Insights

The advent of NFTs has raised important questions about ownership: Does buying an NFT result in ownership of its intellectual property? If not, do you really own the NFT? With so much information and so many misconceptions swirling around online, we’re here to set the record straight. So, who owns NFTs?

What’s the difference between a legal contract and a smart contract?

Even though a smart contract has the word contract in the name, that doesn’t necessarily mean it’s legally binding. A smart contract is simply a set of rules written in code that cause events to occur when certain conditions are met. For example, an NFT marketplace’s smart contract could dictate that each time an NFT is sold on its secondary market, the wallet that originally minted the NFT receives five percent of the sale profits–that’s how artist royalties work. However, that doesn’t mean the artist is legally entitled to royalties on secondary sales. 

While smart contracts execute actions, they do not dictate entitlement to intellectual property.

Do collectors own the IP of an NFT?

Some collectors and artists misunderstand their rights when it comes to NFTs and intellectual property. And who could blame them? This is largely uncharted territory. One of the most publicized examples of web3 related copyright issues is what happened to Spice DAO, and it serves as a reminded to always do your research when it comes to intellectual property; the DAO purchased a copy of storyboards and production materials for a cinematic adaptation of the novel “Dune” that never came to be. They mistakenly thought that purchasing the materials at auction gave them the rights to produce the film, but in reality, it did not.  

While the “Dune” incident did not involve NFTs, the principles are the same. Ownership of an item does not necessarily give the holder ownership over the intellectual property. It’s just like how purchasing a digital copy of a book, a movie, or an album doesn’t make you the copyright holder. 

“Crediting Sources” by Robness on SuperRare

Typically, if you buy an NFT, you do not own the intellectual property. That said, some artists, creators, and copyright holders will use legally binding licenses that may allow for limited use of the work by the NFT holder, or they may even transfer IP to the owner of the NFT. You can never know for sure, so always check before you do something with your NFT that might violate the IP owner’s rights. Some artists and creators even choose to release their work into the public domain, meaning that even if you own the NFT, other people may still be able to use its likeness however they want. This is just like how Vincent van Gogh’s “Starry Night” is physically owned by the Museum of Modern Art in New York, but the painting itself is in the public domain, meaning that anyone can make and sell prints of it, or otherwise use its image however they please.

In the near future, it’s looking likely that we’ll increasingly see legally binding IP and derivative licenses baked into smart contract metadata but, as of now, this remains uncommon.

“Cease and Desist” by Joren Cull on SuperRare

If a collector doesn’t own the IP, what can they do with an NFT?

Just like with physical art and media, even if you don’t own the intellectual property associated with an NFT, you can still privately display an NFT you purchased, and, as long as the copyright holder doesn’t specifically stipulate that you can’t, you can also publicly display the artwork, just like collectors do with the physical artwork they purchase. 

You can also still sell artworks you buy as you wish, and, if the copyright owner licenses the artwork to the token holder in any way, you may have additional rights as long as you own the token. When it comes to intellectual property, everything is on a case by case basis, so make sure you understand the rights you do and do not have when you purchase digital art.