Introduction
With NFTs being a very recent development many questions arise about the legal site of them. Currently there are definitely still a lot of gray areas, and many people get away with scams and other shady activities. However this does not mean the NFT space is a legal vacuum. Copyright laws in particular can be applied to any type of artwork, whether it is physical, digital or an NFT.
Many questions arise when dealing with intellectual property, because the actual sale contracts of NFTs are often hidden in the backend of the NFT marketplace. To make things even more complicated there is no “standard” or international copyright law, rather every country has its own laws. In this article I will clear up the confusion and address the most common questions that arise when dealing with NFT copyrights:
Are NFTs protected by copyrights?
Can I lose my copyright when I sell my art as an NFT?
Can I mint someone else's artwork and sell it as an NFT?
Can I mint an NFT from art that is under the public domain?
What can I do, when someone else minted my work without my consent?
Is it legal to release spin-off or homage versions of existing NFTs?
Disclaimer: This article is not legal advice! The rules can be different for every country, so if you are in doubt, please seek advice from a lawyer.
What is an NFT?
An NFT is a type of certificate to identify an art asset as unique. The NFT is stored on the blockchain making it forgery-proof and easily tradeable. This also means that an artwork can be made unique even if there exist millions of digital copies of it.
The term non-fungible means the tokens can not be interchanged with other tokens, like for example trading one bitcoin for another bitcoin. Even if you have multiple NFTs of the same artwork they are treated as different pieces.
The holder of an NFT is granted the digital ownership right of that token. This concept is very important, as the actual digital art piece connected to the NFT is usually not part of the token itself - at least not directly. Most of the time the NFTs metadata only contains a URL pointing to the specific artwork.
Main article: What are NFTs?
So why is this important?
It means we have to look at the “NFT” part and the “artwork” part of the digital asset individually. In that sense an NFT can be treated as the “receipt” for the owner that he owns a copy of the artwork. The actual copyright applies to the artwork itself - digital or not. The only difference when applying this concept to NFTs is the agreement of buyer and seller, which is handled by a smart contract.
What is a smart contract?
A smart contract is basically a program that is publicly stored on the blockchain. Users of the blockchain can interact with the smart contract and use its functions to perform blockchain related actions - from minting, buying, selling or transferring of NFTs to handling auctions etc.
Let’s look at a simple example here:
Bob wants to mint a brand new NFT of the “Space Alien Club” collection. In order to do that he has to interact with their smart contract. The Space Alien Club smart contract has a public function that handles the minting process.
Bob can call the minting function and the smart contract can then proceed to send Bob his NFT in exchange for his payment. The smart contract could also enforce a rule that for example only one NFT can be minted per wallet address.
As you can see smart contracts are quite powerful and versatile in their use. So in theory they can also be used to specify proprietary rights, for example the copyright.
What is copyright?
Copyright is the protection of an artistic work against unauthorized use, like copying and publishing. The term “copyright” covers a broad range of cases, including digital distribution (this is the part where it applies to NFTs).
Most countries including the U.S. and Europe grant copyright protection automatically upon creation of the work. There is no international copyright law however - rather every country has its own national laws.
FAQ
Are NFTs protected by copyright?
If you decide to mint an art piece that you created, the artwork itself falls under the copyright law. This means your art is protected against unauthorized use from third parties and all commercial rights stay with you (the creator).
Transferring an NFT does transfer the ownership, but the buyer/ current owner is not granted any copyrights (unless specified otherwise, as we will see later). The new owner is only allowed to trade, sell or transfer the NFT.
Can I lose my copyright when I sell my art as an NFT?
Upon sale of an NFT the copyright usually stays with the creator of the artwork. However copyright can also be transferred upon sale. Usually the terms for the transfer of such rights are specified in the following ways:
Specified in a contract that governs the NFT
Using standard terms and conditions
an accompanying contract / deed of copyright
In any case though the seller has to explicitly state that he wants to transfer full or part of the intellectual property using one of the above methods.
When it comes to selling on a marketplace, pay close attention to their terms and conditions for NFTs. Typically the marketplace grants the buyer of the NFT a limited standard license that allows him/ her to use the NFT in his wallet, within the platform or other marketplaces. Some platforms specifically adress the copyright. The NFT marketplace SuperRare for example states:
“According to our Terms of Service, Artists do not lose copyright protection over works when they are sold on the SuperRare Labs marketplace unless the parties expressly agree in writing to convey a copyright interest as part of the transfer.” - SuperRare Copyright Community Guidelines and Policies
Related: How to become an approved artist on SuperRare
Apart from these standard licenses some marketplaces like Rarible or MakersPlace allow their users to create custom licenses by including their own terms into the NFT. The marketplace OpenSea leave the handling of intellectual property rights, like the copyright, solely to the seller:
“...in each case for the sole purpose of enabling you to use the Service as permitted by these Terms, provided that your license in any content linked to or associated with any NFTs is solely as set forth by the applicable seller or creator of such NFT.” - OpenSea Terms of service
Can I mint someone else's artwork and sell it as an NFT?
No, copying someone else's work and selling it without permission as an NFT would be considered a copyright infringement. Most NFT marketplaces also won’t allow you to mint art that was not created by you.
Under US copyright law, the act of minting an NFT onto the blockchain would be an act of copying:
“ “Copies” are material objects [...], in which a work is fixed by any method now known or later developed, and from which the work can be perceived, reproduced, or otherwise communicated.” - 17 U.S. Code § 101.
Because the artwork has to be uploaded to a file system in order to create the NFT, the artwork has to be reproduced, which is a violation of the copyright law.
An exception to this is of course given, when you have the copyright to someone else's artwork, for example by buying or licensing it.
Can I mint an NFT from art that is under the public domain?
Now when it comes to artworks that are under the public domain, it gets a little bit tricky.
Technically the term “public domain” refers to any creative material that is not protected under intellectual property laws, including copyright. So when an item is not protected by copyright I can use it to mint an NFT, right?
Here is why that is not possible: The claim of copyright over items that are in the public domain is called “Copyfraud”. By minting an artwork under the public domain you are falsely claiming to be the owner of it, therefore commiting copyfraud. Even if you are actually the creator of the artwork you can not use it to make an NFT as long as it is in the public domain.
What can I do, when someone else minted my work without my consent?
If someone else falsely claimed your copyright, I got some bad news and some good news for you.
Let’s start with the bad news. Minting an artwork means it is now stored within an NFT on a decentralized blockchain. Due to decentralization, deleting something off the blockchain is almost impossible. You can “burn” an NFT by sending it to the null address, however in order to do that you need to own the NFT and the last thing you want to do is pay someone else for your own work in order to delete it. You can probably see that there is no “quick fix” for this problem.
However there is still the good news, so here is what you can do: Contact the NFT marketplace that hosts the NFT with your own artwork. Usually NFT marketplaces have terms in place that prohibit the infringing of copyrights. The biggest marketplace OpenSea for example has a form for IP takedown requests. These requests must include the following:
A physical or electronic signature of the copyright owner or a person authorized to act on behalf of him/her.
Identifications of the copyrighted material, for example a URL pointing to the specific item you assert.
Contact information such as an email or address.
A statement that you believe the material is used in unauthorized ways.
A statement that you are authorized to act on behalf of the copyright owner.
So while it is hard to take action against the existence of the copyright infringing NFT, you can prevent it from being sold.
Is it legal to release spin-off or homage versions of existing NFTs?
The copyright law includes a doctrine called “fair use”. It basically means that it is allowed to use (copyrighted) artwork from other people within a certain limit.
As you can see the term is very broad so you should ask yourself these questions before you start making a remix of an existing collection:
Does your work add any new value or meaning to the original work?
Does the use of the copyrighted material affect the original work in negative ways?
At best you should also have a written authorization from the original creators. Many marketplaces actively work on limiting spin-off collections. OpenSea for example actively removes collections they see as infringing intellectual property rights. They also don’t give out the blue check marks to spin-off collections. The Solana marketplace Magic Eden even goes a step further and marks remixed collections with a small note.
When it comes down to actual copyright claims by the original NFT owners, in the end only a court can determine whether the use is in fact a “fair use”.
Conclusion
It is often thought that NFTs are not underlying any laws, because they are still a very new development. However this is only partly true, while the NFT part might not be specifically mentioned in any laws, the underlying artwork is treated like any other artwork, whether that is physical or digital.
Ultimately this also means copyright or other intellectual property laws can be applied to NFTs. The important part is to make the distinction between the token in your wallet and the underlying artwork.
In any case, the creator of an artwork has to specifically grant permission for any use of the intellectual property. Most NFT marketplaces emphasize this in their terms by for example giving out limited licenses or the possibility to create custom licenses.