REVISITING THE LANDMARK JUDGEMENT OF DE V RH  ZACC 18March 13, 2020
Comparative AdvertisingAugust 19, 2022
Non-Fungible Tokens, or “NFT’s” have become increasingly popular. What, you may ask, is a NFT? Essentially, a NFT is a unique set of digits which represents an asset and which is then registered on a blockchain. The asset may be digital i.e. digital images, music or could relate to physical assets – the applications are endless.
Blockchain technology is becoming increasingly popular, and, although the working of blockchain is not within the purview of this article, in essence, blockchain serves as a permanent record for a transaction. As a NFT is a unique token linked to an asset, it therefore serves as a “certificate of authenticity” for a particular asset.
Recently, the commercial value of NFTs has made headlines. For example, Jack Dorsey, the CEO of Twitter, took a screenshot of his first tweet, registered it as an NFT, and put it up for auction. The NFT sold for $2,915,835.47. Beeple, a digital art company, also made headlines where an NFT of an artwork comprising 5000 images sold for $69 million by the gallery Christies.
The use of NFTs to sell artwork has gained popularity as a method of commercialising art. Graffiti artists for example, were previously not easily able to commercialise their art. However, by registering an NFT and selling it, such artists are now able to realise the full potential commercial value of their artworks.
Given the large sums of money involved, many people are rushing to create NFTs. However, what rights does a creator of an NFT have? In the case of digital musical and artworks in particular, copyright protection is automatically conferred on these works provided that they are original and reduced to a material form. Typically, the authors of such works are the owners thereof.
While an NFT may serve as a “certificate of authenticity”, in fact, it serves as a record of the transactions that led to creating the NFT as well as the linking of the asset to the NFT. The NFT does not, however, serve as proof of ownership of the underlying intellectual property rights such as copyright in the asset.
Before creating an NFT, you should therefore be cautious to ensure that you do in fact own the underlying copyright in the artwork or musical work and have not reproduced the work without authorisation from the copyright holder.
In the case of Jack Dorsey’s tweet, the question that may arise is that is a tweet copyrightable? With only 24 characters, can the tweet be considered to be a literary work? Some argue that the screenshot of the tweet is an artwork while others believe that the actions in creating an NFT and selling it is a performance work, which is also subject to copyright protection.
As a purchaser of an NFT, what rights do you have? In general, when artworks are sold, the sale does not result in a transfer of ownership of the underlying intellectual property rights in the work. The purchaser will have the right to display the artwork, but not the right to reproduce the work.
However, the NFT also serves as an electronic contract between the buyer and the seller and, as such, licensing terms can be agreed upon between the parties. For example, the NBA recently sold an NFT with merchandising rights.
NFTs can also be very useful to brand owners. NFTs are currently being used by brands to trace the authenticity of luxury branded goods. In this way, purchasers have access to the transactions from the creation of the goods to the purchaser thereof, ensuing peace of mind that the article is in fact genuine.
There haven’t yet been any cases regarding the infringement of intellectual property rights for NFTs, so it remains to be seen how infringements will be handled by the courts.
The value of NFTs is presently uncertain. The current high prices are a result of the perceived value of the linked digital assets as the NFT itself cannot be traded for value and can only be resold. However, for those with a creative flair, the use of NFTs may open up a whole new world of opportunities.
Hillary Brennan – Attorney
Kim Rademeyer – Partner