{"id":8394,"date":"2021-06-22T15:30:00","date_gmt":"2021-06-22T13:30:00","guid":{"rendered":"https:\/\/dev2.marketsonline.co.za\/spoor_bkp\/?p=8394"},"modified":"2022-10-31T09:28:54","modified_gmt":"2022-10-31T07:28:54","slug":"what-content-creators-artists-and-persons-alike-should-know-about-nfts-non-fungible-tokens-an-ip-perspective","status":"publish","type":"post","link":"http:\/\/dev2.marketsonline.co.za\/spoor_bkp\/what-content-creators-artists-and-persons-alike-should-know-about-nfts-non-fungible-tokens-an-ip-perspective\/","title":{"rendered":"What Content Creators, Artists and Persons Alike should know about NFTs"},"content":{"rendered":"<p class=\"p2\"><span class=\"s1\">In an increasingly digital landscape where intellectual output often takes the form of digital output at some point or another, non-fungible tokens (NFTs) are exploding into the world of art, media and entertainment as a means to safeguard digital files and, in turn, enhance the protection, enforcement and commercialisation of intellectual property (IP). After a good few months, it doesn\u2019t seem that NFTs are going away any time soon (as many predicted).<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">Kim Pietersen, associate with Spoor &amp; Fisher, explains the principles and considers the IP aspects.\u00a0\u00a0<\/span><\/p>\n<h2 class=\"p2\"><span class=\"s1\">What are NFTs?\u00a0<\/span><\/h2>\n<p class=\"p2\"><span class=\"s1\">Like cryptocurrency, NFTs are unique digital tokens that use blockchain technology to record ownership and validate authenticity \u2013 call them digital certificates of ownership if you like. Therefore, in much the same way that a title deed records the ownership of fixed property, an NFT records ownership of the digital address on the blockchain.\u00a0\u00a0However, an NFT can, but does not necessarily, convey ownership of the intellectual property rights in the underlying digital asset.<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">The person who buys the NFT doesn&#8217;t necessarily own the actual asset, although this is certainly possible if the creator of the underlying digital asset transfers the intellectual property along with the NFT.\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">What exactly that underlying asset may be is far-reaching and this is precisely why content creators, artists and persons alike have hopped aboard the NFT train.<\/span><\/p>\n<p>Read more about <a href=\"https:\/\/dev2.marketsonline.co.za\/spoor_bkp\/digital-assets-and-the-evolution-of-intellectual-property\/\">Digital Assets and the Evolution of Intellectual Property<\/a>.<\/p>\n<h3 class=\"p2\"><span class=\"s1\">Who\u00a0do\u00a0NFTs appeal\u00a0to?\u00a0<\/span><\/h3>\n<p class=\"p2\"><span class=\"s1\">NFTs can be tied to any digital asset, such as a meme, video snippet or\u00a0a\u00a0tweet.\u00a0Earlier\u00a0this year, an NFT created by British designer\u00a0Beeple\u00a0which related to a JPG file\u00a0of a\u00a0collage of 5000 digital images,\u00a0<a href=\"https:\/\/www.businessinsider.co.za\/who-bought-beeple-nft-art-buyer-revealed-metakovan-metapurse-2021-3\"><span class=\"s2\">sold for $69.3 million<\/span><\/a>\u202f(R1 billion) at a\u00a0British\u00a0auction. Two weeks later, Twitter CEO Jack Dorsey sold his first\u00a0tweet as an NFT for $2.9 million (R42 million).\u00a0Finally, close to home\u00a0our very own Bryan Habana was the first South African\u00a0sports star\u00a0earlier this year to sell an\u00a0NFT, which was\u00a0a three-dimensional\u00a0turntable\u00a0of him\u00a0racing a cheetah\u00a0for R150,000.\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">Now,\u00a0mentions\u00a0<a href=\"https:\/\/consequence.net\/2021\/03\/guide-nft-music-industry\/\"><span class=\"s2\">Kristin Robinson in\u00a0Consequence Sound<\/span><\/a>\u00a0(2021), \u201cA<i>lthough some of the NFTs being offered today might feel\u00a0frivolous, the logic of buying NFTs is similar to other physical goods<\/i>\u201d.\u00a0The appreciation of an NFT is largely determined by a purchaser and, for now that value\u00a0appears to be\u00a0about rarity\u00a0and\u00a0owning an NFT\u00a0as\u00a0a status symbol.\u00a0<\/span><\/p>\n<h3 class=\"p2\"><span class=\"s1\">What do you\u202fown\u202fwhen you buy an NFT?\u00a0<\/span><\/h3>\n<p class=\"p2\"><span class=\"s1\">In the absence of terms stating otherwise, ownership of an NFT does not, by default, grant you any rights to the IP of the underlying asset. However, the NFT does give you\u00a0<i>the right to claim<\/i>\u00a0ownership of the NFT, and to exclude others from\u00a0<i>claiming<\/i>\u00a0ownership of it. \u202f\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">By way of example, most often when you buy an NFT, you cannot legally edit the digital asset even though you paid for it. You can display it on social media, or you can transfer it to another entity through re-sale, but you cannot reproduce any additional verified copies for a profit.\u00a0<\/span><\/p>\n<h3 class=\"p2\"><span class=\"s1\">What are the\u00a0IP considerations?\u00a0<\/span><\/h3>\n<p class=\"p2\"><span class=\"s1\">The South African law affords an author automatic copyright\u00a0protection\u00a0without the need of registration\u00a0if, by way of example, that author independently creates an original work. That original work could, by way of example, be an original tweet (such as in the case of Dorsey\u2019s first tweet which could be eligible for copyright protection insofar as the written piece is concerned) or an original image or video (such as in the case of Habana\u2019s digital image presented as an infinitely looping GIF which could be eligible for copyright protection as an artistic work and\/or a cinematographic film).\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">As we\u2019ve pointed out, NFTs don\u2019t necessarily grant any IP rights to the underlying creative work.\u00a0 As such, in many cases, the purchaser of an NFT, not being the copyright owner, won\u2019t be in a position to object to third parties reproducing the underlying creative work.\u00a0\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">NFTs<b>\u00a0<\/b>can, however,<b>\u00a0<\/b>enhance the protection,\u00a0enforcement\u00a0and commercialisation of IP, particularly in the context of copyright insofar as the digital tokens can be used to manage and validate ownership claims; be programmatically set for royalty disbursements and assist with the detection of plagiarism, to name a few benefits.\u00a0<\/span><\/p>\n<h3><span class=\"s1\">IPFS (InterPlanetary\u00a0File\u00a0System)<\/span><\/h3>\n<p class=\"p2\"><span class=\"s1\">South African NFT platform,\u00a0<a href=\"https:\/\/www.momint.so\/\" target=\"_blank\" rel=\"noopener\">Momint<\/a>, has realised the benefits and potential of NFTs and therefore markets its platform to local content creators and celebrities\u00a0as a way to\u00a0monetise their online creations. Users of\u00a0Momint\u00a0are able to create NFTs, called \u201cminting\u201d, on the\u00a0platform which authorises\u00a0Momint\u00a0to fingerprint and store a user\u2019s digital asset on an open source, peer-to-peer distributed storage system\u00a0called IPFS (<strong>InterPlanetary\u00a0File\u00a0System<\/strong>).\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">This brings us to the question of how the underlying creative work is actually represented in an NFT.\u00a0 One way of doing that is to store all of the data relating to the creative work in the NFT on the block chain.\u00a0 This is inefficient and costly given that the larger the NFT, the more costly and time consuming transfers of the NFT will be.<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">The alternative is for the NFT to merely include a link to off-chain storage of the data representing the creative work. One way is to store the data in a traditional cloud storage facility. The primary benefit of IPFS over traditional cloud storage is that, with cloud storage, if the file is removed or deleted, the link to the file encapsulated in the NFT will no longer function. IPFS on the other hand is distributed amongst many peers, offering redundancy and efficiency.\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">Not running on blockchain but using very similar technology, the <strong>World Intellectual Property Organization<\/strong> (<a href=\"https:\/\/www.wipo.int\/portal\/en\/index.html\" target=\"_blank\" rel=\"noopener\">WIPO<\/a>) launched WIPO Proof in 2020, a service that provides a date- and time-stamped digital fingerprint of any file, proving its existence at a specific point in time.<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">Used to safeguard creative works and designs; trade secrets and know-how; research and data; and other digital assets, the service appeals to content creators, artists and persons alike because it provides verifiable evidence that an intellectual asset existed at a specific point in time.\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">Of course, like any other assets, other than the benefits thereof, associated with NFTs are also certain risks. From an IP perspective, although the trade of NFTs is still fairly a new concept, the possible infringement and claims that an IP holder may have remain largely the same as always.\u00a0\u00a0<\/span><\/p>\n<h3><span class=\"s1\">NFT that is advertised<\/span><\/h3>\n<p class=\"p2\"><span class=\"s1\">By way of example, an NFT that is advertised for sale online could infringe trade mark rights if a registered trade mark is used in respect thereof without the trade mark owner\u2019s consent. Furthermore, if an NFT relates to unauthorised digital reproduction of prior artwork, then the re-sale of that NFT could constitute copyright infringement in much the same manner as the initial unauthorised reproduction would have constituted an infringement.<\/span><\/p>\n<p class=\"p2\"><span class=\"s3\">An NFT does not by itself validate that the creator of the NFT has any rights to the underlying creative work; anyone can mint an NFT for any creative work.<\/span><span class=\"s1\">\u00a0In both instances, the IP holder would be in a position to object to such infringement and could address a letter of demand to the infringer or approach a high court for relief in the form of an interdict and damages, facts dependent.\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">While NFTs may still be a fairly new phenomenon today, there certainly appears to be benefits that content creators, artists and persons alike can leverage, and those benefits do seem to outweigh any associated risks.\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">Purchasers of NFTs should be sure to conduct due diligence on the NFT before purchasing it.\u00a0 Consideration should be given to who the minter was, whether they had any rights to the underlying creative work in the first place, and what rights such as ownership and future royalties attach to the NFT.\u00a0\u00a0\u00a0<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\">This is however an evolving field, with no case law as far as we know.\u00a0 Watch this space!<\/span><\/p>\n<p class=\"p2\"><span class=\"s1\"><a href=\"https:\/\/dev2.marketsonline.co.za\/spoor_bkp\/our-people\/kim-pietersen\/\">Kim Pietersen<\/a> is a senior associate in the trade mark enforcement department at Spoor &amp; Fisher, Cape Town. This article is merely to report, not to advise. For legal advice on intellectual property matters, contact Spoor &amp; Fisher.\u00a0\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In an increasingly digital landscape where intellectual output often takes the form of digital output at some point or another, non-fungible tokens (NFTs) are exploding into the world of art, media and entertainment as a means to safeguard digital files and, in turn, enhance the protection, enforcement and commercialisation of intellectual property (IP). After a [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":7976,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[67],"tags":[],"knowledge_center_type":[18],"class_list":["post-8394","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news-article","knowledge_center_type-latest-news-and-insights"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.2 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What Content Creators and Artists should know about NFTs<\/title>\n<meta name=\"description\" content=\"However, an NFT can, but does not necessarily, convey ownership of the intellectual property rights in the underlying digital asset.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" 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