NFTs, or non-fungible tokens, have exploded in popularity recently as a way to buy and sell digital artwork and other collectibles. However, the legal rights behind NFTs are still emerging. If someone else uses your NFT without your permission, can you sue them? Here’s what you need to know.
What are NFTs?
NFT stands for non-fungible token. Non-fungible means it is unique and not interchangeable. An NFT is a digital certificate of ownership over a unique digital asset. That asset can be a piece of digital art, a music file, a video clip, or something else that exists in digital form.
NFTs use blockchain technology to keep a public, immutable record of ownership and transactions. Each NFT has a unique identifier that distinguishes it from other NFTs, even if it is a copy of the same underlying asset. For example, an artist could sell two different NFTs of the same digital artwork, each with a different unique identifier.
When someone buys an NFT, they are not buying the copyright or distributing rights to the underlying artwork. They are buying the NFT itself as a collectible item. The creator of the artwork typically retains the copyright.
Do NFTs confer ownership rights?
When you buy an NFT, you own that specific NFT and have the right to sell or transfer it to someone else. However, owning an NFT does not necessarily give you intellectual property rights to the underlying artwork. The specifics depend on the terms of the NFT sales agreement.
For example, the agreement may state that buying the NFT allows you to display the artwork for personal use. But it may prohibit using the artwork for commercial purposes without additional permissions. Most NFT sales limit the commercial use of the underlying artwork.
Owning an NFT also does not typically grant you copyright ownership. The original artist usually retains the copyright to their work. The buyer owns the NFT as a collector’s item but not the IP rights.
Can I get in legal trouble for using someone else’s NFT?
It depends. If you simply save or share a picture of someone else’s NFT artwork, that alone does not infringe on their rights. NFTs do not restrict someone from viewing, sharing, or even downloading the artwork as long as it is for personal, non-commercial use.
However, if you try to sell unauthorized merchandise with the NFT artwork, or otherwise commercially benefit from it, then the NFT owner could potentially sue you for copyright infringement. Even if you own your own NFT copy of the artwork, it doesn’t give you the right to produce merchandise with it.
For example, if you owned an NFT of a popular meme but did not have the rights to produce merchandise with that meme, you could get in legal trouble for selling t-shirts displaying the meme art. The original artist likely retained those commercial rights.
Can someone steal and resell my NFT?
The blockchain ledger on which NFTs are recorded makes it essentially impossible for someone to steal and resell your original NFT. Each NFT has a unique identifier tracked on the blockchain. The public record ensures you still retain ownership of your specific NFT.
However, someone could take the underlying artwork and tokenize it into a separate, counterfeit NFT to try to profit from your work. This is sometimes called “minting a fake.” The counterfeiter mints their own NFT that looks identical to your original but has a different identifier on the blockchain.
If this happens, you may have legal recourse under copyright law, trademark law, or the Digital Millennium Copyright Act (DMCA). You should consult an attorney specializing in intellectual property law.
Can I sue for copyright infringement if someone misuses my NFT?
If someone uses your NFT artwork in a way that exceeds the terms you granted to NFT owners, you may be able to sue for copyright infringement. For example, if your NFT terms only allowed personal display of the artwork, but the owner uses it commercially on merchandise, that violates your copyright.
To sue for copyright infringement, you must be able to prove two key things:
- You own a valid copyright to the artwork.
- The defendant violated one or more of your exclusive rights under the Copyright Act.
Your exclusive rights include reproduction, distribution, public display, and derivate works. Unauthorized use for commercial purposes often violates these rights.
What remedies are available for NFT copyright infringement?
If you can prove copyright infringement, some of the remedies available include:
- Injunction – A court order for the infringing party to stop violating your copyright.
- Monetary damages – Compensation for any financial losses resulting from the infringement.
- Defendant’s profits – You can recover any profits the infringer earned from using your work.
- Statutory damages – Pre-set damages in the Copyright Act, up to $30,000 per work infringed.
- Costs and attorney’s fees – The infringer may have to pay your litigation costs.
Getting an attorney experienced with copyright law is advised if you wish to pursue infringement claims. They can help assess if you have a viable case and identify the best remedy to seek.
How can I protect my NFT artwork from copyright misuse?
Some tips for protecting your rights as an NFT creator include:
- Register your copyright – This establishes your ownership and gives you access to enhanced remedies if infringed.
- Include clear terms of use – Spell out the rights being transferred and not transferred in the NFT sales agreement.
- Add visible copyright notice – Include your name and date in the metadata and directly on the artwork files.
- Limit commercial use – Only authorize personal, non-commercial use and display in your terms of use.
- Implement tracking measures – Use blockchain analytics tools to identify unauthorized use.
- Send DMCA takedown notices – If your work appears improperly used online, send infringement notices.
Can I get in trouble for using AI-generated images for my NFTs?
Using AI tools like DALL-E or Midjourney to generate unique images for your NFTs enters ambiguous legal territory. While you prompted the AI output, these systems are trained on vast datasets likely containing copyrighted works.
Currently, there is no clear legal consensus on who owns the rights to AI-generated content. The AI system’s developer? The prompt engineer? Or is it entirely new work not infringing any rights? These questions remain unsettled.
Until courts provide more clarity, minting NFTs with AI art comes with elevated legal risks. If identifiable copyrighted material appears within your AI output, you could potentially face infringement claims down the road.
Conclusion
NFTs represent an exciting new digital frontier, but the legal landscape is still evolving. If you create and sell NFT artwork, take steps to protect your IP rights. Consult an attorney if you find your work used improperly. With the right precautions, you can feel more secure trading in this emerging marketplace.