Amin Hosseini is an IPilogue Writer and an LLM Candidate at Osgoode Hall Law School.

The Singapore High Court ruled on 21 October 2022 that non-fungible tokens (NFTs) can now be considered property, . are blockchain-based assets with a distinct identification number and metadata which can represent real-world objects and cannot be copied or replaced. They are minted using smart contracts. In , the NFT's owner applied for a loan on and provided the as collateral. Later, he failed to make loan payments and asked for an extension. The defendant initially consented to offer an extension of time to repay the loan. However,  he also declared that if the loan was not fully paid by the timeframe, he would use the "foreclose" option of the NFTfi's Smart Program. The defendant then used the "foreclose" feature to move the NFT from the escrow account into his cryptocurrency wallet. The claimant reminded the defendant of their agreement but the defendant declined to negotiate further and declared he would keep the Bored Ape NFT for himself. He then advertised sale of the Bored Ape NFT.

The claimant then sued the defendant for an “equitable proprietary claim” over the Bored Ape NFT, conversion, breach of contract, and unjust enrichment. The claimant also requested a proprietary injunction banning the defendant from dealing with the Bored Ape NFT in any form.

The court had to determine whether the Bored Ape NFT, and NFTs in general, are capable of giving rise to proprietary rights which could be protected by an injunction in making its decision. In deciding the case, the court applied Lord Wilberforce’s criteria for property in National Provincial Bank Ltd v. Ainsworth (the “Ainsworth test”), which was previously used to decide if crypto assets are property.

According to the , “before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be (1) definable, (2) identifiable by third parties, (3) capable in its nature of assumption by third parties, and (4) have some degree of permanence or stability.”

The court maintained that the test’s first criterion means that the asset must be capable of being isolated from other assets, whether of the same type or of other types. Thus, NFTs fulfil the first requirement, since they can be distinguished using their metadata. Second, the asset must have an owner who can be recognized by third parties. For NFTs, the presumed owner would be whoever manages the wallet that is connected to the NFT. The third requirement comprises two aspects: “third parties must respect the owner's rights in that asset, and that the asset must be potentially desirable.” Here, the court believed that these prerequisites would be satisfied because  the owner has the exclusive authority to transfer the NFT to a third party using blockchain technology and such NFTs are the subject of market activity. Finally, to satisfy the fourth requirement, the aforementioned NFT is as permanent and stable as money in bank accounts.

The court that NFTs meet the Ainsworth criteria and therefore may be formed as property in a general sense, leaving open the question of what the specific nature of this property right is. For the reasons outlined, the court approved the claimant's request for a proprietary injunction.

This decision demonstrates that NFTs can be considered property  separate from the item they represent. The judge's ruling is a turning point for NFTs and the decision may have widely applicable effects and implications.

Further reading

Read more mere about .

To read more about the absence of proper Regulation of NFT Platforms and the associated outcomes, please see .

For in-depth knowledge about how smart contracts combine property and contract functions, please see .

The post Steps forward: Singapore Deems NFTs as Property appeared first on IPOsgoode.

Nikita Munjal is an IP Innovation Clinic Fellow and a third-year JD/MBA Candidate at Osgoode Hall Law School. This article was written as a requirement for Prof. Pina D’Agostino’s Directed Reading: IP Innovation Program course.

Artists in the digital space have always been vulnerable to the unauthorized distribution, copying, and sale of their work. Still, the for creating non-fungible tokens (NFT) has accelerated the . Listing someone else’s artwork on an NFT marketplace is as simple as saving a copy of the work from an artist’s website or social media platform and uploading it onto a marketplace where it is minted into an NFT. The rampant theft has forced some artists to , limiting the ability of artists to profit from the commercialization of their IP.

What Can Artists Do When Someone Else Mints their Work into an NFT?

Copyright law provides recourse to authors who feel their work has been minted into an NFT without permission, but as copyright attorney cautions, “IP considerations get very complex very quickly.” The author of a copyright-protected work can bring a claim for copyright infringement, but this is contingent on knowing the infringer’s identity. Many NFT marketplaces do not require the person listing the piece to provide proof of ownership or personal information. Alternatively, authors can inform marketplaces of copyright infringement and request the removal of infringing content. Some marketplaces, like OpenSea, provide artists with a when they suspect someone is infringing their IP. However, this mechanism places the burden on artists to monitor marketplaces for infringement and is given the number of requests OpenSea receives to take down listings.

What Can Be Done?

Various stakeholders that can implement changes to reduce the likelihood of thieves profiting from the commercialization of others’ IP. First, marketplaces should partner with companies like DeviantArt, which have created to scan public blockchains and third-party marketplaces and inform users of any potential infringement. This recommendation would still require artists to verify the results and report an infringement to marketplaces. However, artists would be aware of the infringement and could use their platforms to inform consumers of the scam. Second, marketplaces need to overhaul their process for verifying listings. For example, , it updated its requirements for listers to “provide their names, a photo of themselves, proof of them creating the work, and a digital portfolio.” Third, consumers should do their due diligence by reaching out to artists to verify the authenticity of the NFT before purchasing. Alternatively, consumers should purchase from auction houses like Christie’s or Sotheby’s to reduce the likelihood of buying a fake.

Incorporating these changes will require significant investment from stakeholders. However, since art is a cultural tool and an economic driver, those who create work should be protected by all invested stakeholders.

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