Introduction to digital property rights

The good: Why are NFTs and digital rights important for artists?

Although it remains to be seen what potential long-term impact NFTs will have on both domestic and international copyright laws, for now it appears the typical hurdles to copyright owners exist, albeit with some added benefit.

There have been decades-long disputes over artists’ resale royalty rights globally, for example and NFTs present potential workarounds for artists in this respect. Currently, the EU, UK, Australia and the Philippines officially recognise artists’ resale royalties, whereas the US does not.

However, NFT platforms do offer artists the possibility to claim resale royalties on subsequent sales of the artists’ work not otherwise traditionally offered in certain countries.

As you now know, the sale of an NFT does not necessarily transfer the underlying copyright in the work. That copyright exists “off-chain” to the purchaser.

Some argue that what we‘re actually building at present is Web2.5, referring to businesses that are crypto-native but not fully decentralized in operation. This distinction is important. For example, the NFT itself might live on a blockchain but then there are centralized repositories of data connected to it, such as OpenSea. If the server went down, valuable data could be lost.

Legalities are still in flux

The legalities of NFTs are still evolving. As Mark Penner and Eliane Ellbogan write in NFTs, Intellectual Property, and Art:

“We are only now beginning to see how NFTs will evolve over time. Many were skeptical at first, but are coming around to the idea that NFTs are here to stay – and perhaps, refashion the art market (and other digital collectible markets). In any event, before blockchain technology generally, and NFTs specifically, receive any kind of large-scale legal application, there are certain hurdles to overcome, not least of which is that intellectual property law is jurisdictional, whereas the blockchain is not. That being said, from an IP angle, distributed ledger technology offers obvious possibilities when it comes to IP protection and registration. As seen in parts 1 and 2 of this series, NFTs can be used as evidence of creatorship and for authentication purposes, but also for tracking the distribution of registered and unregistered IP rights and facilitating royalty payments in real-time. On a larger scale, consensus-based blockchain technology could also be used to validate certain IP rights and, by extension, detect IP infringement.

In sum, the technology is still evolving. And, as it evolves, more and more industry stakeholders – developers, artists, legal practitioners – will work to develop interoperability standards and protocols. The technology will continue to build from there, as will the community around it.”