By Katherine Smothers
Saint Louis University School of Law
Juris Doctorate Candidate, 2024
Many people when they hear the term “NFT” think of different types of cryptocurrencies such as Bitcoin but that is not what an NFT is. An NFT is a nonfungible token, unlike cryptocurrencies, which are fungible tokens or currency like money that are exchangeable. NFTs are simply digital files, such as photographs, videos, or audio files that can be bought and sold with cryptocurrency, and perhaps even old-fashioned currency. The art created for the NFT is usually a large file so many NFTs simply contain a link to the actual art form that is stored on the blockchain rather than an actual piece of artwork. Since many NFTs are depictions of the art piece and not the actual art piece, some purchasers of NFTs assume they have bought the artwork and obtain rights to the actual artwork, but this is not true. When purchasing an NFT a buyer is simply buying the metadata or computer code linked to a piece of artwork and not the actual artwork or the rights attached to it. Since NFTs are treated the same as any other traditional artwork, the question then becomes who owns the various rights?
When it comes to who owns the copyright, we look first to the creator of the original artwork. The artist who creates original artwork automatically acquires copyright rights in that work. The owner of the copyright then has the exclusive rights to reproduce their work, make similar work and distribute copies or their work. This means that the original artist can make an NFT based off their original artwork because an NFT is seen as a copy or derivative of the original artwork. Artists are then free to sell such NFTs based on their original artwork and the copyright rights would not transfer to the purchaser of the NFT: it stays with the original creator. Since NFTs can be bought and sold like all other forms of artwork, once they register the copyright in question, artists can sue for copyright infringement if anyone creates art that copies or infringes upon the original protected work. For an NFT to infringe upon an artist’s copyright the NFT would have to be created without the owner’s authorization and the NFT must be substantially similar to the original artwork, meaning there must be sufficient elements of the original artwork in the NFT.
To be able to create NFTs that do not infringe upon an artist’s copyright, the artwork must be covered by the fair use doctrine of copyright law. For something to qualify as fair use there are four factors that are looked at by the courts. First, you would look at the amount and substantiality of the artwork that was taken without the owner’s permission, i.e., whether it was only a small and insignificant amount or a large key portion of the original work. If the amount taken is deemed to be small, then it is more likely to be considered a fair use unless it is the heart of the original. Second, you look at the purpose and character of the use, in other words, was the second use transformative. Does the work using the copied material add new meaning to the original or is it simply copied from the original? Third, you look at the nature of the copyrighted work, with work that is fact-based it is more likely to be considered fair use than work that is pure fiction. Finally, does the use of the copyrighted work harm the owner’s ability to profit from the original work?
Another way that copyrighted work can be used and not infringe upon a copyright owner’s rights is of course when a license is granted by the original owner to the NFT creator. Many licenses to copy artwork are provided in written contracts between the copyright holder and the artist wanting to make NFTs of the artwork. Even though NFTs may seem like a new thing, the way they are treated is nothing new. NFTs are just like all other forms of art.
The buying and selling of NFTs is not going to stop anytime soon. If anything, this form of creating and selling artwork will continue to grow as we move further into the world of technology. As more artists continue to create new artwork, some may choose to create NFTs or other copies of their artwork, and it is important for the original artists to know what rights they have. Artists are free to create their own original NFTs and sell them as much as they want because they retain the rights to make copies and sell their artwork as they please. As the world of technology continues to expand, mediums for artists’ works will continue to expand as well and artists can rest easy knowing their rights are still protected.
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