A brief guide on NFTs and how to protect yourself
NFTs – what does it mean?
The acronym NFTs stands for non-fungible tokens , which can be described as one of a kind digital artistic asset (such as drawings, videos, music) that exploits most commonly Ethereum blockchain technology.
NFTs have taken the digital art market by storm and brought a new meaning to art collecting.
Within the art industry, ‘provenance’ (i.e. origin) and ‘authenticity’ of a work of art are the real keys to its commercial value and (exorbitant price valuation). Thanks to blockchain technology, each individual NFT is composed of metadata stored on a digital ledger that cannot be changed, such metada authenticate the underlying asset of the NFT as a genuine and original entity.
NFTs and Intellectual Property Rights: where do you stand?
If you are a buyer
There is a common misconception that if someone acquires a NFT (even paying for a significant price for it), they will also own the intellectual property rights, i.e. copyright or trade marks, in the underlying artwork/digital asset that constitutes the NFT.
Unfortunately, this is not the case. As many NFT platforms terms and conditions clearly state, the buyer of the NFT will only be granted ownership of the blockchain technology constituting the NFT but not of the underlying asset. This means that the owner of the NFT cannot modify the ‘content’ of the NFT nor he can use it for commercial purpose it (e.g., sell or license the content of the NFT).
This is a very important point to understand if a buyer wishes to avoid any lawsuit for infringement of a third-party’s intellectual property rights. Buyer should think of their NFTs as a framed portrait. You are allowed to sell the portrait ‘as is’ (i.e. framed) but you cannot take the artwork out of the frame or do anything with it.
If you are an artist/illustrator or a brand
This digital art market is thriving. More and more artists are approached by NFT platforms and major brand to create capsule collections to be minted into NFTs. It is therefore important that you know where you stand.
If you are the illustrator, artist, videographer, sculptor, etc. that has created the original underlying asset, you will be therefore the owner of the underlying intellectual property rights in the work. You artist will decide what an NFT buyer can or cannot do with your artwork embedded in the NFT.
Usually (unless you are super tech savvy) artists will require the assistance of a software developer to mint the NFT. Even though, it is very likely that you will not do it on your own, it is important to be aware of the options available to you in term of available technology. Once you have created your artwork is to choose how to mint an NFT (i.e. which blockchain technology will support the NFT). There are many available and suitable choices but usually the most popular are Ethereum and Binance Smart Chain as these are reliable and offer more visibility to artists.
However, it is important to understand that the technology you choose will influence the marketplace (i.e. the platform) in which you are able to sell the NFT. Ethereum gives you a wide range of options including renown examples like OpenSea and Mintable whilst Binance Smart Chain is supported by platforms like Juggerworld, Treasureland, and BakerySwap. If you have a particular preference, you should specify that to the software developer in advance of minting the NFT as this will affect your chance of selling your work quicker.
Finally, once your NFT is up and running you should check the terms and conditions of the platform in which you are selling it as more often than not the platform will retain some commission from the sale. Again, knowledge is power, and you should factor this when you decide which platform to use.
If you are a brand looking into launching your NFT collection
It is very common that major brands want to provide their customers with new digital experiences through the minting of NFTs. For instance, major football clubs are partnering up with digital artists to create new digital merchandise for this on-line environment.
These types of collaborative relationships are regulated through comprehensive licensing agreements in which the clubs allow the artist to use their brand (club logos, uniforms, players’ image rights, merchandise) to create digital sculptures of their players to be then minted into NFTs, in exchange of commission on the sale. The brand will usually act as the intermediary between the platform and the artist, dealing most of the time with the minting of the NFT and the developers.
When entering into a contract with an artist, brand should require to be indemnified by the artist if the underlying digital work infringes any third party’s intellectual property rights as well as having guarantees that they will deliver the work for the collection to be launched on time.
At Briffa, we are here to help you to navigate through the complex areas of blockchain technology and digital art. Whether you are potential buyer; or an artist looking to enter into a collaboration; or even a brand looking into starting your NFT project, Briffa is here to provide you with advice in all aspects of intellectual property law and practice in this field.
If you would like to arrange a free consultation with one of our specialist intellectual property lawyers, please contact Elisabetta Bestetti on 020 7288 6003 or [email protected].
Written by Elisabetta Bestetti, Solicitor