Lynch LLP Shares Insight on NFTs

(MENAFN- EIN Presswire)

When buying an NFT, one owns a copy, not a copyright. This is madness. There Are So Many Misconceptions.

LOS ANGELES, CALIFORNIA, UNITED STATES, February 14, 2022 /EINPresswire.com / -- NFTs have been written about ad nauseam, but lawyers at Lynch LLP haven't yet seen a good analysis of how these new assets interact with existing intellectual property laws. Excitement around NFTs is undeniable, with something as simple as an NFT of Jack Dorsey's first tweet being sold for $2.9 million. But what are consumers really buying when they buy an NFT? If someone buys an NFT of a work of art, can someone else use that art for some other purpose? Can the artist sell another NFT using the same artwork? Lynch LLP give a close look at how US copyright laws interact with the bleeding edge of blockchain innovations.

Lynch starts with what an NFT is and what someone is buying when they buy an NFT. NFT stands for“non-fungible token .”“If something is fungible, then all items of that type are interchangeable. A great example of this, of course, is ordinary money. A dollar is a dollar no matter which dollar you use,” explains Sean Lynch.“The same is true of crypto currencies—1 bitcoin is the same as any other single bitcoin. NFTs, on the other hand, are designed from the outset to be completely unique. There is only one like it, and its uniqueness is assured by an underlying blockchain.”

BUYING AN NFT.
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One searchs for a chosen work of art that has been minted into an NFT, and then conducts a transaction to buy that NFT. First, they need to be able to conduct a transaction using a crypto currency. The crypto currency one needs to purchase an NFT depends on the blockchain onto which the desired NFT has been minted. Ethereum is a popular blockchain choice for NFT minting, so to purchase an NFT that has been minted on the Ethereum blockchain, the person perchasing needs to own Ether. If the NFT is on a different blockchain, they will need to own the correct corresponding cryptocurrency.

Finally, the NFT can be bought. So what are they actually buying? Up to this point, intellectual property law has not yet really been implicated. But purchasing artwork involves copyright law, and copyright law, whether one likes it or not, is slow to change and adapt (everyone knows how slow congress works even on the most important issues). Artwork that has been minted as an NFT is subject to all the same laws that apply to artwork created anywhere else.

A QUICK OVERVIEW OF COPYRIGHTS.
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A copyright protects an original work of authorship that has been fixed in a tangible medium of expression. Common works that are copyright protectable include music, books, film, photography, artwork, and so on. There are a lot of cases interpreting what is and is not protectable by copyright, but for the sake of this piece, assume artwork sold as NFTs is protectable via copyright. A person that owns a copyright has the right to exclude others from reproducing, adapting, distributing, and in some cases, performing or displaying a work of authorship.

There are limits to what works can qualify for copyright protection, because copyright eligibility has an underlying creativity requirement.“So who owns the copywriter when you buy an NFT?' asks Lynch. 'Probably not you.'

In general, the owner of a copyright is the person that created the work. An exception to this rule is that if, for example, the work is created by an employee within the scope of their employment or the work is a specially ordered or commissioned work. When one buys an NFT, are the signing a contract with the artist stating that the work is made for hire? Is the artist their employee? If the answer is no (and it usually is), it's not a work made for hire.

That's not the only way someone can come to own a copyright. Copyright ownership can also be transferred via assignment. But how often are NFT sellers creating and executing copyright assignment contracts? It is safe to say, pretty much never.

Let's say someone follow through with an NFT purchase. What exactly do they own? The answer to that question implicates something called the first sale doctrine. So do they own the right to sell copies of the artwork they just purchased? No. The original artist owns that right. The artist could, if they wanted, mint more NFTs using the exact same artwork. But does to person who purchased the NFT own the right to re-sell the NFT to another person? Yes! That's the first sale doctrine at work.“An easy example of this doctrine in practice is if you buy a Blu Ray movie, you are welcome to sell that Blu Ray at a garage sale later without any fear of infringing a copyright,” explains Lynch.“But you cannot burn that Blu Ray and resell any copies for profit—that would be copyright infringement.”

WHAT DOES THIS MEAN FOR NFTS?
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It means that NFTs are a bit out over their skis as it relates to intellectual property law—and that's the fault of our somewhat old laws, if looked at it from that perspective. The last major revision to copyright law happened with the Digital Millennium Copyright Act (DMCA) that Congress passed in 1998. So Congress last changed copyright laws (minor changes aside) when Outkast released their third album, Aquemini. This was the year before RIAA sued Napster. The year Fear and Loathing in Las Vegas came out. It has been a while, and whether one likes it or not, everyone is still subject to copyright laws as they are currently written.

When buying an NFT, that person is buying only that: the non-fungible token that creates a digital asset from some work of art. That does not mean they own any rights to that work of art, and that anyone else can own a different copy of that work of art (NFT or otherwise). It certainly does not mean they can sue anyone for copyright infringement because that person probably doesn't own the copyright.

THIS WHOLE THING KEEPS PLAYING OUT OVER AND OVER AGAIN ON SOCIAL MEDIA
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And frankly, it's hilarious. A popular perception is that purchasing an NFT means someone owns the underlying artwork, and that they should be able to prevent other people from using that artwork for, say, a Twitter profile picture. Of course, that's not true.
A natural consequence of this is the (honestly, probably somewhat rare) occurrence of someone getting upset about another person using their NFT artwork in a way they don't like.

About Lynch LLP
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Lynch LLP helps clients large and small protect their inventions across a wide range of practice areas. We have specialized expertise in a wide range of technical fields and focus our practice on providing strategic guidance and services including patent prosecution as well as strategic patent counseling. We also have experience with clearance searching, prior art searching, product licensing, as well as litigation and enforcement of patent and other intellectual property rights.

Patent attorneys at Lynch LLP have focused technical backgrounds that give us the breadth of scientific knowledge to write patent applications that not only capture a new and novel invention, but that also create an umbrella of coverage extending beyond the exact confines of the invention. We combine our experience as patent attorneys with our experience with patent litigation to prepare and file patent applications of all types that are created to withstand scrutiny and to maximize enforceability. Our expertise extends into negotiating and drafting licensing agreements.

We have experience representing plaintiffs and defendants in a wide variety of proceedings before courts and the USPTO, crafting patent strategies that complement and further our clients' business interests.

We have experience filing utility patents and design patents to protect all aspects of your invention. Visit Lynch LLP at to set up a free consultation.

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Lynch LLP Spokesperson
Rainboost Digital Communications
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