I think there may be some misinterpretation of what was said and claimed. NFTs are NOT by default an assertion that the person selling or minting an NFT is the owner of the intellectual property associated with the NFT being created. This inherent lack of congruity or necessity of congruity creates a marketplace in which many NFT sellers do not actually have the rights to the intellectual property they are selling in the form of an NFT; and further the brokers that facilitate the transactions were not doing the due diligence to ensure those trading, selling, or minting NFTs had the license to do so.
That is the root of the conflict as to why NFTs cannot be automatically treated as intellectual property and should be considered to be personal property at the least; and intellectual property when the license is legally transferable. Otherwise, the notion that IP is natural and not a function of regional law would be a highly debatable and contentious point to make. Intellectual Property Law is artificial and man-made; and is most definitely not a natural right. Whether it “should” be a fundamental right is another debate. Inherently, it is not a natural law and is completely dependent upon capacity to enforce; in that IP law with no enforcement may as well not exist.
The argument was not being made that “NFTs cannot function as IP”. Rather, the argument that was being made is “The current marketplace treats NFTs as personal property in the way they are traded, claims it is intellectual property in the way smart contracts are meant to function, and the reality is incongruous.” Another issue is that the incongruity in understanding of the terms of a contract can cause a misunderstanding of terms; and in that context the agreed terms of the contract that both sides agree upon become the legally binding terms in the context of personal property exchanges.
A further example that has not seen the investigation completed is that of the art collector that turned a Frida Kahlo painting into an NFT and burned the original painting. This case will be important to the NFT legal framework in that a person who purchases a piece of art purchases it under a personal property contract unless there is an explicit intellectual property transfer. To be clear, buying an original artwork does NOT guarantee the complete transfer of ownership over the license associated with that work. Especially in the context of art prints being a fairly common practice in which the creator of a work may retain the license over a work to distribute prints while the original work may be sold in a completely different transaction without the original artist losing control of the IP rights associated with the original work.
Even then, I would assert that there is an appearance of being a fundamental right; but actually being a benefit reserved for individuals and organizations with the capital to procure legal protection. Filing a patent costs money. Getting a copyright costs money. Suing to protect a work costs money. While the laws protecting IP are meant to be all-encompassing concerning their applied protections; in reality it is unfortunately not as equally applied as it should or could be.
As a musician that has had my work stolen and sold by a company in a different country; I can personally attest that IP protection enforcement is not nearly as accessible for the poor artists and creators looking to protect their works and that the capital to procure legal protection often can come to usurp who is the “technical creator” of a work. This is routinely an issue with musicians that record a work, own the intellectual property contained in the work, but do not own the master recordings. While Taylor Swift owning the intellectual property but not the master recordings may seem tangential; it’s actually a very important case concerning the congruity of protections on a work when there is both intellectual property and physical or in some cases digital property both present.
At the core, it is clear that intellectual property also must be a person’s “personal property” in order for them to be able to legally sell it; but this is not the case when IP provides licensing terms that are associated with copies of the original property. Distribution license, reselling license, modification license, or any other type of license that is granted is not necessarily going to be held by the same party that holds legal control of the personal property. In some cases the holder is congruous, but there are enough cases of incongruity in ownership that it is not a clear issue and ultimately why the most relevant nuances should be pointed out for discussion.
This points to a flaw in the ownership-possession-control triangle of IP
as creator the copyright automatically devolves to you by act of law … but
the studio possess the master recordings which are needed to produce derivative works (or commentary or other downstream compilations)
control of the work is effectively split. Without creators having the capital to own their own recording studios, the control effective shifts to later stages of the value-chain, in this case the platforms like iMusic or spotify which sets the market prices and basically treats artists as un-unionised suppliers
We also have the trend in that previously the creator economy was dominated by a few major studios and they were big enough that whilst bullying new artists, at least the set of copyright infringers was small that it made sense to go through centralised bargaining. With modern rip-mix-burn and AI synth and generative music, the control becomes more decentralised and the bargaining power of individual artists is sharply reduced.
There are 3 possible solutions (in no particular order)
artists band together in coop-style DAOs to own the platforms, buy the upfront studio capital equipment and seize control back from distributors
we have better smart contract tainers which correctly stream the royalties including tips, micro-subscriptions and merchandising
new forms of artistic organisation which builds audiences which are sticky (tours, franchises, memes etc) which self-identity with the artist who becomes more celebrity rights (cf K-pop)
NFTs if correctly designed, can form a partial solution to the 2nd item.
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The author identifies existing legal frameworks through which NFTs can be adjudicated as personal property instead of intellectual property.
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This summary has 18 comments and 985 views.
Wearing my finance hat, I am not convinced that NFT has an intrinsic value. The process for analyzing an NFT valuation is not predetermined. Simply put, NFTs cannot be evaluated using the same parameters that you would use to evaluate private companies or traditional investment vehicles like shares where the last buyer’s payment typically provides some indication of the worth. However, with NFTs, it can be challenging to predict what the subsequent buyer may pay based on their predictions. As a result, estimating the value of an NFT is based on speculation.
*co-author’s response: Thank you for these questions! I will start in reverse order to address the foundational issues that affect the rest of the questions. That is: what rights do NFT owners have? The answer is relatively none. Unless there is an explicit statement of licensing agreement or some statement of explicit transfer of intellectual property; the purchase of an NFT does not grant any rights beyond those that are granted with purchasing anything from a third party. The transfer of NFTs should be treated as property and should be regulated as such, in that they are explicitly not transmitting rights of ownership over the license with a general NFT purchase.
I recently encountered a legal article proposing framework for division of “virtual currency” (meant to include NFTs) in divorce proceedings. Doesn’t necessarily advance the conversation but it does serve to highlight the many pitfalls surrounding intersection rule of law, rule of code. NFTs vary tremendously in type, value and complexity - can link to jpeg, can ‘wrap’ other tokens and investments (liquidity positions) and can relate to data for environmental and decentralized science applications, and as ticket for access/privileges, etc. But forewarning, the law might not necessarily care, and/or be prepared to pay gobs of money for legal counsel if you need litigate concerning ownership, characterization of your NFT collections. Prevention worth ounce of cure here :)
Article sets forth a proposed framework for identifying, characterizing, valuing, and dividing virtual currency in dissolution of marriage cases. The framework follows four primary steps: (1) adopt uniform discovery requests tailored to uncover virtual currency, and review concurrently produced discovery for evidence of virtual currency transactions; (2) consult with financial experts and review existing virtual currency exchanges for transaction history and inception of title for virtual currency; (3) value the virtual currency as of the date and time of dissolution separate from the rest of the marital estate and address any future marital earnings received from virtual currency or assets; and (4) encourage like-kind division or immediate sale of virtual currency upon divorce.
@Larry_Bates
The terms of service agreements for many of the centralized NFT merchants specify certain legal requirements for customers. There hasn’t been much investigation into whether NFT buyers’ expectations match up with these regulatory requirements.
The rights and obligations that buyers have when acquiring NFTs from a centralized merchant may not always be clear to them. Furthermore, some centralized merchants could not be clear about their terms of service, which could cause misunderstandings and conflicts between customers and sellers.