NFT art is growing in popularity. But when someone buys NFT art, what rights do they get?

What is an NFT?

NFT stands for “non-fungible token.” The token is a unit of currency on the blockchain, the technology that underlies Bitcoin and other cryptocurrencies.

Fungibility is the idea that one thing is exactly like another. Think currency. One dollar and another dollar are the same and if you swap them it doesn’t matter. Things that aren’t fungible could also be described as unique. A work of art, a priceless heirloom, etc.

An NFT is a token that technologically creates non-fungibility. No other token will be fungible with that token. 

NFT art is therefore a graphic tied to an NFT token. It’s like buying a certificate of authenticity that says “this art is a digital asset and this digital asset is unique.”

What is a copyright?

Copyright is an interest in a creative work fixed in a tangible medium of expression. 

Copyright typically vests with the creator of that work. Though, in some cases, it might vest with the employer of the creator.

In the United States, copyright originates in the Constitution, but the exclusive rights of copyright holders are enumerated in 17 USC §106. They include the exclusive right:

1. to reproduce the copyrighted work in copies or phonorecords;
2. to prepare derivative works based upon the copyrighted work;
3. to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
4. in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
5. in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
6. in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.

I’ve underlined some sections above to literally underscore some of the ways in which the purported ownership conveyed by NFT ownership appears at odds with the ownership of the copyright.

So what?

The individual who purchases the NFT undoubtedly gets the ability to buy and sell that specific NFT. That’s all they get. An NFT ownership interest does not give any rights to any intellectual property. Instead, it gives interest in the literal digital file purchased. The digital file could be literally anything. It derives value from the file’s scarcity, not the image.

An NFT doesn’t provide a warranty that the creator of the NFT had the right to create the NFT in the first place. Some platforms are taking steps to solve for this.

For example, SuperRare provides in its terms of service both a DMCA and a refund policy in the event that a user uploads infringing work:

Still, if someone were to buy a piece of art for a half million dollars that turned out to be infringing and the seller cashed out their crypto, skipped the country and spent all the money,  it would be the buyer holding the bag. There are some who will say that the solution is more crypto and blockchain ledgers so that fraudsters’ actions could be unwound, but the world certainly isn’t there yet.

Put differently: when someone buys an NFT piece of digital art it’s somewhat akin to buying a physical piece of art. The original painter or creator of the art still owns the underlying copyright. 

If I walk into a gallery and buy a painting I like, I cannot then sell that image to Coca-Cola to put on its cans. That would be copyright infringement. 

If I took a picture of that art and sold an NFT version of it, that would also be copyright infringement. If I bought an NFT version of it from someone else who did not have the right to create the NFT in the first place, they (and maybe I too) have engaged in some plain vanilla copyright infringement with a tech twist.

There is some bad marketing around NFT ownership that suggests the interest is more broad than this. Buyer beware!

All of this is to say nothing of the environmental impacts of NFT (which are pretty shocking), or the issue of moral rights (which are rights that vest with the creator regardless of who has ownership of the copyright or an NFT).