How to Enforce Intellectual Property Rights With NFTs

Intellectual property rights with NFTs are a hot topic, and to shed light on this, insights from a founder & attorney and an IP attorney have been gathered. The article kicks off with why it's crucial to utilize smart contracts for protection and wraps up with the urgency of acting quickly to protect copyright. With four expert insights, ‌every angle of protecting digital assets through legal means is covered.

As the digital realm continues to expand, so does the need to protect intellectual property (IP) rights. With the advent of non-fungible tokens (NFTs), a unique set of challenges arises in enforcing these rights. Here are four expert insights to help navigate this landscape:

1. Utilize Smart Contracts for Protection:

In the realm of NFTs, where digital ownership is paramount, business owners must prioritize protecting their digital assets. As a founder and attorney, I've witnessed firsthand the importance of establishing clear rights before minting an NFT. Smart contracts play a crucial role in this process, enabling the programming of specific conditions to safeguard ownership and track provenance. For instance, when creating an NFT for a piece of digital art, creators can ensure that resale royalties are embedded in the contract. A notable example is Beeple's sale of his art as NFTs for millions, securing ongoing royalties for future sales. This highlights the necessity of setting clear terms and conditions that uphold the creator's rights. To maintain these rights,続ける vigilance and monitoring of NFT marketplaces is essential to identify any unauthorized uses. This approach not only guards the creator's interests but also fosters trust within the digital-commerce ecosystem.

2. Define Clear Licensing Terms:

Enforcing IP rights with NFTs can be a sticky issue. As an IP attorney, I must stress that NFTs exist in a digital space where traditional IP laws may not directly apply in the same way they do with physical goods or services. The key legal question centers around the ownership and licensing rights of the digital content tied to the NFT. While someone may purchase an NFT, that doesn't necessarily mean they own the copyright to the associated digital asset. For example, an artist might create an NFT tied to a piece of digital art. When someone buys that NFT, they essentially own the token, which verifies their ownership of that specific digital copy, but they don't automatically own the underlying intellectual property rights, like the right to reproduce or profit from the artwork. The artist would retain those rights unless explicitly transferred to the buyer through a licensing agreement.

A well-known example of this issue arose with Larva Labs, the creators of the popular “CryptoPunks” NFTs. Originally, buyers of CryptoPunks owned the digital collectible but did not have the commercial rights to use the artwork in other projects or profit from it. Over time, this led to disputes, as some buyers believed they should have full commercial rights to the characters they owned as NFTs. Larva Labs later adjusted their policy and granted broader usage rights, allowing owners to use their CryptoPunks for certain commercial purposes. This case highlights the importance of clear licensing terms when dealing with NFTs. Creators and platforms must explicitly define what rights are transferred with the sale of an NFT, and buyers need to be aware that purchasing an NFT often grants them ownership of the token but not necessarily the IP rights to the associated content.

3. Understand Limited-Use Rights in NFTs:

The enforcement of IP rights in NFTs usually falls on the underlying rights assigned to a digital asset. In the creation of an NFT, the originator will often retain some rights, such as copyright, unless it is transferred specifically. In addition, owners of NFTs must understand that purchasing an NFT does not imply ownership of the IP rights but rather limited-use rights. Infringement of such rights—by reproducing the NFT or using the artwork without permission, for example—is actionable by an IP holder. That may mean sending cease-and-desist letters and filing DMCA takedown notices, or it could mean litigation in egregious cases. Most NFT marketplaces also have their own IP infringement procedures that make enforcement much easier.

However, the decentralized nature of NFTs means this is usually difficult to enforce, considering different jurisdictions may be an issue. Overall, clear licensing agreements and due diligence are important on both sides—of creators and buyers—for effective navigation in the IP rights of the NFT space.

4. Act Quickly to Protect Copyright:

A unique aspect of enforcing IP rights with NFTs is ensuring creators retain control over their work. In one instance, an NFT was minted using a client's copyrighted photograph without permission. We pursued legal action to remove the NFT from the marketplace and sought damages under copyright law. The lesson here is that NFT platforms don't override copyright law. While blockchain technology is new, the legal principles around intellectual property remain the same, and creators must act quickly to protect their rights when infringements occur.

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