When you buy or sell non-fungible tokens (NFTs), there is a lot of ambiguity about the rights you will receive and the rights you are granted.
As it stands now, NFTs have no mechanism to automatically define rights held by the producer, owned by the seller or acquired by the buyer. NFT is a code that: 1) records the chain of ownership of the NFT; and 2) identifies the location of securely stored digital assets. Even smart contracts not linked to NFTs, which allow blockchains to perform automated actions when certain events occur with NFTs, will not automatically protect or define intellectual property rights. Not only are the rights of the creators at risk, but also those of third parties in the digital images associated with NFT, especially when those images affect the third party’s branding rights. Lastly, there is no universal enforcement mechanism – you can only request that the NFT be removed by the platform on which it is being sold, such as OpenC.
Providing clarity on the rights to NFTs and digital assets is important to individual creators and collectors, but it is important for businesses and retailers to protect their hard-earned branding and image in the retail market, both virtual and physical. are much more important to do. The display and transfer of images, logos, jingles and other intellectual property is now protected by trademarks, copyrights, design patents and rights of publicity. These items explain who owns what and when; How those rights are registered and how you can enforce your rights. It is important to note that these protections do not automatically extend to NFTs and digital assets. To do so, you will need to redeploy those security’s registrations to include those digital assets; And, you need to design smart contracts that grant a license, require a digital signature that allows both the licensor and the licensee access to the information.
Once the intellectual property rights of digital assets are well defined, there are enormous benefits for businesses. The list of token offerings can be managed quickly and efficiently, and the encrypted blockchain is fraud and knock-off protection. As it exists now, NFTs have more transparency on things like used car repair history than property rights.
For this system to work to its full potential for both the creators of digital assets and businesses using digital assets to enhance their brands, two things are needed: first, uniform and universally accepted terms. The set of licenses to which a digital asset is licensed means the intellectual property attached to a digital asset, the scope of the intellectual property rights and to whom these rights are transferred or retained. The second is a quick way to recognize that the intellectual property rights of NFTs are protected along the lines of a universally accepted license.
At this point, it’s good to remember that, although we are light years away from what our ancestors were dealing with more than a hundred years ago, there are, nevertheless, lessons to be learned from the past. In particular, the origin of the term, “all rights reserved”. That phrase, now out of date and unnecessary to protect intellectual rights, was a product of the 1910 Buenos Aires Convention. At that time it was created to protect intellectual property as world trade became more global. It was agreed that any person who indicated that they reserve their rights to intellectual property enjoys protection in any signatory country. From this came the term, “All rights reserved.” Almost fifty years later “All Rights Reserved” was officially adopted. In fact, the term still has some moral, if not legal weight when used on creative work.
It is time for platforms and marketplaces such as Ethereum and OpenC to agree on what the basic security would be; And, what code is required in a smart contract that, when used, activates those rights for the owner, to protect their rights, the rights of the buyer, and the rights of third parties. This will go a long way in clearing some of the ambiguities and misconceptions about what NFTs do and don’t do with respect to Intellectual Property Rights.
Matthew Erskine is the Managing Partner at Erskine & Erskine.