It seems like everyone is talking about NFTs these days, doesn’t it? Despite existing since 2014, NFTs have recently grown in popularity as a way to buy and sell digital creations.
With this technology, you can now buy items such as digital art and collectibles and receive a digital token that verifies authenticity as well as your ownership. Essentially, NFTs have become the digital equivalent of collectibles, in the same way Bitcoin was the digital equivalent of currency.
However, even though they’re digital assets, NFTs are granted intellectual property rights in the United States, just like any original creation or artwork. As with physical goods, they’re protected by trademarks, patents and copyright.
So, what does this mean when you buy them? Do you really own them and can you use them however you like? We’re discussing it below.
What Are NFTs?
An NFT (non-fungible token) is a digital asset that is used to prove ownership of internet collectibles such as artwork and music. To authenticate asset ownership, every NFT comes with a digital certificate created using blockchain technology. In addition to an identification number, each certificate contains metadata related to the asset it represents. This makes them ideal for verifying and securing digitally native assets as well as tokenized physical assets.
But, what sets them apart from other digital assets and makes them so valuable is that, unlike crypto and fiat currencies, where all units are identical and interchangeable, NFTs are non-fungible, making them rare and also difficult to duplicate. In other words, they cannot be counterfeited or altered in any way.
With NFTs, it’s possible to differentiate original digital assets from copies. Because of this, a wide range of digital content has been transformed into highly valuable commodities that collectors can easily buy and sell.
Do NFTs Give Ownership Rights?
Many NFTs don’t clearly define their intellectual property rights. If you are planning to purchase one, make sure you know exactly what you are buying.
Despite the fact that an NFT’s smart contract will automatically transfer ownership upon sale, it does not simultaneously transfer copyright to the new owner by default. If there is no definitive assignment of copyright, it will generally remain in the hands of the original owner.
Collectors will receive a license that tells them what they are allowed and not allowed to do with their new purchase. Typically, the license provided by most NFT creators prohibits commercial use and gives users only personal usage rights.
When purchasing an NFT, it’s important to understand the various types of licensing classifications, regardless of whether or not the token you purchased clearly indicates ownership rights:
- Personal: Many times, NFT creators do not specifically disclose intellectual property rights, which means it has a personal license. If this is the case, then it is likely that you don’t have intellectual property rights and cannot use the NFT for commercial purposes. So, for instance, if you’ve purchased a digital painting, you would be able to display it in your home but you wouldn’t be able to use it to create merchandise.
- Commercial: With a commercial license, the creator remains in control over the intellectual property rights of the NFT while granting some rights to the buyer. To use a digital painting as an example again, in this case you would be able to create and sell merchandise using this image. It should be noted that in some commercial licensing arrangements, royalty payments may be requested by the original creator.
If You Need a Consulting Regarding NFT Ownership and Intellectual Property, Sanchelima & Associates Can Help
Sanchelima & Associates, P.A. is one of the leading intellectual property law firms in South Florida. With over 40 years of experience, we have represented the IP interests of a wide array of businesses in the US and abroad, including Fortune 500 companies. Whether you need a consultation or prosecution of a patent, trademark, or copyright, we can protect your business’s interests.
Contact us to book your consultation!