The year is 2002.
Johnny* fires-up his desktop, opens Kazaa and begins downloading the latest Metallica album. At this point, copyright of digital assets hasn’t truly entered the public consciousness. Johnny didn’t think of what he was doing as stealing. All his friends were doing it. Files were digital. Digital things were not *real*.
Johnny would never DREAM of stealing a CD from Best Buy. That was clearly wrong, and Johnny was a good person who didn’t steal things. He was only “file-sharing”. Sharing is good, Johnny’s kindergarten teacher taught him that. Besides, you can’t own something you can’t hold in your hand, right?
The RIAA (which represented EMI, SONY, Universal Music Group, BMG, and Warner Music) didn’t see it that way when they sued people’s grandparents for their entire life savings for copyright infringement just because little Johnny downloaded Metallica from their I.P. Address.
This was the wider public’s first major wakeup call that digital assets are real and what we do (and possess) online impacts us IRL.
Fast forward 20 years.
Now the public understands digital assets are not only real but can be extremely valuable. There has been a massive cultural shift. Cryptocurrency is literally digital money. People drop a million dollars on a cartoon Ape. Houses have been bought and sold via JPGs. There’s talk that airplane tickets, tax records, and much more may soon reside on blockchains. NFTs are not some abstract dream in the future, they are today.
And the concept of digital ownership has created an absolute frenzy.
But like back in the early 2000s, there is a lot of confusion over these new digital assets and buyers’ relationships to them. Where does ownership begin and end? How does “digital ownership” impact copyright?
I am not a lawyer. This article is not legal advice. I am writing this from the perspective of a person who:
- Personally owns many copyrights.
- Has signed many licensing agreements for the sale of my original works to the public.
- Has also created and sold thousands of NFTs as an NFT artist.
Here is what I know.
What is Copyright?
Copyright is a legal concept that grants creators of original works exclusive rights to reproduce, distribute, and display their work. Copyright law is intended to protect creators and owners of original works, such as music, literature, and art.
How Are Copyrights Created?
As soon as an artist creates a work, it is copyrighted by virtue of its creation. For additional protection, an artist may register their work with their government’s copyright office.
If I Buy a Piece of Art, Do I Own the Copyright?
This is where it gets tricky. If the piece was a “Work for Hire” – where you commission an artist to create a piece of art and a stipulation of that agreement is that you own the copyright of the work once created, then yes.
But if you go to T.J. Maxx and buy a painting of a lighthouse that says “Live Laugh Love”, you cannot take that picture home, scan it, and start selling that image in your Etsy store. Even if you have a receipt from T.J. Maxx – proof of ownership – that says you bought it. Yes, you bought the picture. You did not purchase the copyright.
This is the same concept as people ripping music from CDs in 2001 they bought for $9.99 to burn onto bootleg discs to sell for $5.99 out of their trunk. That $9.99 investment in buying a band’s CD did not give that consumer the legal copyright to begin duplicating and distributing the work. The only people who can do that are the copyright owner…. and a license holder. But we’ll get to licensing in a minute.
Again, I’m not a copyright lawyer, and copyright is extremely complicated. These are boilerplate facts, but the rabbit hole goes deep… which is why lawsuits over misuse of media attached to NFTs are highly likely.
Do I Own the Copyright to an NFT I Bought?
When asking “Do I own the Copyright to an NFT I bought” we have to consider that an NFT isn’t only one thing. It’s broken down into parts.
NFTs have two main parts: a media component (ie. image, audio, video, file, etc.) and a Token ID.
In my opinion, it is unlikely that you own the copyright to the NFT’s media (ie. image) you purchased if you are not the original creator of that work.
Why? Simply transferring an image digitally does not immediately transfer copyright. Here’s an easy to understand example:
If I download Justin Bieber’s photo and mint it to a blockchain, that doesn’t mean I now own the copyright to Justin Bieber’s picture. If you buy that NFT from me, that doesn’t mean you own the copyright. Who owns it? The person that created the original photo or Justin Bieber himself if he commissioned it as a work for hire. You and I transferring that photo digital asset makes ZERO difference to our claim over its copyright. The fact the the work now exists on a blockchain instead of a hard drive – regardless of who put it there – doesn’t negate this fact.
So, What Do You Own When You Purchase an NFT?
If you don’t own the copyright to the image associated with the NFT, what does digital ownership actually mean?
First, when we talk about digital ownership, we often are speaking on the ability to resell the item you purchased to someone else. When you buy an ebook on Kindle or stream a song on Spotify or pay Netflix a monthly subscription fee to watch a movie, you cannot re-sell that book or song or movie when you are done with it. The money that you invested in those purchases or subscriptions is gone and cannot be recovered.
An NFT is different. You have the ability to resell it to another user in the future once you decide you no longer want to own it.
Most times, you also have the ability to take the NFT you purchased and resell it on another marketplace if you believe you’ll be able to extract higher value there – this may be outside and independent of where you initially purchased it.*** So, the freedom to move your digital assets around is another component of digital ownership.
When we download books or movies or music from web 2.0 platforms, there are now sophisticated licensing agreements that we consent to when we purchase these digital goods – and those purchases can sometimes disappear if the platform that hosts them goes bust. So, in web 2.0 we don’t *own* any part of that digital work other than the right to access it while it is available on these platforms. This is one huge factor that sets NFTs apart.
One thing to be aware of is where your NFT’s image and metadata are hosted. If it’s hosted on a paid service, the image associated with your NFT may disappear if the developer of the project stops paying their hosting bill. However, many NFTs are stored in a way – often by IPFS – that gives them longevity and unlinks them from the founders’ financial obligations.
(***This becomes complicated when some projects restrict where things can be sold on a contract level, but that’s a conversation for another day.)
The Difference Between IP Licensing and Copyright
If you own a CryptoPunk NFT that you purchased for 2 million dollars, do you own the copyright?
No.
The amount of $ that you used to purchase the NFT has no impact on whether you own the copyright.
In this case, the copyright is owned by Yuga Labs. HOWEVER, holders are granted IP (Intellectual Property) licenses as per an agreement with Yuga Labs as long as they actively hold the NFT.
Here is what Yuga Labs says on the subject:
“Yuga Labs owns all rights, title, and interest in and to the CryptoPunk Art including any and all copyrights, trademarks, and other intellectual property rights therein (“IP”). However, we grant you the License (defined below) to use the CryptoPunk Art associated with Your CryptoPunk NFT (“Your CryptoPunk Art”) for as long as you hold Your CryptoPunk NFT.”
Do All NFTs Come with IP Licensing?
No. If an NFT project does not explicitly state they are offering IP licensing to holders (and then provide a copy of that agreement), it is best to assume that the copyright owner is retaining IP rights.
If IP Licensing is important to you, you may consider that in your decision whether or not to purchase an NFT.
In my next post I will discuss possible factors that give NFTs value – and how IP Licensing may or may not impact an NFT’s value based on what its use-case is.
In Summary
Copyright is intended to protect creators and owners of original works and to encourage the creation of new works by allowing creators legal protections that allow them to monetize said work. However, the rise of digital downloads and the proliferation of file-sharing platforms in the early 2000s caused confusion among consumers of the time about the nature of copyright and their rights as users. Today, with the emergence of NFTs, there is a similar confusion among buyers about the nature of digital ownership and copyright when it comes to NFTs.
What you own in regards to your NFT is a question for legal battles that will invariably be played out in courts – just like the famous RIAA lawsuits from the early 2000s. In that case, courts decided that copyright remained with the original copyright holder, whether or not a consumer purchased a digital file of the work.
It is important for consumers to understand that just because they possess an NFT, it does not mean they own the copyright to the digital media represented by the NFT, and it is important for the copyright holders and creators to be aware of the confusion it can cause.
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*Johnny is a fictitious name to illustrate this story.
No part of this article should be construed as legal or financial advice.