NFT Copyright Protection for Beginners

NFT sales totaled a whopping $24.9 billion in the year 2021. As a growing industry, NFTs have been making the headlines, with some serious artwork of bored chimps seeing some of the highest number of sales. While cryptocurrencies and blockchain were mostly seen as things “nerds” take an interest in, NFTs are for everyone. With several celebrities adopting NFTs to roll out their art and music, it only makes sense that people want to hop onto this ship in time. They may have been late for Bitcoin, but why be late for NFTs?

While some bystanders still think NFTs are nothing more than a Tulip mania, the adoption of NFTs by some big wigs has generated more interest than any other innovation in the blockchain space in the last year.

But what exactly are NFTs? And what exactly are they not? As there is copious literature on the former, it is a bit more important to understand the latter in all its nuance.

NFTs or Non Fungible Tokens are basically a block of code on a blockchain. It is a representation of ownership of an asset, not the thing itself, and not a legal proof of ownership (yet). In the words of Naval Ravikant:

An NFT represents ownership of an off-chain asset--the asset itself may be digital or physical. So, in that sense, an NFT can be anything that has an on-chain token. Like chewing gum, the paper you just crumpled up, or a picture of your cat.

The social contract is enforced by the creator and is (typically) not on-chain. That is not to say that it can’t be on-chain, but most of the NFTs we see on marketplaces today have off-chain legal contracts backing them. The value attributed to an NFT rests with the community supporting it. As is the case with any work of art, its valuation is based on how people see it, how much they think it is worth. So is the case with an NFT.

NFTs Rely on Scarcity

As with any asset, the value of an NFT is derived from its scarcity or at least perceived scarcity. For example, if a famous artist were to release 5 songs, with only 10 copies of each available--as NFTs--he could potentially make millions of $$ from just those 50 sales through auctions, hypothetically speaking. Though the example is hypothetical, it is based on supply-demand concepts: if a lot of people want to buy something that is rare, the price tends to be high. The exact models may differ, but the principle remains the same. For eg, Kings of Leon made $2 million in revenue from their first NFT album ‘When You See Yourself.’ So, scarcity contributes in great part to the value attached to a non-fungible token.

The trouble with this aspect of an NFT is that scarcity is tough to enforce, especially in the digital realm. To enforce this scarcity, there needs to be a binding

1. on the creator
2. on the buyers

that further copies of the asset shall not be created.

This, unfortunately, has not been enforced on the blockchain as yet. You can check whether a particular copy of an asset has a token attached to it or not, but you cannot stop someone completely from copy-pasting it and making a million copies of the same thing. This is in the realm of legal paperwork. Even so, with a legal contract in place, enforcement of the legal contract itself is a headache, since it is difficult to track new copies of an item being made.

The charm of an NFT then is in the knowledge that you bought something “original” and “rare,” signed by the creator (the token). This concept is most easily understood by artists, which is probably why NFT art is the fastest growing industry. Just the same, it is important to remember that the actual scarcity is only legally enforcable, not on-chain (yet). That technology can be built, and perhaps someone is building it as we speak, but it is not commonly used yet.

NFTs and Copyright Protection

NFT creations stand almost the same as any other creation as far as copyrights go--that is to say, the creator inherently owns the copyright as per the laws of most countries in the world. The Berne Convention ensures this for its signatory countries. When someone buys an NFT, they only buy a token on the blockchain, authenticating the uniqueness and originality of the work. The copyright can be coded into the metadata of the file, and thus is minted as part of the NFT.

Whether they buy the copyright or not, and what type of rights they buy depends on the platform. This part is fuzzy to many people dabbling into NFTs. Many NFT platforms that are mushrooming do not allow transparency in terms of what rights the artist is selling, and the buyer is buying. Both, the creator and the buyer are often in the dark. Ideally, a creator should be able to select the rights they want to sell.

It gets even more complicated when people create NFTs of things that are already copyrighted. Who owns the copyright then? International laws have not yet accounted for this form of creativity and authentication yet. As per Berne Convention, the rights to make derivative works, to translate, to modify, etc. rest with the author by default, unless they choose to sell it.

Furthermore, an artist has “moral rights” to claim authorship of their work, and to object to mutilation, or derogatory representation of their work. The same principles apply to NFTs and their derivative works: unless the creator sells these rights, the rights remain with the creator, and they can sue someone for unfair usage.

For eg, a bot on Twitter started creating NFTs of tweets without informing the creators, including works of artists. Some of these NFTs were sold at an auction on OpenSea. This created a few ripples in the NFT community in early 2021. Though there is no way to fake identity on the blockchain, it is possible to create derivative works without informing the owner. This can be difficult to trace, and it may take a while before it can be legally enforced. The instances of such fraud are few, but cannot be ignored.

The Future of NFTs

There is no doubt that NFTs solve a big challenge for creators and artists: having ownership of their work, selling at a price they want, and being able to earn in cryptocurrencies. NFTs have given a big boost to the digital creator economy. They can easily make their way into other non-creative aspects of life, like creating a new system of authentication. For example, instead of OTPs for every login on the web, you only need to use a token--an NFT--that verifies your ownership. Or if your voter ID was simply a token on an electoral blockchain, which you could use to cast your vote from anywhere. If concepts like these can be implemented securely, the possibilities are limitless.

A lot of work is required though, to make these possibilities fructify, and one of those areas is the legal framework--if the legal community can synchronize their efforts with the tech community to create an on-chain legal framework recognized and enforcable as laws, it will be a blessing to numerous artists and creators, and their supporters. More investment and innovation is required in this space, to allow for wider adoption of NFTs, to eventually make them a stable part of our lives.