This blog is authored by Megha Hurkat, 3rd-year student of Gujrat National Law University.
INTRODUCTION
Non-Fungible Tokens have seen a recent uptick in interest from tech-savvy readers, who may have even purchased a few for their use. This year has started with increased news about buying and selling “non-fungible tokens” (NFTs). As a result, they may be used in a variety of contexts, fostering creativity and making money for both the inventors and the buyers. The question of intellectual property rights arises when a creative work hits the NFT market.
“Everyday: The First 5000 Days,” a digital collage created by 40-year-old graphic designer Mike Winkelmann a.k.a. Beeple, sold for nearly $69 million on March 11, 2021. Although this wasn’t a record-breaking sale, the buyer ended up receiving a digital version of the collage and Non-Fungible Tokens (NFTs) at the close of this transaction. From Grimes to Kings of Leon and even the NBA have all used this technology in the previous three months.
WHAT EXACTLY CONSTITUTES NON-FUNGIBLE TOKENS?
When it comes down to it, an NFT token is a digital asset (token) that may be used to verify the legitimacy and ownership of an asset or item that is exchanged on the blockchain. It’s feasible to consider music, art, or maybe even a tweet like an example.
Despite its superficial resemblance to the other asset, this one has distinct characteristics that define it apart. Artwork or a cinema ticket are examples of tangible goods, whereas a virtual environment or a game are examples of intangible assets. When a child has a picture of an actor from the movies, he does not own the actor. The actor’s photographer may own the original rights to the photograph and any copies made of it.
However, it’s vital to keep in mind that the NFT cannot confirm the authenticity of creative work on its own. An NFT might have an inaccurate initial ownership entry or might be linked to a fake blockchain. As a result, it is possible that conventional techniques of art verification and assessment may be required in the future.
NFTs IN INDIA
Indian Cricketers were the very first public figures to participate in the first ever Sports NFTs. A digital collectables platform themed on cricket was established by Rario in August 2021 in conjunction with former Indian men’s cricket team ace Zaheer Khan, using the NFT platform. Rario now includes cricketers Rishabh Pant and Mohammad Siraj too. Rario will be able to generate unique digital artefacts of their historic events both on and off the field as a result of the cooperation of the cricketers. On that line, an auction of a digital art reel from such a match, in which Dinesh Karthik struck a match-winning six on the final ball is also now expected to raise around 5 Ethereums.
Apart from the cricketers, Bollywood stars are also engaging in NFTs. An NFT of his own was just established by Bollywood star Amitabh Bachchan with Beyond Life. Signed posters from his films were offered for sale. Credit and debit card users may be able to participate in the bidding process started during the first week of November.
INTERFACE WITH IP LAWS
Intellectual property has always been about exclusive interests and monopolies, thus it should suffice to say that some quickly see a link between NFTs and IP. However, NFTs do not immediately confer intellectual property rights or the right to file a PCT application in India as a result of their existence.
IP encompasses a wide range of creations from literary and creative works to designs and symbols as well as words and names. Legal frameworks of Intellectual Property Rights can be used to control and protect intellectual property like NFT. Intellectual property is fundamentally based on the concept of monopolies and other forms of exclusive ownership. Only the IP rights holder has the right to create, use, present, or sell the work in question.
Brands, authors, actors, musicians, game developers, and even painters who create actual works of art are examples of NFT owners. These owners are expected to distribute their assets to third parties, who can then use them to create an NFT, putting their rights at risk. However, NFTs do not inherently come with rights to intellectual property (IP) in the first place. Having a stake in an NFT does not indicate ownership of its underlying intellectual property or assets, which are two different things. However, NFTs can be regarded with copyright and subsequently the copyright law can also be used to determine the ownership conundrum.
COPYRIGHT AND NFTs
No matter how you look at it, the creator of an NFT does not seem to relinquish all of his rights in the work just because he sells the NFT. The Copyright Act, of 1957 allows Indian authors to protect their intellectual property rights in their works. Copyright for one’s original literary, musical, dramatic, or aesthetic works can be obtained under the terms of Section 13 of the Act. It is stated in Section 22 of the Act, that a work’s copyright would be protected during the author’s lifetime and for 60 years after his or her death.
Section 14 of the Copyright Act of 1957 grants copyright owners a wide range of rights, including the ability to reproduce and modify their works. Purchase of a creative work’s associated NFT results in the buyer receiving a JPEG, PDF or MP4 of the original work as well as tokens in their digital wallet. Copyright infringement may occur if an NFT is reproduced, distributed, or adapted in any way without the permission of the copyright holder. Artists’ works are increasingly being discovered on NFT trading websites, which is a sad development. By implementing “Notice and Takedown” and “Repeat Infringer” provisions in its Terms of Use, NFT marketplaces like OpenSea are addressing these problems head-on.
OWNERSHIP OF NFTs WITH RESPECT TO COPYRIGHT LAW
We don’t know what rights the author transfers to the buyer because the NFT market in India is still in its infancy. However, it appears that the Copyright Act may not have an issue with the transfer of total ownership, unlike in many Western countries. If the author of a copyrighted work so desires, he or she may transfer all of his or her rights in the work to a buyer under Section 17 of the Copyright Act. There may be a way to transfer all copyrights to the NFT platform.
Following a sale, the tokens in the buyer’s digital wallet are theirs to keep. Ownership of the artwork, on the other hand, is more complicated. Though Section 19 of the digital contract governing NFT sales allows the seller to specifically arrange for a copyright assignment in a signed form, this is not the case with NFTs. To put this in perspective – even if the buyer gets title to the actual physical artwork, an artist’s copyright remains with him or her. Similar to NFT sales, the author or copyright owner keeps their rights in most cases.
According to the Auction Terms, a purchaser of Kings of Leon’s most recent NFT album was granted non-exclusive, non-transferable, royalty-free permission to display the album artwork and some related products for their own non-commercial use. Alternatively, Dapper Labs’ NFT License Version 2.0 for NFT sales related to the hugely popular CryptoKitties allows customers to make commercial use provided that such use does not result in an annual gross income of more than $100,000. When an NFT sale is complete, a buyer should thoroughly review the digital contract to ensure they know exactly what they’re getting.
CONCLUSION
While it’s true that you possess an NFT, it’s important to remember that you don’t necessarily own the underlying asset or work as well, particularly if that item or work is protected by intellectual property rights. One can basically own a copy of an NFT by purchasing it, which means that you have full control over the digital copy of the original work. Ownership of the NFT does not grant rights to other digital copies of the NFT or to the core work which the NFT depicts. A copyrighted work means that the person minting the NFT must have official permission of the original work in order to use the underlying work’s copyright in the NFT they are minting.
LAW AND TECH TIMES 