NFT purchase doesn’t bring automatic copyright ownership

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Non-fungible tokens are all the rage these days, with buyers scooping up these digital assets — often motivated by inaccurate assumptions about what legal rights they are obtaining.

An NFT is a unique piece of software recorded on a blockchain — or virtual ledger — and tells the world you own something. In other words, it’s your digital proof of purchase.

NFTs can be created by anyone, requiring few or no coding skills, and be sold and traded online. Since they’re uniquely identifiable assets, NFTs differ from cryptocurrencies, which are fungible, or replaceable by an identical item.

Often, we think of an NFT as equivalent to the piece of digital art or other item with which it is associated. That’s incorrect and can result in buyers facing copyright infringement issues because they mistakenly think they own the copyright to an image purchased in the digital marketplace.

Most of the images in NFT marketplaces aren’t there by permission of the copyright owner who controls the rights to that creative expression. The images are infringements or fakes, and purchasing them can be illegal — so buyers definitely need to beware.

Copyright infringement

OpenSea, the leader in NFT sales, has acknowledged that as many as 80% of the images on its platform are copies made without the copyright owner’s permission, which is copyright infringement.

Before you purchase an NFT image, make sure you confirm its authenticity through an online search of the creator and seller as well as compare its price to similar images. Copyright owners generally price NFTs at their real value, while scammers price them low to make a quick buck.

On the flip side, if you’re a copyright owner, there’s a lot of policing to do on these NFT platforms — and a legal professional can help with this to ensure your legal rights are protected.

Trademark infringement

Trademark infringement is another area of the law being tested in the NFT space, with Nike’s swoosh at the center of one of the first major trademark lawsuits over NFT sales pending in the courts. French fashion giant Hermes also is suing an artist for trademark infringement over NFTs depicting its popular handbag.

A trademark is a name, logo or other indicator a company uses to distinguish itself in the marketplace to communicate to consumers about how it is the source of a good or service. Companies with stellar brands must be vigilant in ensuring their trademarks are protected; failure to do so can dilute their worth.

The courts so far are applying intellectual property laws in the NFT space in a predictable way. These laws apply in the digital world the same way they do anywhere else. In other words, if someone comes along, takes your company’s trademark and uses it in a way that confuses consumers about the source of goods or services, that’s very likely trademark infringement.

Legal professionals are watching these cases, finding unique nuances in how judges are understanding the development of IP law in the NFT space, helping to contribute to this understanding and supporting clients who find their goods duplicated in the virtual world.

Whether you’re an NFT owner or buyer, the online marketplace isn’t the Wild Wild West. Make sure you do your due diligence before purchasing.

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