How Are Intellectual Property Rights Enforced in NFTs?

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How Are Intellectual Property Rights Enforced in NFTs?

Imagine owning a digital artwork worth millions, only to find it duplicated everywhere without permission. Intellectual property rights with NFTs are a hot topic, and to shed light on this, insights from a founder & attorney and an IP attorney have been gathered. The article kicks off with why it’s crucial to utilize smart contracts for protection and wraps up with the urgency of acting quickly to protect copyright. With four expert insights, ‌every angle of protecting digital assets through legal means is covered.

  • Utilize Smart Contracts for Protection
  • Define Clear Licensing Terms
  • Understand Limited-Use Rights in NFTs
  • Act Quickly to Protect Copyright

Utilize Smart Contracts for Protection

Enforcing intellectual property rights with NFTs requires understanding the unique digital landscape they occupy. As a business owner, I recognize the importance of protecting digital assets, especially as NFTs represent ownership over digital content. The enforcement process often begins with ensuring that proper rights are defined before minting an NFT. Smart contracts play a pivotal role; they’re programmed to execute specific conditions that protect ownership and track provenance. For instance, when owning a piece of digital art as an NFT, creators ensure that resale royalties are embedded in the contract.

A notable example is when digital artist Beeple sold his art as NFTs for millions, ensuring ongoing royalties for future sales. This highlights the necessity of setting clear terms and conditions that uphold the creator’s rights. To maintain these rights, vigilance and monitoring of NFT marketplaces are essential, helping identify unauthorized uses. This approach not only guards the creator’s interests but also fosters trust within the digital-commerce ecosystem.

Rick C.
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Rick C.
Licensed Paralegal & Legal Assistant | Marketing Expert, Kahlon Law


Define Clear Licensing Terms

Enforcing intellectual property (IP) rights with NFTs (non-fungible tokens) can be a complex issue, as NFTs exist in a digital space where traditional IP laws may not directly apply in the same way they do with physical goods or services. The key legal question centers around the ownership and licensing rights of the digital content tied to the NFT. While someone may purchase an NFT, that doesn’t necessarily mean they own the copyright to the associated digital asset.

For example, an artist might create an NFT tied to a piece of digital art. When someone buys that NFT, they essentially own the token, which verifies their ownership of that specific digital copy, but they don’t automatically own the underlying intellectual property rights, like the right to reproduce or profit from the artwork. The artist would retain those rights unless explicitly transferred to the buyer through a licensing agreement.

A well-known example of this issue arose with Larva Labs, the creators of the popular “CryptoPunks” NFTs. Originally, buyers of CryptoPunks owned the digital collectible but did not have the commercial rights to use the artwork in other projects or profit from it. Over time, this led to disputes, as some buyers believed they should have full commercial rights to the characters they owned as NFTs. Larva Labs later adjusted their policy and granted broader usage rights, allowing owners to use their CryptoPunks for certain commercial purposes.

This case highlights the importance of clear licensing terms when dealing with NFTs. Creators and platforms must explicitly define what rights are transferred with the sale of an NFT, and buyers need to be aware that purchasing an NFT often grants them ownership of the token but not necessarily the IP rights to the associated content. Legal disputes around NFTs are likely to increase as the market evolves, so ensuring proper legal agreements are in place is crucial for both creators and buyers.

This illustrates how critical it is to define and enforce intellectual property rights in the growing world of NFTs. Clear agreements and understanding the separation between ownership of the token and IP rights are key to avoiding legal conflicts.

Rock Rocheleau
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Rock Rocheleau
Founder & Attorney, Right Lawyers


Understand Limited-Use Rights in NFTs

The enforcement of IP rights in NFTs usually falls on the underlying rights assigned to a digital asset. In the creation of an NFT, the originator will often retain some rights, such as copyright, unless it is transferred specifically. In addition, owners of NFTs must understand that purchasing an NFT does not imply ownership of the IP rights but rather limited-use rights.

Infringement of such rights—by reproducing the NFT or using the artwork without permission, for example—is actionable by an IP holder. That may mean sending cease-and-desist letters and filing DMCA takedown notices, or it could mean litigation in egregious cases. Most NFT marketplaces also have their own IP infringement procedures that make enforcement much easier.

However, the decentralized nature of NFTs means this is usually difficult to enforce, considering different jurisdictions may be an issue. Overall, clear licensing agreements and due diligence are important on both sides—of creators and buyers—for effective navigation in the IP rights of the NFT space.

Michael Cohen
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Michael Cohen
Ip Attorney, Cohen IP Law Group PC


Act Quickly to Protect Copyright

A unique aspect of enforcing IP rights with NFTs is ensuring creators retain control over their work. In one instance, an NFT was minted using a client’s copyrighted photograph without permission. We pursued legal action to remove the NFT from the marketplace and sought damages under copyright law.

The lesson here is that NFT platforms don’t override copyright law. While blockchain technology is new, the legal principles around intellectual property remain the same, and creators must act quickly to protect their rights when infringements occur.

Jeffrey A. Preszler
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Jeffrey A. Preszler
Partner, Preszler Law Alberta


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Block Telegraph Staff

BlockTelegraph is the leading blockchain news publication, covering NFTs, DApps, and the decentralized finance industry.