurrency exchange platform, has debuted its take on an ‘NFT’ auction website. Because of the larger “blockchain ecosystem” that is drawing attention of people from all around India, these advancements have produced a frictionless interchange of intellectual property and digital content, which includes works of art, music, movies, programmes, and even tweets. The right to construct an ‘NFT’ is a crucial issue at this point in the growing transcendence of blockchain now being the future internet.
In fact, “Section 14 of the Copyright Act” grants the writer a slew of legal rights that allow them to design unique platforms for the public presentation of their work and to bar others from doing so. However, the Act does not specifically list blockchain based digital or digitised works as copyright protected subject matter when it pertains to ‘NFT’ because the law is equally applicable to both physical manifestations and those that require the use of a computer or device to comprehend them.An ‘NFT’, which is just a ‘cryptographic token’ that displays evidence of possession of the token themselves, the works, the work’s copyright, or even a combined effect of either of these, is not copyrightable on its own unless a little amount of creativity, originality, and fixation are shown within it. Therefore, these characteristics must be included in any authoring with a copyrighted, including creative ‘NFT’s like [Crypto-kitties] offered by the writer.
Who Is Competent to Build an ‘NFT’?
The strict language of ‘Section 14 of the Copyright Act’ has prohibited the power to generate ‘NFT’ from being even remotely accepted as a part of the legal package of rights given to an author.The fact that an”NFT” is exclusively technological and lacks any foundation to be taken into account by the authors of the Copyright Act presupposes the existence of a morpho lawful claim that may be connected to the formation of something like a”NFT” or other technological advance that depends on the command of writers to their making.The term “copyright” refers to the specific right to make a work available to the general public, to distribute copies of the work that have not yet been made available to the public, to modify a work, as well as to translate a work for the purposes of the Copyright Act. Here, we should discuss whether distributing a”NFT” to the broader public qualifies as mass distribution of the work. or to publish duplicates of the same piece? As an alternative, should the work be translated, altered, or both?
It’s intriguing to note that copyright concerns begin to arise at the time the work is uploaded. Any platform can be posted to in a variety of ways, including posting from a hard disk drive, using a link, or uploading through the cloud.When a work is published on the ‘NFT’ marketplace without special permission, copyright infringement happens immediately, whether it is a genuine or simply a replica. This is because, even though downloading or other forms of personal copying are occasionally permitted, it is still against the law in almost every country to upload and otherwise make copyright-protected content available for sharing (without permission) once it has been made publicly available. display (‘NFT’ marketplace).
Copyrights transferred and licensed to buyers of NFTs
In legal terms, the idea of property refers to the privilege of possessing and regulating something, as well as the authority to prevent others from using or controlling it. This notion is commonly depicted as the owner of the property having an exclusive right to it. When the word “intellectual” is added to the property concept, it refers to the safeguarding of intangible items created, imagined, formulated, or discovered by a person or a group, which hold some value and are worthy of protection under the law. Intellectual property (IP) comes in several forms, including copyrights, trademarks, patents, right of publicity, moral rights, economic rights, and trade secrets.
The emergence of non-fungible tokens (NFTs) has brought forth a new set of complexities in the area of intellectual property rights, specifically in copyright law. The creators and buyers of NFTs, which can be artists, collectors, investors, or other creatives, often hold differing views and expectations regarding the copyrights attached to the content associated with an NFT. According to the standard rule in copyright law, the copyright of creative works is not passed on to the buyer of the works. Therefore, unless the creator of the NFT takes proactive steps to transfer or license the copyright to the purchaser, the latter will not have any copyright rights over the works that are linked to the NFT.
The aim of this section is to provide knowledge to NFT creators, buyers, and their legal advisors about the matter of whether any copyrights associated with tokenized works should be licensed or transferred to NFT purchasers. It seeks to clarify the complexities of copyright transfer and licensing in the realm of NFTs and blockchains.
The artwork is distinct from the copyright that covers it, and NFTs do not represent the artwork itself:
In order to delve into the transfer or licensing of copyright rights to NFT buyers, it’s important to first understand the nature of non-fungible tokens. Here are some key points to keep in mind:
- Copyright refers to the right to own and govern the reproduction and usage of an original, imaginative work.
- NFTs do not represent artworks. Instead, an NFT serves as a record of the creation and ownership of an asset, which could be an artwork.
- NFTs are a cryptographic tool that operates via a “smart contract.” A smart contract is a small piece of code that comprises a basic computer program that governs the operation of an NFT.
- Blockchain technology is used by smart contracts to verify and record the existence and ownership of both digital and physical assets.
- When an NFT is purchased, the buyer obtains control over the smart contract that defines and regulates the functions of the NFT. The smart contract creates a record on the blockchain, which is commonly accepted in the NFT industry and crypto community as proof of ownership of the asset associated with the NFT, whether it is an artwork, a piece of real estate, or some other asset.
- An NFT does not automatically confer ownership or control of the copyright to the artwork that is connected to the NFT.
When you buy an NFT, what exactly are you acquiring?
When you purchase an NFT for a digital or physical artwork, you are not acquiring complete possession of the artwork as if you had bought it from an NFT gallery and walked away with it. Instead, you are buying exclusive access and control of the smart contract for the NFT, which is stored on the blockchain and creates a record of your ownership of the NFT and its linked artwork. Along with the purchase, you receive a private key, which is a cryptographic tool that allows you to control the smart contract. If you choose to sell the NFT, you will transfer the private key to the new buyer.
One of the main reasons people buy NFTs is to own the underlying asset that is being offered for sale. However, it is important for the buyer to carefully read the NFT listing to understand exactly what is being sold. If the listing mentions a physical artwork, the buyer should ensure that the wording of the listing clarifies whether the physical artwork is included in the sale or if the NFT is being sold merely as support or patronage for cultural property.To ensure that you have a clear understanding of what you are purchasing, it’s important to look for information about how the physical work or digital asset will be claimed, stored, protected, and insured. If it’s a digital asset, check for a link to its storage location, which may be included in the smart contract script. You should also carefully review the NFT listing to determine whether any part of the underlying asset’s copyright is being assigned or licensed to the purchaser, as without such an assignment or licensing, no part of the copyright will transfer to the purchaser.
Comparison between the purchase of a physical artwork and the purchase of a digital artwork that is linked to an NFT:
The concept of copyright protection is distinct from the actual creative work or expression produced by the author. It is important to understand this distinction as it clarifies why purchasing an NFT does not automatically confer copyright ownership.
The concept of property law maintains that the copyright is a distinct asset from the object or file that contains the protected work. This principle is widely recognized in the United States and elsewhere in the world. In fact, the law defines the copyright as a distinct set of property rights that are separate from the property right associated with the actual artistic creation, such as the painting, digital art, musical composition, or sculpture. This is because a copyright comprises several different rights that can be exercised independently or licensed or sold separately. Moreover, the object containing the work can be sold independently of all the copyright rights, which is the most important aspect of this discussion.A copy of the work is the object that embodies the copyrighted work, while the actual expression of the work is referred to as the “work”.
It is generally assumed that the creator of the Work retains the Copyright.
Besides the fact that the copy that embodies the work can be sold or transferred separately from all copyright rights, there’s also a presumption that under current copyright law, the copyright of a work does not transfer to the purchaser of a copy, whether it be a physical or digital copy, or an NFT of a tokenized artwork, unless the copyright owner takes affirmative steps to transfer or license the copyright to the purchaser. This means that unless the copyright is separately transferred to the purchaser, they cannot make copies of the original work or create derivative works. Furthermore, the purchaser cannot stop others from making copies, whether authorized or unauthorized, of the original work. Hence, owning the NFT linked to a digital art does not prevent others from copying the digital image. However, the copyist only gets a copy, while the NFT owner becomes the registered owner of the original copy. This is akin to owning a physical artwork displayed in a public place, where viewers can take photos of the work but only come away with a copy of the original. Nevertheless, if someone obtains the copyright to the artwork, they can attempt to prevent copying of the digital and physical art.
It is common for artists to have a strong desire to keep the copyright to their artwork, as they value the benefits that come with it. The following section will explore these benefits, which can be summarized as “control” over the creation. Ultimately, ownership of property, whether intellectual or physical, is about having control over it.
Several of the rights that come with owning a copyright will be appealing to NFT owners. Among them, the most desirable right is likely the right to make copies of the work, followed by the right to sell and distribute those copies. If the artwork linked to the NFT is going to be used in other projects or activities, it will likely need to be copied and shared in various forms. Another important right is the derivative works right, which allows the copyright owner (not the owner of the physical or digital object) to create new works based on the original. This includes a wide range of possibilities, such as translations, musical arrangements, dramatizations, films, sound recordings, reproductions, abridgements, condensations, or any other type of transformation or adaptation.
It’s common for NFT owners to want to utilize the artwork they’ve acquired in different ways. One popular adaptation is to crop and copy the artwork to use it as their profile picture on various social media platforms like Twitter, Instagram, and Facebook. This adaptation most likely involves copying the digital file or uploading the original or cropped version of the work as a profile picture, which means it’s a form of copying.
Procedures for transferring or selling either all or a portion of the copyright rights to the buyer of an NFT:
The previous discussion focused on scenarios where the NFT owner did not acquire any of the copyright rights to the image associated with the NFT. However, it is possible for the NFT creator to transfer or license some or all of the copyright rights to the NFT purchaser, which could result in a different outcome.
To give the buyer all the copyright rights, it is usually known as an assignment of the copyright, and it must be done in writing rather than orally or through actions. On the other hand, if the seller wants to give only some of the copyright rights, it is usually referred to as a license of the rights.
There are two main types of licenses: exclusive and non-exclusive. An exclusive license gives the licensee the sole right to use and receive the licensed rights, and the copyright owner cannot license the same rights to anyone else. However, if the exclusive license involves valuable economic rights, it must be done in writing. On the other hand, a non-exclusive license allows the licensee to use the rights while the copyright owner can license the same rights to multiple people. A non-exclusive license can be done without a written agreement, as it can be inferred from the parties’ conduct or agreed upon orally.
There are different ways to establish the terms of a license, listed here in order of their legal enforceability when it comes to part of the artwork’s copyright intellectual property:
- Agreement on terms negotiated between seller and buyer prior to the purchase
- Embedding license terms in the NFT’s smart contract
- Requiring the purchaser to accept license terms through a pop-up clickwrap agreement at the time of purchase
- Stating the license terms in the NFT’s listing and item description on the sales platform
- Displaying the license terms on the NFT creator’s website.
Bargained for exchange between seller and purchaser before purchase:
The ideal solution for conveying license or copyright to the artwork is through a bargained for exchange between the seller and purchaser. This option involves both parties communicating, discussing and agreeing on the terms of the sale, and signing an electronic contract that explains the rights conveyed. However, many crypto natives may find this option unattractive as they prefer to remain anonymous, avoid direct communication, and do not want to involve legal solutions such as contracts. In the blockchain and crypto community, NFT sales are expected to be paperless and run by the platform’s code, and they are meant to be “trustless,” meaning that the code handles everything. For those who prefer not to form a legally binding contract, there are alternatives listed below.
Adding license terms into the NFT’s smart contract through coding:
The option of coding license terms into the smart contract of the NFT would most likely meet the legal requirements of the license because the terms would be in writing within the code, and access and control of the smart contract are what is being purchased when someone buys an NFT. However, it would be necessary to disclose the terms to the purchaser through another means, such as pop-up clickwrap terms, terms in the listing, or terms on the creator’s website, in order to give actual notice of the terms to the purchaser. It is unlikely that the average purchaser of an NFT would delve into the coding of the smart contract before purchasing it. Additionally, it is probable that many NFT creators will not be comfortable programming the code of a smart contract, so they may need to rely on outside help from the NFT platform itself.
A license agreement presented to the user as a pop-up:
This option refers to the use of pop-up screens that require users to actively click on a button to accept the terms of a license agreement. This type of agreement is commonly used when installing software or accessing online content. The advantage of using a pop-up clickwrap license is that it requires the user to take an affirmative action to accept the terms of the agreement, which can be done at the point of purchase. In general, clickwrap licenses are more legally binding than browse wrap licenses, which rely on implied consent to the license terms. While implied consent is also a valid form of agreement, the act of clicking is a more direct and explicit form of consent, similar to signing a written agreement.
Although pop-up clickwrap and browsewrap licenses are effective in communicating license terms to the initial purchaser of an NFT, they may not be effective for subsequent purchasers who obtain the NFT on a different sales platform or through a wallet-to-wallet transfer. However, it is important for the creator and copyright owner of the artwork to ensure that the terms of the license apply to each subsequent owner of the NFT. This can be achieved by coding the license terms or a link to the terms in the metadata of the NFT’s smart contract or by including a term in the license that requires the current owner to notify any subsequent purchaser of the terms of the license. Although the current owner’s compliance with this requirement is not essential, including it in the license serves as evidence that the subsequent owner should have been aware of the license terms.
Terms of the license included in the item description and listing on the NFT marketplace
The creator of an NFT being sold on a sales platform can typically include a description of the NFT in the listing, which can contain the license terms or a link to them. This serves as another piece of evidence that the purchaser had the opportunity to review the terms before buying the NFT. However, as with the clickwrap and browse wrap options, this method may not effectively communicate the terms to subsequent purchasers who obtain the NFT through a different platform or method. Nonetheless, including the terms in multiple places can provide stronger support for the validity of the license.
License terms made available on the creator’s website
The creator’s website is a popular option for disclosing license terms, particularly in projects like the Bored Ape Yacht Club and Vee Friends. It is a convenient solution that allows the creator to adjust the terms as needed. However, this option does not require any act of acceptance or agreement from the NFT purchaser, making it a “take it or leave it” proposition. As a result, it may not be the best option for ensuring easy enforcement of the license terms. Nonetheless, some disclosure of terms is better than none at all.
License terms provided to the buyer of an NFT
When creating and selling an NFT, the copyright owner of the linked artwork must consider which rights they want to transfer to the buyer. If the artwork is regularly used in commercial projects or the creator plans to make derivative works, these rights should be excluded from the buyer and any future NFT owners. However, if the creator is part of the collaborative, open-source community often found in the crypto and metaverse space, they may choose to share or give up all rights to the artwork linked to the NFT.
When drafting a license, it is important to consider various rights that should be included in the terms. Some of the important rights to be considered are, when drafting license terms for an NFT, the creator should take into account various rights related to the artwork, including the right to display it, the right to make copies for certain incidental purposes, the right to create derivative works, the right to commercially exploit the artwork, as well as the option to share or assign the copyright to the purchaser.
Providing one right to the purchaser doesn’t necessarily mean that other rights cannot be offered, and a license can include multiple rights. The license should be tailored to satisfy the current purchaser while also protecting the creator’s rights for the long term.
Due to the challenges caused by the digital nature of many tokenized artworks, the first right to consider transferring or sharing with a purchaser is the right to display the artwork. It is advisable to specify that this includes a license to obtain a copy of the artwork solely for the purpose of displaying it on the internet, social media, or in the metaverse to avoid any misunderstandings. Without such a clarification, the right to display a digital artwork would be meaningless since the owner would have to make an unauthorized copy of the digital file to do so. Additional minor uses of the right to copy are described in the following option.
Copying for Specific Incidental Purposes:
This involves granting a limited license for specific uses of the copyright such as creating a profile picture, reselling the work, moving the NFT to a new wallet, or lending or loaning the work to an online or metaverse gallery or museum. However, it should be emphasized that the grant of these limited rights does not imply the transfer of any other rights to copy and that the creator retains the copyright over the artwork.
The entitlement to generate adaptations of the original artwork:
As the license options become more community-oriented, the NFT creator may choose to share or assign the right to create derivative works to the NFT owner. However, since the concept of derivative works in copyright law is very broad, the creator should consider this option carefully and possibly limit the types of derivative works that may be created. Since the artist’s pseudonym (wallet address) is recorded on the blockchain with the NFT, the artwork can always be traced back to the creator. Furthermore, many artists aim to create a distinct, recognizable style in their artwork. If the NFT owner creates a derivative work that negatively impacts the artwork’s reputation or takes it in an unexpected direction, this could have long-term consequences for the artist’s career. Therefore, some NFT projects that allow owners to create derivative works place restrictions on the right, prohibiting the use of the artwork in connection with hatred, discrimination, intolerance, violence, or cruelty, as well as any use that infringes on the rights of others, including copyright, trademark, right of publicity, patent, moral rights, or trade secret rights.
The right to use the artwork for commercial purposes:
The right to commercially exploit the artwork explicitly grants permission to the NFT owner to use the artwork for monetary gain, which may include creating and selling new works derived from the original artwork. This can be seen as the copyright owner allowing the NFT owner to compete with them using their own artwork.
While it may appear as an unwise move, some famous NFT initiatives have chosen this path. For instance, Yuga Labs, the originator of the Bored Ape Yacht Club (“BAYC”), offers the subsequent rights to its NFT holders:
Under certain conditions, Yuga Labs LLC permits owners of its NFTs to have an unrestricted, global license to utilize, reproduce, and showcase the purchased art for the purpose of developing derivative works from it (“Commercial Use”). This includes using the art to produce and sell merchandise products, such as T-shirts, that feature reproductions of the artwork. The company clarifies that this section does not restrict owners from owning or operating a platform that enables the use and selling of Bored Apes, operating a third-party website or application that allows the involvement of Bored Apes, or earning income from any of these activities.
Dapper Labs, the creator of CryptoKitties, also includes commercial rights in its license agreement for NFT owners. However, the license limits the right to earning up to $100,000 per year in gross revenue:Dapper Labs provides a restricted license to buyers of CryptoKitties, allowing them to use, copy, and display the artwork of their purchased kitty for commercial purposes such as creating merchandise that includes the artwork. However, this license comes with a limitation that the commercial use should not generate more than $100,000 in gross revenue per year.
To ensure a clear and fair revenue cap, it is recommended to express it as gross revenue instead of net revenue. This approach is preferable because it is simpler to calculate and eliminates potential disagreements regarding the allocation of costs and expenses to specific sales.
Employment of licenses under the Creative Commons framework:
For some copyright owners, the idea of someone else making money off of their artwork is not a problem, as long as they receive the resale royalty (if available). In fact, some may welcome others to profit from their work extensively. One way to do this is by donating all or some of the copyrights to the public domain through the use of a Creative Commons license. This will allow anyone to use, copy, and distribute the artwork freely without any restrictions.
As detailed on the Creative Commons website, the following actions are permitted under a Creative Commons license:
- Donate your work to the public domain, only requiring attribution credit (Attribution license)
- Donate your work with a requirement that anyone who uses the work must also donate their derivative works to the public domain with the same terms (Attribution-Share Alike license)
- Donate your work with the condition that others can use it, but not create or pass on derivative works (Attribution-NoDerivs license)
- Donate your work for personal use only, with no commercial uses allowed (Attribution-Non-commercial license).
To indicate the issuance of a Creative Commons license for an NFT, there are various options available, such as embedding it into the smart contract of the NFT, displaying a clickable pop-up message during purchase, including it in the description of the artwork on the sales platform, or communicating it through the artist’s website. It is important to note that a Creative Commons license is a public grant of rights and therefore provides rights to everyone, not just the buyer of the NFT.
Assignment of Copyright to the Purchaser:
The last recommendation is to transfer the copyright to the buyer of the NFT by selling it as a separate transaction with additional compensation. The transfer must be in writing, separate from the sale of the NFT, and could be done electronically. If the copyright was registered with the Copyright Office of the Library of Congress, then the transfer must also be registered. Following the transfer, the buyer of the NFT will become the new owner of the artwork copyright and can exercise their rights over the work as they please.
Finally, in the realm of copyright law, artists and creators often make careful and significant decisions about licensing their works. This is because we tend to assume that the works we are seeking to protect are deserving of protection against unauthorized copying, distribution, and exploitation. In the traditional physical forms of fine art, it was important to the artists whether their works could be copied or distributed without their permission. This allowed others to beat them to new markets or outmaneuver them in exploiting the works until it became pointless to try to claim them or control their use. In the case of complex and labor-intensive ventures such as video game development, motion picture production, and metaverse world-building, it has been deemed crucial that the end product of years of work not be duplicated or distributed freely without compensation or control by those who invested the time, effort, and money to create the work. In the past, it was more difficult to make copies of paintings or sculptures, providing a natural barrier that could slow down exploitation to a reasonable and controllable level. However, with digital artistic expression in visual arts, film, and performing arts, the situation has changed because it is so easy to duplicate and distribute these works without any perceivable loss in fidelity of content.
In the metaverse, NFTs are being considered by developers as a means of exchange, an admission passes to events, an access key to gatherings, and as a medium for artistic expression to enhance the alternate reality experience. Digital art will play a significant role in the metaverse, raising questions about the ownership and commercial use of these creations in the present and future. One possible solution to this issue is the implementation of copyright licenses.
The concept of fair use also demands reconsideration within the context of NFTs. Transformative use, a crucial aspect of fair use determinations, becomes complex as NFTs often involve the direct replication of the original work in digital form. This raises questions about whether the mere act of tokenization constitutes transformative use or if additional creative elements are required to meet fair use criteria.
To navigate this evolving landscape, a nuanced approach to copyright law is imperative. Some proposals include adapting existing copyright principles to account for the unique attributes of NFTs, such as implementing a resale royalty system, where creators receive a portion of the proceeds from secondary sales. Alternatively, new legislation or international agreements specifically tailored to digital assets and NFTs could be explored to ensure adequate protection for both creators and buyers.
In conclusion, the advent of NFTs has introduced a paradigm shift in copyright law, necessitating a reevaluation of existing legal frameworks to accommodate the complexities inherent in this digital evolution. As NFTs continue to reshape the creative economy, stakeholders must collectively address the legal uncertainties and ethical considerations that arise at the intersection of copyright law and blockchain-based assets. Only through careful deliberation and adaptation can a harmonious equilibrium be reached, where the rights of creators, buyers, and the broader public are respected in this transformative era of digital ownership.‘NFT’s propose a grand dream for artists, allowing for the very first time during the history of the digital age the existence both ownership and originality proof. ‘NFT’s give artists the chance to bypass middlemen and disseminate directly to customers, in contrast to established markets for dissemination. Additionally, ‘NFT’s have the potential to give virtual and underprivileged artists the chance to earn from their creations in the online market. Until recently, some artists could only distribute their works to customers by selling their privileges to a larger organisation, like a music producing house. While others shared a sizeable portion of their income with an organisation like a gallery, which would market and sell the work to a potential customer, in exchange for their distribution of creative works to consumers. ‘NFT’s, though, now permit creators to maintain ownership of their creations and receive royalties from further sales.
‘NFT’s appear to present a chance for the author to regain control over how their work is distributed. It transfers control from a select few to a large number of people. ‘NFT’s were created with the aim of fostering a more egalitarian online environment and redefining virtual ownership. However, some contend that by introducing fresh censors, middlemen, and wealthy consumers to the ‘NFT’ market, ‘NFT’s ultimately transfer exclusive authority from one entity to the other. This Note contends that some level of copyright protection should remain well over artistic activity coined unto an ‘NFT’ in order for ‘NFT’s to fulfil the lofty goal of shielding artists from the present standard of voluntarily giving up rights and ownership in an artistic activity.
Justin Scheck, OpenSea’s ‘NFT’ Free All, WALL ST. J. , https://www.wsj.com/articles/openseas-’NFT’-free-for-all11644642042?st=ouz50qst53h03qw&reflink=article_email_share
 Abhay Panda, Development In Indian IP Law: The Copy-right (Amendment) Act 2012, Intellectual Property Watch, https://www.ip-watch.org/2013/01/22/development-in-indian-ip-law-the-copyrightamendment.com
 Gramophone Company of India Ltd. v. Birendra Bahadur Pandey &Ors, 1984 AIR SC 667; Also see Entertain-ment Network (India) Limited v. Super Casette Industries Limited, 2009 AIR SC 1150.
 Jaideep Reddy Et. Al., Cryptocurrency: The status and future of ‘NFT’s and crypto art in India, The Economic Times , https://economictimes.indiatimes.com/tech/catalysts/the-status-and-future-of-’NFT’s-and-crypto-artin-india/articleshow/81970883.com
 The Copyright Act, 1957, No. 14, Acts of Parliament, 1957
Ghaith Mahmood, ‘NFT’s: What Are You Buying and What Do You Actually Own?, The Fashion Law, https:// www.thefashionlaw.com/’NFT’s-what-are-you-buying-and-whatdo-you-actually-own/
 Rich Stim, Copyright Ownership: Who Owns What? – Copyright Overview, Stanford Copyright and Fair Use Centre ,https://fairuse.stanford.edu/overview/faqs/copyright-ownership
 Omkar, Binance-Owned WazirX Introduces the First “NFT” Platform in India, CoinDesk, https://www.coindesk.com/binance-owned-wazirx-launches-indiasfirst.com
 Benita, How a new platform could usher in the Indian art market’s next major trend — ‘NFT’s,The Indian Express,https://indianexpress.com/article/express-sundayeye/how-a-new-platform-may-start-the-next-big-trendin-the-indian-art-market-’NFT’s-7287485/
 The Copyright Act, 1957, No. 14, Acts of Parliament, 1957
 Jordan, Harrison, No, NFTs aren’t copyrights, TechCrunch (June 16, 2021).
 The laCollection NFT marketplace is selling NFTs associated with impressionist paintings and drawings that are rarely exhibited by The Museum of Fine Art, Boston. However, the actual physical artworks are not available for sale. The NFTs can be purchased on https://lacollection.io.
 Montgomery v. Noga, 168 F.3d 1282, 1292 (11th Cir. 1999).
 17 U.S.C. § 101 (2021).
 17 U.S.C. § 101 (2021).
 The interpretation of the term “economic value” is broad, meaning that if the licensee gains some form of advantage or benefit, it can be considered to have economic value.
 De Forest Radio Tel. Co. v. United States, 273 U.S. 236, 241 (1927).
 Okolo, Michael, and Catherine E. Tucker. “NFTs: What they are, use cases, and limitations.” (2022).
Cryptopedia, What Does Trustless Mean?, (Aug. 11, 2021), https://www.gemini.com/cryptopedia/trustless-meaning-blockchain-non-custodial-smart-contracts.
 Lee v. Ticketmaster L.L.C., 817 F. App’x 393, 394 (9th Cir. 2020); Campbell v. Gen. Dynamics Gov’t Sys. Corp., 407 F.3d 546, 557 (1st Cir. 2005).
 Murray, M.D., Transfers and Licensing of Copyrights to NFT Purchasers, 6 Stan. J. Blockchain L. & Pol’y 119 (2023).
 Close v. Sotheby’s, Inc., 894 F.3d 1061, 1072 (9th Cir. 2018).