Non-Fungible Tokens and Copyrights: Is There Any IP in NFT Ownership?

Non-fungible tokens have become all the rage since its explosion in 2020. But since its emergence, non-fungible tokens have caused considerable confusion regarding ownership stake in related intellectual property because of the public’s misunderstanding of the rights conveyed with such purchase of non-fungible tokens. This confusion has led to a wave of intellectual property litigation such as claims of copyright infringement.

Copyright Not Transferred in Non-Fungible Token Sale

Earlier this year in January 2022, a decentralized autonomous organization, known as Spice DAO, paid over $3 million for an unpublished copy of the unpublished film, Dune. The purchase, which occurred at a Christie’s auction, stunned the world when the purchase price went for almost ninety times what experts had estimated for it to go.

Almost immediately after the purchase, Spice DAO publicly announced that it would make its own animated series based on the freshly purchased manuscript as well as allow derivative projects to be created by third parties. The tweet was met with almost universal ridicule as it was clear that Spice DAO did not understand how intellectual property ownership rights were legally conveyed.

Brand Protection Against Non-Fungible Token Owner IP Rights Claims

Owners of non-fungible tokens continue to claim rights in intellectual property works that have no connection to the non-fungible tokens to which they supposedly belong. For instance, earlier this month, Nike had to file a trademark infringement lawsuit against an entity known as StockX over the sale of non-fungible tokens that StockX claimed to be related to Nike.

The issue with these non-fungible tokens is that there is no proof that these tokens convey any sort of intellectual property rights with them. Some experts have even gone as far as to liken non-fungible tokens to nothing more than status symbols. While brands such as Birkin and Nike have argued that the sale of these tokens negatively impact their reputation, the popularity of the non-fungible token industry has only grown.

NFTs, Hacks, Scams, and Questions of IP Ownership

According to some studies, the market hit approximately $40 billion in sales just last year. But with such popularity has also come an accompanying surge in malicious scams, hacks, and other swindles that are related to non-fungible tokens’ connection to cryptocurrency and blockchain.

As it stands now, there seems to be no stopping the growth of non-fungible tokens and their place in the intellectual property realm. While non-fungible tokens currently rely on the use of direct licensing to convey rights, to achieve true legitimacy, it will need not only protection by federal law but direct acknowledgement of its place in digital assets. Currently, copyright laws do not recognize such tokenization of digital assets as legitimate, and as such, the sale and transfer of non-fungible tokens will remain unable to convey copyright or other intellectual property rights as may be preferred by both the seller and purchaser.

Key Takeaways on Non-Fungible Tokens and IP Rights

The rocketing popularity of non-fungible tokens has raised legitimate questions about what rights are conveyed with the sale or transfer of these tokens. Currently, it should be understood that:

• Non-fungible tokens do not inherently convey any intellectual property rights—there must be accompanying licenses;

• Current copyright law does not recognize such tokenization of digital assets; and

• NFT connections to cybercurrency and blockchain has made it ripe for attachment to growing scams and malicious schemes.

For more information on copyright protection, see our Software Protection & Copyright Services and Industry Focused Legal Solutions pages.