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Emily Prieur is an IPilogue Writer and a 3L JD Candidate at Queen’s University Faculty of Law

In May 2021, a phenomenal by Keir Strickland-Murphy (Osgoode Law ‘22) touched on the recent boom of Non- fungible Tokens. In this piece, I will recapitulate Strickland- Murphy’s exploration of IP ownership of Non-fungible Tokens and expand on recent developments since May.

What are non-fungible tokens?

Non-Fungible tokens (“NFTs”) are unique digital assets that as a certificate of authenticity for an object, be it physical or virtual. Blockchain acts as a ledger to secure these assets. Blockchains are often relied upon for their security, so much so that certain universities have begun through them. As described in their name, NFTs have unique properties and are not interchangeable. As such, any digital asset can be tokenized through the “minting process”, much like a refrigerator, car, or computer is given a serial number. Unique identification is a valuable tool for the many and auction houses that have started using the blockchain to sell or . The sale of an NFT also includes a smart contract.

Strickland-Murphy noted that and were early adopters of the NFT craze. Since then, public fascination has only grown since then, with celebrities like Jimmy Fallon and Emily Ratajkowski jumping on board. In May 2021, Emily Ratajkowski sold an NFT called “. The NFT came in the form of a digital-only photograph featuring the model. Ratajkowski explained the impetus for its creation in her essay “Buying Myself Back”, where she shares that the photo she shared on Instagram had been hanging in the Gagosian as part of Richard Prince’s “New Portraits” art show. Prince had been putting other people’s photos from Instagram on canvas and re-selling them for $90,000. Given this situation, Ratajkowski’s NFT auction was, as Ratajkowski explains it, an opportunity to reclaim ownership over her photo.

Recent celebrity obsession with the Bored Ape NFTs has further fueled the NFT buzz. A bundle of 101 Bored Ape Yacht Club NFTs recently . The funky cartoon images have caught the attention of . The interest in Bored Ape is almost palpable as the release of the Yacht Club NFTs can be connected to nearly a in the sale of the NFT Ethereum.

If an image is attached to an NFT, does that mean I own the copyright for that image?

Where an NFT buyer has purchased an image, they do not necessarily receive the copyright associated with that image. If we refer to the computer serial number example, just because you own one version of a computer does not mean you own the patent for the underlying software in the computer. In this case, the software would still belong to the software engineers that invented it. Similarly, if you purchase a painting, you do not assume the copyright over that painting once you have purchased it.

In Canada, an is necessary to transfer copyright from an artist to a purchaser. Therefore, the purchaser of an NFT will only receive the underlying copyright when the smart contract accompanying the NFT expresses this. Of course, unless waived by the artist, the moral rights associated with the artistic work remain with the artist. ensure the integrity of the work, and, when reasonable, the artist’s right to association with their work by name or pseudonym.

What about copyright infringement?

The images associated with NFTs have caused some confusion. An NFT seller must hold a copyright in the image associated with the NFT they are selling. To “mint” an image as an NFT, it is crucial that a seller holds the copyright or a license. However, as long as the seller is the copyright holder, several NFTs can be associated with the same image. In short, NFT sellers can sell as many NFT’s associated with a particular image as they wish, so long as they hold the copyright to that image. If they do not own the copyright to an image, they cannot tokenize it into an NFT and lawfully sell it.

Although NFT’s are a relatively recent addition to the investment scene, numerous lawsuits involving their associated copyrights have already emerged. Rapper Jay-Z Damon Dash, co-founder and shareholder of his record label RAF Inc., for attempting to mint one of his music albums, Reasonable Doubt, as an NFT. The court held that Dash does not own a copyright to the album simply by being a minority shareholder in the record label that owns it. As such, he cannot, in the court’s words,.

Quentin Tarantino is at an impasse with his efforts to profit off the booming NFT industry. Tarantino is embroiled in a legal dispute with the film production company Miramax after announcing that he would be auctioning off excerpts of his original Pulp Fiction screenplay, which he touts include “secrets” about his creative process. that Tarantino does not own the rights to the screenplay and, therefore, selling these secrets through an NFT would constitute copyright infringement.

Old Laws Protect New Trends

Despite the law’s reputation as conservative and , in the case of NFTs, old copyright laws have proven to be tremendously practical. Although the world of blockchain is exciting, it is at this junction that potential NFT sellers should take a moment of pause amongst the excitement to contemplate the legal implications of selling NFTs with legally protected works. When infringing a copyrightable work through the minting process, one must balance the cost of copyright infringement versus the value of the NFT itself.

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What is NFT?

are non-fungible tokens based on Ethereum, powered by smart contracts. means it is unique and one of a kind. It can also be understood as a proof of ownership and authenticity. is an open source and decentralized software platform, and it is also the technology behind the cryptocurrency ether (ETH).

There are various platforms for NFT marketplace, such as , , and (for sports digital collectibles).

What does NFT mean for artist, collectors and the market?

Traditionally, artists would sell the physical copy of their painting, but this business model is not as suitable for digital artworks as physical artworks. Some artists were posting their artwork , or unable to sell their digital work, because there was significant difficulties in the digital work or authenticating the owner of the original copy when there is no physical copy. With NFTs and increasing amount of marketplaces for digital works, artists might be able to finally make money with their works.

This article written by Andrew R. Chow also mentioned that NFTs seemed to encourage and applaud more creative and innovative forms of artworks - “[m]any other artists working in groundbreaking and sometimes controversial styles are also receiving unprecedented interest from NFT collectors. Art with whirling 3-D renderings, street-style oversaturated color schemes, and hyper-referential (and often crass) cartoons are thriving.”

For collectors and the digital art market, NFT is a proof that the person is the owner of the original copy. Collectors might be paying more for “” or appreciation of digital arts than just for the money in this .

Concerns about NFTs?

Ioanna Lapatoura has discussed copyright ownership with respect to NFTs in her recent article on . NFT ownership is different from copyright ownership or a proprietary right over an actual asset. NFT is the “proof of owning an unique digital version of an asset, rather than the asset itself”. There is also new type of alleged infringement – copied artwork . Since NFTs are still new and developing, there is likely to be difficulties in enforcing intellectual property rights.

What’s in the Future of NFTs?

Some people view NFTs as cards and were bidding on the virtual future. Some people were skeptical and worrying that the NFT bubble might burst. Nonetheless, NFTs are providing creators of digital works a way to monetize their work product and receive real returns for their virtual work. Since NFTs are based on the Ethereum blockchain, maybe the other question that we ought to ask is – what is Ethereum and ETH’s long term growth potential?

Written by Ya-En Cheng, JD Candidate 2022, enrolled in Professor D'Agostino's Directed Reading: IP Innovation Clinic course at Osgoode Hall Law School. As part of the course requirements, students were asked to write a blog on a topic of their choice. 

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