Conflicts between IP and NFTs keep rising

NFT is currently becoming one of the hottest topics in the world. NFT, short for Non-fungible token, is a unit of data on a blockchain digital ledger. In a word, it is a type of digital asset present on a blockchain number chain. This blockchain acts as a ledger that ensures the authenticity of both the assets and the owners. It is because of the high security of NFT that millions and millions of people around the world rush into this world of cryptography with unlimited potential. However, because the world of NFT is gradually developing at an incredibly fast speed, leading to the loss of strict control, leading to the problems of copyright on this platform are also increasing day by day.

Although NFT is becoming more and more popular, creating certain economic stimulation and international integration effects, however, we cannot just go for the sake of immediate benefits and ignore the interests of a small group of stakeholders including the author, the creator of the works in the society.

With NFT works being rampant, there have been countless incidents where the NFTs uploader will use images, videos, paintings, etc. of other creators and digitize them into NFT assets and then sell them on the internet. 

Profiting on someone else’s intellectual property without asking the owner’s permission is definitely a violation of the law. However, because there are currently no specific regulations or laws to punish this behavior, plus the general psychology of users on society and NFT platforms which is not quite interested in the origin of the products or works, rather, they are only interested in the work itself, so these piracy cases still happen frequently.

Another important factor affecting the determination of rights, who is right and who is wrong when a dispute occurs is about the ‘property rights’ regulation of the NFT.

NFT ownership and intellectual property rights

An important principle when trading NFTs is that the purchaser of an NFT asset will have full exclusive ownership of that cryptographic NFT product, which is guaranteed and certified by the blockchain.

However, as mentioned above, if an individual or organization uses real-world works to create an NFT-encrypted version of it and put it up for sale, does the buyer become the owner of the work, both in the virtual world and the real world?

If not, how are NFT proprietary rights understood?

It is obvious that with current technology and regulations there are no grounds and logic that the owner of a real-world painting would lose ownership of it if a third party purchases an NFT work from another third party who has plagiarized and encrypted the author’s products.

However, not everyone understands this. Currently, most NFT users are the young generation, so most of them will not care about the copyright trouble behind their purchases.

They will only understand that they already have exclusive rights to the NFT asset, therefore they will have the right to repair, buy and sell the NFT asset.

They might even think that they have the right to transfer the NFT products from the digital world to the real world and profit from it, all because of the exclusive NFT proprietary rights.

However, this is completely wrong. In reality, the NFT buyers won’t even have the right to change the contents of the products which might have damaging effects on the first NFT sellers, let alone the true author of a work in the real life. 

NFT creation with the violation of copyright 

There have been many incidents where the authors of work in real life suddenly receive overwhelming warnings that somebody else has taken advantage of their works. 

However, about 10 years ago, these are just warnings about some manufacturing companies, enterprises in the real world. 

Nowadays, they got violation warnings from the digital world – NFT platforms. 

One of the victims of this online piracy of works is Auckland bass player and music producer Jacob Park who has discovered that there has been an album artwork featuring his face being sold as an NFT on the non-fungible token (NFT) platform HitPiece for US$100 for quite some time.

This artwork is made completely out of his consent and obviously, there is not a single penny transferred to him as a reward for being the subject of those NFTs products. 

Park said he wants the money that the platform generates from sales of the NFTs to be given to the musicians.

On the other hand, the online community now realized that not only small individuals but even big platforms, big companies may also be the culprits behind these actions. 

Founded in 2021 by Rory Felton, a music executive and Los Angeles resident, and investor Jeff Burningham, HitPiece sells images, names, and album art associated with famous musicians that are minted into NFTs. However, as we have already figured it out, most of the works on these platforms are NFTS created without the consent of the musicians and intellectual property owners.

Several other musicians including Wolfgang Van Halen, Jackie Venson, Jeremy Blake, and Left at London had also called out the problem of HitPiece via social media for minting artworks associated with them into NFTs and selling them without their knowledge or permission, asking their followers to be extra careful when participating in this platform, as well as in other NFTs platforms.

The Recording Industry Association of America has sent a letter to HitPiece requesting that they stop committing its acts of IP infringement. The association also said it might take the NFT platform on with a lawsuit.

In an open letter, HitPiece stated, “Clearly we have struck a nerve and are very eager to create the ideal experience for music fans. To be clear, artists get paid when digital goods are sold on HitPiece. … We are continuing to listen to all user feedback and are committed to evolving the product to fit the needs of artists, labels, and fans alike.”

The website shut down on February 2.

Does NFT help with copyright protection?

Although the NFT still has many legal loopholes, in general, the NFT is not so famous for no reason. Leaving aside the fact that in some cases, third parties may plagiarize real-world works into NFT, but on normal, NFT platforms have extremely tight protection for original works that are made and encoded on the platforms themselves. This means that there has never been any version of it before in the real world. 

If that is the case, one can sell them and profit from those products. Activities, transactions, transfers for NFT are all recorded on a public and decentralized ledger. Thereby, anyone can verify, trace the origin and ownership of the property, thereby avoiding plagiarism, counterfeiting, or the sudden “copyright strike” of the author.

Accordingly, we can draw the conclusion: NFT has a lot of potential for development, however, it has not reached the level of complete transparency and still needs a lot of modifications, and improvements to completely resolve all disputes between rights holders, creators, and NFT users.

Expert opinions

Shelley Slade-Gully, a partner at Tompkins Wake in Hamilton, said that copyright awareness is not taken into high consideration when intertwined with NFTs: “The potential implications under copyright law in this space are not widely considered by the public. It appears that many of those newly involved in the NFT space are unaware that art, music or other content which the NFT links to, belongs to the copyright owner and that any copying of those works or creation of derivatives requires a license – subject to the laws of the relevant jurisdiction. There also appears to be significant confusion around whether purchasing NFT grants any ancillary rights, including any part of the copyright of a work.”

“As ever, individuals and small businesses can struggle to enforce their copyright in an online environment, and the costs in resolving the issue can be prohibitive,” said Gully.

She added that if copyright infringement takes place, Park and other individuals in similar situations should take necessary measures such as reporting the websites, contacting a legal consultant for advice, etc. to claim their rightful benefits. 

Stating about the method to improve the situation, Gully gave advice to NFT platforms on how to prevent situations like these, in order to protect the author’s rights and their own platform’s reputation: “Ideally, NFT marketplaces should be very clear as to the rights attached to any particular NFT. Content hosting sites should also specify in their Terms and Conditions (T&Cs) that no license is granted to third parties to create derivative works, including NFTs, without express permission. This should already be covered by the T&Cs of most such sites, but there may be value to users in these websites making this clearer. We are starting to see solutions available to tackle this issue though, with some hosting sites providing a service that alerts its users if it finds NFTs created of their artwork.”

AAA IPRIGHT – Global IP – Global Trademark Registration

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