This document discusses the relationship between non-fungible tokens (NFTs) and intellectual property. It explains how NFTs use blockchain technology to create digital scarcity and represent unique assets, though ownership of an NFT does not necessarily confer ownership of the underlying intellectual property. The document outlines the process of creating NFTs, issues around evolving legal definitions and jurisdiction-specific approaches, and concludes that while NFTs allow for certifying uniqueness, they do not grant full ownership of connected intellectual property.
1. NFT- Intellectual Property
Abstract;
The invention of disruptive technologies broadens the horizon of opportunities
for intellectual property owners. The very idea of selling copyright works in a
digital space and using the same to form a digital currency is disruptive. This is
one opportunity Non-Fungible Token (NFT) offers. But that disruptiveness raises
certain questions and provoke the consciousness to wonder if NFTs are a form of
intellectual property, or whether NFT would shift the paradigm of copyright law
as we know it. Governments through her agencies are also caught in the Un
restlessness of deciphering what NFT means and whether it holds any value for
intellectual property. This article will address the relationship between NFT and
copyright, the foreseeable problems and solutions, and how NFTs are channels for
intellectual property commercialization.
Introduction:
NFTs are non-fungible tokens. Before we understand non-fungible tokens, we
have to understand what “fungible” and “non-fungible” mean. Fungible tokens
can be physical currencies chips in a casino, or crypto currencies: they are
interchangeable by another identical item, which is why a €10 note can be
replaced by another €10 note. Furthermore, they can be divided in fractions of
the currency. For example, a €10 note can be replaced by ten €1 coins. This
2. property makes currencies fungible. Further, tokens are programable digital unit
of value that is recorded on blockchain or other decentralized networks such as
Ethereum, Cardona etc.
Now, NFTs are non- fungible tokens and thus are not interchangeable. They are
unique assets with no substitutable equivalent token or currency. This uniqueness
makes them drive a realm of digital scarcity thus creating digital assets.
Intellectual creations such as digital art works, memes, music albums in the digital
age can be easily copied and replicated ad infinitium. NFTs with their unique
digital encoding mechanism are seen as a solution against imitation and
replication. Digital tokens can represent variety of things from coins, shares,
loyalty points, commodities etc., however at the core they are a piece of code
which acts as an encrypted version of the object they are representing.
Procedure:
• There are various standards on which tokens are created. One such
standard is the Ethereum network standard known as ERC-721 smart
contracts, smart contract allows for implementation of a standard API for
NFTs providing basic functionality to track and transfer NFTs, digital art
named “Herbie Starbelly” with the corresponding ERC 721 smart contract
and metadata. As we see the contract has a token ID and the contract
address linked with the Owner ID. Various other features can be coded into
the metadata. NFT is thus a contract which ties to the artwork and not the
artwork itself.
• To continue the analogy of the limited-edition print of an artwork - if a
collector owns a physical limited-edition print, the collector would own the
physical print itself but would not usually own any proprietary rights in the
original artwork. This is an important distinction which is being missed by
much of the media coverage of NFTs. Such coverage tends incorrectly to
suggest that ownership of an NFT amounts to some form of ownership of
the underlying asset.
• However, there are certain examples where an NFT is in fact to be sold
together with the underlying asset. One interesting example is Nike’s
patent, obtained in in 2019, for a system called “Crypto Kicks” where Nike
3. could tokenise ownership of shoes by linking an NFT to a physical shoe. This
system reportedly allows designers/businesses to have control over their
shoe design - for example, by limiting the number of copies that can be
produced. With the prevalence of fake trainers on the market, this provides
an innovative way to combat counterfeiting. It also has the benefit of
offering a limited-edition product, engendering brand loyalty between
brand owner and customer, and helps keeps the business current and
relevant. To our knowledge, this system has not yet been launched by Nike
but it is an interesting concept to be aware of in the retail sector.
Issues:
• it’s important to point out that this is very much an evolving area of the
law. I mean, this is the definition of an evolving legal field. And in pretty
much in all jurisdictions around the world, we are seeing legal systems
responding to things that are happening, right. So so it’s important to to
keep that in mind that we are going to be most likely we are going to be
seeing developments in the way that NFT’s are approached from an IP
angle and from other angles as well. And also, it’s important, it’s important
to stress that jurisdictional issues are also very important. different
jurisdictions are going to be approaching the issue of entities differently at
different speeds. So that’s important to keep in mind as well, what might
be true for for the US might not be true for Europe, and so on. So first of all,
and we will we’ve already discussed this today, but I think it’s a
fundamental point that people should understand if me if there’s only one
4. takeaway, that from from today for the audience’s NFT’s by themselves are
not going to grant you ownership in whatever it is that the NFT’s are
connected to, if the NFT is connected to digital artwork, you know, cats,
you know, what do they call them the kitties, or, you know, care, special
characters, whatever it is, it’s not it’s not granting ownership over that
there’s separate ownership rights over that separate intellectual property
rights. And those are not going to be implicated merely by issuing a token
right by minting a token for for in connection to that asset. So if you’re
looking at the at the technical aspects of the the NFC minting, there is going
to be some copyright that is implicated there, right, there’s going to be
some original work similar to that, which is present when one code is
written. Right. So so there is copyright in that, but that has to be
distinguished, it’s in fact, it’s essential to distinguish that from copyright, in
what assets that are that are connected to the to this entity.
Conclusion:
there could be multiple copies. And there are ways of basically formalizing that
uniqueness. Now the thing is, if you’re buying a, you know, a counterfeit CD, it’s
going to be very difficult for the person selling that to you to extract value from,
you know, saying, Look, this is the 1,000,000th copy of, you know, the, you know,
Bob Marley CD that we that we burn here. However, even within even without
jumping over to two NFT’s, let’s just say that somebody told you well, actually,
you know, this is the, this is the copy that she, you know, she’s in pain burned.
You know, one time when he was born, you know, you know, by when he was
governor of Fujian, well, all of a sudden, it’s like, well, that’s, you know, that that
has value that exceeds the the actual, you know, there’s there’s there’s a million
other burn CVDs with that one, right has has that, that, that extra value and if I
can certify that, right, and in the case of an FDA, that’s exactly what you’re doing,
it’s just that you’re doing it using a blockchain