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What Should Businesses Know About NFTs and IP Protection?

by Chris Brook on Monday December 5, 2022

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29 Intellectual Property Experts & NFT Experts Reveal What Businesses Should Know about NFTs and IP Protection

Non-fungible tokens (NFTs) have taken the digital world by storm, and interest in NFTs remains high, especially among digital-native generations. There's also an emerging interest in NFTs by businesses for their monetization potential and immutable transaction records. We've created this collection of expert tips to provide insight into what you should know about NFTs and intellectual property protection, such as:

  • The transfer of NFT ownership does not confer ownership of the underlying asset. Those who are not well-informed may inadvertently infringe on the owner's IP rights.
  • NFTs have already resulted in lawsuits for IP theft, trademark infringement and dilution.
  • As the market is immature, it's not regulated, and there's minimal case law that can be used to navigate the legal waters.
  • Copycats are a common problem in the NFT space.
  • Robust cybersecurity is a must for businesses minting their own NFTs to safeguard their intellectual property.
  • ...and more.

But this merely scratches the surface of the ins and outs of NFTs and how they can protect or otherwise impact intellectual property rights. To provide more insight into what you should know about NFTs and IP protection to keep your business on solid financial and legal footing, we reached out to a panel of intellectual property experts, NFT experts, and business leaders and asked them to answer this question:

"What should businesses know about NFTs and IP protection?"

Meet Our Panel of NFT Experts & Intellectual Property Experts:

Keep reading to learn what your business should keep in mind regarding NFTs and IP protection.


Eloisa Marchesoni

Eloisa Marchesoni

Eloisa Marchesoni is a tokenomics expert and angel investor.

"While it may be that the disputed NFTs discussed on the web experience drastic fluctuations in value due to..."

Market volatility and, in some cases, negative publicity and uncertainty over the various exploits that have targeted the owners, as well as OpenSea and similar platforms, it is highly improbable for these cases to trigger a collapse of the general NFT market.

A simple reason for this is that more and more big-name brands are taking their first steps into the NFT realm: Taco Bell, Coca Cola, and Nike are just a few.

For these companies, the risk of their NFTs becoming the subjects of legal action is extremely low to zero because they own all the IP rights related to the underlying works. In a nutshell, a business minting NFTs based on proprietary IP will never incur such problems.

The same cannot be said for freelance creators. In fact, on January 14, 2022, luxury design house Hermès filed a lawsuit against Mason Rothschild with the Southern District Court of New York, citing multiple causes, including trademark infringement and dilution. Mason Rothschild is a digital artist who has created METABIRKINS NFTs featuring the Hermès BIRKIN handbag design, and he is now accused of IP infringement. The case is still ongoing.

The novelty of the NFT marketplace means that IP case law has yet to account fully for these assets. If an individual creator wishes to mint their own NFTs but is unsure of the legal repercussions, it's good to err on the side of originality or seek specialist advice.


William Scott Goldman

William Scott Goldman

@GoldmanLawGroup

William is a Senior IP counsel at Goldman Law Group, acquiring first-hand experience in the entertainment industry, business, and branding as the founder of several successful startups. He advises creative business clients, both established and early-stage, graphic designers, advertising agencies, and other attorneys/law firms.

"From a legal perspective, under U.S. law, copyright exists in the underlying work if..."

It's considered original and fixed in a tangible medium of expression.For instance, paint arranged on canvas could be considered a copyrightable work. However, minting the same as an NFT simply encodes the data on the blockchain as an electronic certificate of authenticity and automatic, smart contract.

In fact, on most platforms, the purchaser can only sell or transfer the NFT to others while the author reserves all rights in the underlying work, including reproduction rights, public display rights, distribution rights, and rights to derivative works.

Of course, this creates a host of new legal issues. Courts are now retroactively attempting to fit this technology within the framework of existing IP case law. Specific legislation will also likely be introduced, as we've seen in the past with the advent of other cutting-edge innovations. Meanwhile, enterprising businesses and individuals will continue testing the boundaries of what is legally acceptable in this rapidly-emerging digital frontier.


Blockchainsure

Terrance Blau

Terry Blau is a technologist and blockchain evangelist. As a data scientist and AI researcher, Terry has led projects funded by DARPA and the NSF. Currently, he is the Technical Operations Lead at Blockchainsure, where he develops deep neural networks for dynamically-priced insurance contracts.

"IP ownership is hotly debated in the blockchain community..."

Libertarian-leaning maximalists tend to hate IP claims and push for open standards for everything. Others are the opposite, filing copyright, trademark, and patent claims in the U.S. and elsewhere. But going after infringers is difficult since the blockchain community is a global network. If someone copies and resells your NFT jpeg but lives in another country that doesn't recognize judgments from your courts, how do you go about stopping that?

There are some sophisticated technologies you can deploy to uniquely mark specific files that are associated with specific NFTs, and that may be part of the next generation of NFTs in the marketplace. It still doesn't solve the enforcement issue, but it can make it clear whether a particular jpeg file is original or not, which is part of the overall perceived value of any NFT.


Laura J. Winston

Laura J. Winston

@LauraWinston

Laura J. Winston is the chair of the Intellectual Property Group at Offit Kurman, P.A. Laura's law practice focuses primarily in the areas of trademarks, copyrights, and the internet, representing U.S.-based and international clients, from individual business owners and small startup ventures to established publicly traded companies.

"If you're thinking of minting NFTs (and who isn't these days), there are IP considerations both for..."

Protecting your rights and avoiding infringement of others' rights. An NFT can be subject to IP protection similarly to more traditional assets — for example, an NFT containing original artwork and/or written content is subject to copyright protection.

In order to be able to assert those rights against a copycat, it is necessary to register the copyright for your NFTs with the U.S. Copyright Office. NFTs that are sold under a particular brand are goods subject to trademark protection, and those brands will have better protection if registered as trademarks in the U.S. and other jurisdictions. Many have already done so — there are more than 4,000 U.S. trademark filings for non-fungible tokens.

If you are minting NFTs of others' original artwork or content, or if you're using others' brands, you run the risk of being on the wrong end of an infringement lawsuit. Companies like Nike and Hermes have already taken such action against perceived infringers. So it is important to be cautious, seek licenses (even for stock images), and conduct trademark searches to ensure you are not inadvertently copying another's brand. Also, be careful of right-of-publicity claims if you want to mint NFTs relating to celebrities.


Dominic Harper

Dominic Harper

Dominic Harper is the Founder of Debt Bombshell.

"NFT ownership is different from IP rights..."

With NFTs, the owner generally gets the digital ownership of the digital media, but it doesn't necessarily mean that they get the IP rights of that certain NFT too.

This is why business investors should be very careful in deciding to invest if they originally want the intellectual property rights of a certain NFT — because ownership doesn't include the IP rights. When you purchase an NFT, you get a unique copy of the asset but not the actual asset, which means that you aren't entitled to the IP ownership of such.

Also, NFT investors should check who owns the underlying asset for verification and in case they want the purchase to cover IP rights too. However, these should be processed in writing to be legally binding.


Alex Wang

Alex Wang

Alex Wang is the co-founder and CEO of Ember Fund, a leading crypto investment management app democratizing investment opportunities normally only available to elite or accredited investors.

"NFTs require special forms of security — your regular virus protection won't cut it..."

As companies begin to mint their own NFTs and incorporate them into their business plans, cybersecurity is paramount in order to protect their assets.

Fortunately, there are multiple options, whether it's cold storage hardware wallets, an InterPlanetary File System, or efforts to create more complex credentials — just make sure you and your employees are well-educated in your NFT cybersecurity practices.


Raj Kallem

Raj Kallem

Raj Kallem is the CIO (Chief Information Officer) at GROW Design and Development and head of Development for 1687, an NFT-based production company giving voice to stories that need to be heard.

"NFTs (non-fungible tokens) are blockchain-based tokens..."

This means that once the token is on the blockchain, we (web app developers) have no control over protecting the IP; the blockchain takes care of it.

As web app developers with clients in the NFT space, what we do have control over is the centralized sites we use to produce those NFTs. One way we do this is by setting up firewall settings on Azure (Microsoft's public cloud computing platform), which only allows specific IPs to access the servers. Azure also comes with out-of-the-box security on apps which protects against bots or red-flagged IPs. Another way we provide security on apps is through domain whitelisting.

While the blockchain protects NFTs, it's still our duty as developers to ensure safety protocols are met throughout the development process.


Kyle Hill

Kyle Hill

Kyle Hill is President and Head of Digital Assets at Troika IO. Before joining Troika, he was founder and CEO of Redeeem, a peer-to-peer Bitcoin and NFT exchange launched in 2018 and acquired by Troika Media Group.

"The internet is used daily by nearly 65% of people on Earth, and the Metaverse feels like the inevitable next step..."

If we pay attention to how humans communicate, it's becoming more and more digital. The risk to reward in NFTs is extremely low for creators, so there's a lot of money (and talent) pouring into the space.

Top 5 Crypto Advice (Beginners)

  1. Don't buy crypto with credit cards
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  3. Celebrities are not crypto experts
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  1. If you're earning a APY, you don't own your keys
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  3. Don't take financial advice from Twitter/TikTok
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Top 5 Crypto Advice (Experts)

  1. Minimize option trading
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  1. Phishing - social engineering to reveal keys
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  5. Government - Covid, banking, IRS, charities, etc.


Maxim Manturov

Maxim Manturov

Maxim is the Head of Investment Advice at Freedom Finance Europe, a subdivision of a Nasdaq-traded Freedom Holding Corp. His work has been published in Business Insider, Nasdaq, U.S. News, Financial Express, Kiplinger, The Next Web, and The Diplomat.

"NFTs can present plenty of opportunities for businesses..."

But what do businesses need to know about non-fungible tokens and intellectual property protection?

Thanks to their blockchain framework, NFTs can be an effective way of securing your business's intellectual property without having to spend time and resources on gaining more formal IP protection. However, it's also important for small businesses to understand how NFTs can protect intellectual property, as well as the regulatory rules in place that are designed to keep IP safe.

NFTs act as a digital certificate of ownership for content, but this doesn't work in the same way as a copyright and won't act as a comprehensive layer of fraud protection.

With this in mind, startups can certainly convert their intellectual property into NFTs for greater recognition of ownership, but at this time, it's worth avoiding relying solely on this as a form of intellectual property protection.


Eric Florence

Eric Florence

Eric is the Cybersecurity Analyst at Security Tech. With a strong commitment to online security and digital freedom, Eric is working hard to deliver the content and analysis his audience is looking for. His other passions include web development and finding new ways to use VR.

"The most important fact to consider regarding IP and NFT protection is that..."

These things are nearly always stolen by insiders.

Business leaders must be very selective in who and how they allow access to these properties. I would even go so far as to say that only people with a vested interest should have access to these properties, especially if they are a high-value target.

 


Radiance W. Harris, Esq.

Radiance W. Harris, Esq.

Radiance is an award-winning trademark attorney, speaker, and bestselling author of Trademark Like A Boss: The Ultimate Step-By-Step Guide to Protecting Your Brand . She is also the founder and managing attorney of Radiance IP Law, a boutique trademark law firm based in Frederick, Maryland.

"Non-fungible tokens or NFTs are a digital asset that can be used to represent unique, one-of-a-kind assets..."

They are irreplaceable assets and cannot be exchanged or swapped. NFTs create new markets and investments for businesses. NFTs are another way for businesses to monetize their assets and generate additional revenue streams.

NFTs may include any of the following physical or digital properties:

  • Digital artwork
  • Limited edition sneakers
  • In-game items such as avatars
  • Digital and non-digital collectibles
  • Domain names
  • Event tickets
  • Real estate
  • Music
  • Videos

With NFTs, trademark protection is essential to ensure that no one can use your brand name or logo.

To maximize trademark protection, take an inventory of your existing trademarks and consider applying for additional and/or new trademarks that cover digital assets, cryptocurrency, and virtual goods.


Joris Delanoue

Joris Delanoue

@FairmintCo

Joris Delanoue is co-founder and co-CEO of Fairmint, the decentralized platform that allows founders to exchange tokenized equity with community members who contribute time or cash.

"The NFT market is booming, making crypto adoption hit record highs by..."

Including people who were not exposed to tokens before.

Large companies and brands coming into the space will need to balance the immense potential NFTs represent, both for revenue and for generating closer relationships with their audiences, with the risk created by the lack of regulation at the industry's nascent stage.

NFTs are also the best way to transform a complex tracking model, protect sensitive data, or deliver a specific license or access, as they can provide proof of ownership. In the near future, we will also start to see fractionalized ownership, offering a way for people to own a fraction of an asset like art or real estate.


Craig Smith

Craig Smith

Craig is a Partner at Lando & Anastasi, LLP. Craig is a successful trial attorney who helps clients protect and defend their inventions in complex intellectual property litigation.

"Businesses that purchase, sell, or mint NFTs need to understand..."

Who owns the underlying asset that is linked to the NFT and what rights the NFT owner has been given. Ownership of an NFT does not necessarily convey rights to the underlying asset. Thus, unapproved use or reproduction of the underlying asset can lead to claims of copyright or trademark infringement.


Jared Stern

Jared Stern

Jared is the CEO of Uplift Legal Funding. They are a small business agency that provides top-notch lawsuit loan experiences for its customers.

"Businesses must know that NFTS and IPs operate in parallel..."

A transfer in ownership of NFT doesn't guarantee IP ownership. The IP rights lie with the previous owner unless explicitly stated in the contract. If owners do not wish to sell the IP rights, the same will be licensed after the sale of the NFT. Royalty can be claimed on a complete sale of IP and NFT. Be wary of contract terms before you close a deal.

 

 


Bob Secord

Bob Secord

Bob Secord is the Founder of Charged Particles, NFT protocol that sits at the forefront of DeFi and NFTs, fusing art and finance together into one.

"Increasing market share, recruiting investors, and optimizing exit value are..."

All common aims for startup entrepreneurs.

The use of NFTs might help you reach one or more of these objectives. NFTs can be used to limit and track the distribution of software developed by your tech business. You and your investors will benefit from greater sales if you can prove ownership of the NFT-linked software and distinguish it from pirated versions.


Maria Rebelo

Maria Rebelo

Maria Rebelo is the Head of Business Development at NFT Magic Box. Maria has started her professional path in Marketing and Business. After founding successful businesses and NGOs in Portugal, she moved to Barcelona, where she learned more about cryptocurrency and blockchain technologies.

"This is a very tricky slope that requires clearer regulations and research..."

So, does owning an NFT mean that you own the IP of the product? Well...it depends.

NFT is the metadata of the tokenized version of an asset. Owning the NFT usually doesn't give you control over the asset. However, there are some exceptions. Bored Ape Yacht Club (BAYC) gives the holders complete IP control over their Apes. You can go on Twitter and see folks making t-shirts and sneakers out of their apes.


Mateo Silva

Mateo Silva

@ESG_NFT

Mateo Silva is the CMO at Teilur, the world's first talent development network connecting U.S. tech startups, ESG investors & Latin American talent.

"When it comes to NFTs, businesses should know that..."

NFTs must be backed by something with value for purchasers. Because when you purchase an NFT, you're acquiring what makes it valuable.

Let me further explain with a business example. Teilur allows you to invest in developing tech talent through NFTs. The concept is simple; these NFTs are employed to finance the training of tech professionals in developing nations.

With as little as $20, NFT investors fund the training of talent pools and get a return when the talent starts working in the technology they were trained in. Therefore, these NFTs are backed by a candidate's share of potential earnings in their tech career.

That's how we use NFTs to fund tech training, and investors earn a profit when talent gets hired because the value of Teilur's NFTs is tied to the development of tech professionals.


Chris Olson

Chris Olson

Chris Olson is the CEO at The Media Trust.

"Despite the claim that NFTs provide proof-of-ownership, they are actually..."

Harder to defend than traditional IP in most cases.

That's because owning an NFT does not automatically confer a copyright to the underlying assets (images, videos, or files). Meanwhile, the mechanisms behind NFT ownership are not currently backed by any government, leaving NFT owners with little recourse against unauthorized use, regardless of location or legal jurisdiction.

Aside from that, companies who own NFTs are faced with a variety of cybersecurity threats — so far, we have seen NFT trading platforms compromised, theft of crypto wallets that grant control over NFTs, and the failure of storage mechanisms which can result in a permanent loss of underlying assets.

Ultimately, NFTs are overwhelmingly less safe than IP stored on private servers and protected by traditional means like encryption and authentication. For now, organizations should exercise the strictest level of caution when experimenting with NFTs and other Web 3.0 technologies.


Jack G Abid

Jack G Abid

Jack Abid practices in the area of patent prosecution and IP portfolio management. His patent prosecution experience includes electrical and electronic equipment, telecommunications equipment and cables, laser and optical devices, semiconductor devices, semiconductor processing, mechanical devices, medical devices including implants and telemedicine, and software.

"Non-fungible tokens (NFTs) are unique units of data stored in the blockchain..."

The most common application of NFTs is to create a market for owning, selling, and transferring the NFTs. When the NFT for a given property is transferred, it is then memorialized on the blockchain with the new owner. The NFTs in and of themselves are nothing more than unique units of data, but their real-world utility arrives when you connect the unique units of data with legal property.

The most common application currently is to tie NFTs to digital art media. So, in short, NFTs are a technological innovation based upon blockchain technology for organizing a market for owning, selling, and transferring the NFTs. In NFT digital art media markets, the NFTs are associated with digital art media.

The issues for businesses are as follows.

The NFT market is not based in law and does not affect legal rights in and of itself. For example, there are several startups attempting to launch NFT applications for the transfer of real estate. Here, the NFTs are connected to real property. If you want to buy a piece of real property, you transfer the purchase price to the current owner, and the current owner transfers the associated NFT to you.

The hope is that this will streamline the cumbersome existing process of dozens of documents being filed with the county clerk. To be successful, these startups will need to secure buy-in from the local governments that currently handle those transactions. Without it, a real estate property owner can sell you an NFT for their real estate property, but the NFT does not confer any real rights unless you execute the same transaction with the county clerk. So, you would end up with an NFT for the real estate property but no right to inhabit the real property.

This brings us back to the most common application, digital art media. Just like with real property, the rights to digital art media have an existing legal regime (i.e., copyright), and that regime is not currently connected to the NFT markets. The copyright to the digital art media includes a bundle of rights, such as the right to reproduce and the right to distribute. So, the purchase of an NFT for a given digital art media does not confer any copyright in and of itself. One may purchase the NFT for the given digital art media, but you may still be precluded from using the given digital art media in the future because you do not own the copyright.

In many NFT digital art media sales, the author of the given digital art media is selling the NFT associated with the given digital art media. This is the most advantageous arrangement since the author typically (default arrangement) holds the copyright for the digital art media in question.

Usually, the author will transfer all or a subset of the copyright bundle of rights to the buyer of the NFT. This must be done in writing and separate from the actual transfer of the NFT on the blockchain. So, in short, here are some items to look out for when it comes to NFTs:

  • NFTs exist in blockchain only and do not affect your legal rights without something else happening.
  • When purchasing an NFT, you need to ascertain who the seller is and what rights the seller has to the property associated with the NFT.
  • In digital art media NFTs, you need to verify what copyright rights you are getting, if any.
  • In situations where the author is only giving you a copyright license for the given digital art media, you need to make sure your planned use of the given digital art media will fit into the licensed uses.
  • Nothing stops the author from minting multiple NFTs in different markets. But once the author transfers the copyright, that cannot be replicated.
  • NFTs don't exist without an NFT marketplace to host the transactions. When purchasing an NFT, research on the marketplace.


Volodymyr Shchegel

Volodymyr Shchegel

Volodymyr is the VP of Engineering at Clario, a cybersecurity company and app aimed at making cybersecurity accessible to all.

"In simplest terms, the digital information contained in the NFT may be copyrighted, but..."

The intellectual property rights of the artwork or image itself are not necessarily passed along with the purchase.

Unless it is explicitly part of the copyright package, you are only purchasing the digital information of the NFT, basically. A great metaphor I hear often is you can buy an original Warhol and own that painting, but that doesn't mean you can sell merchandise with that image or that you are now the artist.

In other words, if you are a company looking to create an NFT for any purpose, make sure you own ALL of the copyrights or are creating something entirely original before committing to a record in the blockchain.

It goes both ways, too: if your company has created an NFT that you plan to sell, make sure that you are aware of what you are selling. Are you passing along rights to the digital asset, or are you including all rights to the image in perpetuity? Be thorough and definitely consult a lawyer familiar with the NFT space.

This is, of course, a simplification, but the takeaway is that you need to be absolutely sure what you are creating is original or that your purchase of an NFT includes a copyright package that suits your needs.


Yanush Zaksheuski

Yanush Zaksheuski

Yanush is a UI / Web designer with over 8 years of experience in different areas of design. He is experienced in creating complex user interfaces, websites, and services. Yanush is currently working as a blockchain developer at iTechArt Group.

"There are a few things businesses should know about NFTs and IP protection..."

1. NFTs are not fully adopted in terms of law (legal side) worldwide, but it's already possible to obtain a trademark or service mark that would be used for sales of NFTs or related services (creation, marketing, sales, goods, etc.).

2. An NFT itself can be used as a guarantee that the creator (owner of the contracts) has produced an exact amount of specific tokens, provided the ability to mint them (or minted them himself), and associated those tokens with metadata. Proof of creation would be transactions (deployment from the creator's address) and data stored on the blockchain (and/or ipfs).

3. In the world before NFTs, you could grab a jpeg/mp3 or any other digital asset and think that you "own" it if it's on your HDD, but with NFT, you can now prove that the rights granted by the creator and "ownership" have been transferred into some form of a contract (a smart contract in this particular case).

4. As a creator, you can tokenize literally anything (image, movie, song, text, tweet, document, etc.), make it available for purchase (mint), and all tokens would be associated with your address (which means if you have an access to this wallet — you'd be able to prove that you are the owner).


Mike Pedrick

Mike Pedrick

Mike Pedrick is the VP of Cybersecurity Consulting at Nuspire.

"It's fair to say that the phenomenon surrounding non-fungible tokens (NFTs) is bewildering to many people..."

And even more people are still completely unsure of what NFTs are.

Many exchanges break down like this:

Person A: Hey - you know what these NFTs are?

Person B: Yeah. It's a non-tangible, digital asset. Usually videos, music, and art. NFTs are bought and sold like their tangible counterparts. And just like their tangible counterparts, they are one of a kind.

Person A: Wait. Hold on. Can't I just right-click and save a digital image? Now I have it, right?

Person B: You have a copy.

Person A: ...That's virtually indistinguishable from the original.

Person B: Yes, but it's a copy.

Person A: ...

Absent from most casual conversations about NFTs between the initiated and uninitiated are two key points. First, NFTs leverage digital signatures for authentication purposes; two identical-appearing images on a screen will have different digital signatures, creating the opportunity for one to be identified as the original and the other a facsimile. Naturally, the original has greater value than the facsimile.

The other key point is that anyone can create an NFT from anything. For example, an entire video from a corporate source can be subject to enforceable copyright laws. But a brief clip or image from that video can easily be captured and an NFT generated — again, by anyone and at any time. Because NFTs exist in the blockchain, once created, they exist forever. And while NFTs have only one owner at a time, they can be bought and sold over and over in perpetuity.

This opens challenges for the business world, as intellectual property (IP) may be inadvertently and otherwise captured in NFTs by employees as well as the public. Consider a clip or image that includes trade secret data in the background or outright exfiltration of data that, once out in the world, cannot be clawed back, nor can the memory of the leak be erased.

With the explosive popularity of NFTs, it isn't a leap to imagine that somewhere in your organization exists at least one NFT enthusiast looking to cash in. Jack Dorsey sold his first-ever post to the Twitter platform for $2.9M. That may seem like an extreme example, but consider 'Clock,' a dynamic NFT that updates daily, memorializing each day of WikiLeaks founder Julian Assange's imprisonment. 'Clock' is valued at $52.7M.

Not all IP-related offenses are intentional where business insiders are involved. A quick cubicle selfie posted to Instagram, for example, can share IP with the world accidentally.

The takeaway for cybersecurity professionals and business leaders alike should be enforcement of the principle that if an employee, associate, partner, or vendor doesn't need access to sensitive IP, they shouldn't even be able to see it. After all, if they can see it, they can capture it and capitalize on it. NFTs are young, and case law for copyright infringement in the world of NFTs is uncharted territory.


Rylee Armond

Rylee Armond

@RyleeArmond

Rylee Armond is a surreal multi-chain NFT artist and web3 educator. Rylee has been a guest on several podcasts and spoken at in-person NFT events like NFT San Diego Con about women in the NFT space and how to enter web3 safely.

"NFTs are still a very new industry, and..."

Businesses entering the space now benefit as early adopters as long as they are willing to understand the space. It is better to fully research the space before creating any NFTs, especially for existing businesses wanting to enter the space.

Businesses can utilize their existing IP within the NFT space to protect their IP. For example, only Disney can create legitimate NFTs using Disney IP. So, creating NFTs is a method of protecting existing IP, as anyone involved in the NFT community should have more awareness that the brand has legitimately entered the space, as opposed to a bad actor stealing their IP.

When IP theft has happened in past NFT projects, owners of the IP have been able to contact OpenSea to delist projects that violate IP concerns. A recent example of this would be the Not Okay Bears, which were a derivative copy of a popular project Okay Bears. Being active in the NFT community is also vital to the IP protection of existing NFTs. Delisting an NFT on OpenSea does not necessarily mean it cannot be listed on another NFT marketplace, but the NFT community should not condone intellectual property theft.

Also, creating an NFT and selling it does not inherently sell any IP rights to the holder. Those rights must explicitly be given by a project. For example, the Bored Ape Yacht Club has given IP rights to their holders.

The blockchain also created a receipt, so the creation of NFTs as a type of public portfolio of IP for businesses is interesting. However, it is not complete for representing copyrights or trademarks; those must be appropriately gained by other methods rather than minting an NFT.


Pedro Atencio

Pedro Atencio is the founder of The NFT Generator, an online tool that helps artists create large generative NFT collections.

"Businesses should know two things about NFTs and IP protection..."

1. The buyer of the NFT does not automatically get the IP of the image with the purchase unless the creator of the image expressly says so.

The IP of a work of art belongs to the creator by default. When someone buys an NFT, they are not actually buying the image but a link to the image which is hosted somewhere on the internet. That is the actual NFT. This is why the IP of the image does not automatically go hand-in-hand with the NFT.

2. Most sellers don't know they need to explicitly say they transfer the IP.

The reason sellers don't mention it is that they are unaware of the subtle difference between the nature of the NFT and the image itself, and they are also unaware of how this difference affects IP rights ownership in the transaction, so it never crosses their minds that they need to explicitly transfer those rights.

I say this from experience. I work with NFT creators, and I am aware this is one of the issues that slips most creators' minds when creating an NFT collection.


Rexor Allen

Rexor Allen

Rexor Allen is the founder and brain behind NFT Drops. As a passionate digital collectible expert, he became determined to contribute to the development of the NFT industry. Right now, he has embarked on a journey to share his insights on non-fungible tokens with the help of an experienced team.

"NFTs don't guarantee IP protection..."

What a lot of business owners think when purchasing NFT is that because they get digital ownership to such, this would also include the intellectual properties of the digital work. These are two different things and have respective regulations. NFT's provide intangible ownership to a digital work through codes, while patents, trademarks, and copyrights are legal certificates of ownership, which have legal restrictions as well.

Also, certain permissions should be obtained to turn copyrighted materials into NFT versions, as the copyright law encompasses owner restriction to distribute, copy, or adapt a work. Digital creators should license agreements and create regulations for NFT use and other parameters such as royalty payments and specific provisions.


Vishesh Raisinghani

Vishesh Raisinghani

Vishesh Raisinghani is a senior editor at PiggyBank and the founder of Sharpe Ascension, a financial content marketing agency based in Toronto. He is also an investor. His investments and research are focused on tech stocks, growth opportunities, cryptocurrencies, emerging markets, and real estate.

"An NFT is a digital representation or metadata of an item stored in the blockchain..."

And while the data itself isn't necessarily valuable, what makes NFTs worth the hype is that they can be used as proof of ownership and authenticity of the item. With a smart contract, NFTs can also be used to indicate how end-users or customers can use the product.

In these cases, businesses that sell digital products, such as those in the SaaS space, can use NFTs to their benefit. An example of an application of an NFT for a SaaS company is that NFTs can be used to authenticate their products, preventing fraud and protecting their software from piracy. Another benefit is that they can define how their end-users can use the products by licensing customers using a smart contract rather than actual selling.

However, I recommend that NFTs be only an additional measure to protect a business's IP rights rather than replacing formal IP protection entirely. NFTs are still relatively new and can still be weaker when it comes to claiming IP protection, especially if you also sell to customers outside the country.


Chris Seline

Chris Seline

Chris Seline is CEO of Darkblock, a decentralized protocol for unlockable content to help NFT creators control the distribution and monetization of their content. Chris is a serial entrepreneur tackling hard tech problems.

"Businesses should know that there basically is no IP protection..."

There has been rampant copying of content, even entire projects, but this is going to be part of decentralized technologies. We will need technology to help combat the issue because the laws won't be a lot of help.

OpenSea has taken action to ban copycat projects, making them less lucrative because they have a big audience, but it does not eliminate the problem. We will need new tools to detect fraud and make sure people are aware and can determine authenticity, but it can't simply be stopped.


Lew Zaretzki

Lew Zaretzki

Lew Zaretzki is a world-class IP strategist who advises leading technology companies and investors on IP strategy, licensing, and transactions, including major M&A. Lew has appeared in leading business publications and academic journals and published influential studies of the mobile licensing industry and the patent transaction market.

"The market for NFTs has grown explosively, but..."

It's still very early in the technology lifecycle.

For the market to grow and mature, producers of NFTs and associated platforms and exchanges will need to begin developing products and services that are relevant to the public at large — not just to a few tech enthusiasts and early adopters. This will require more turnkey and integrated services — and more attention to cyber and legal risks, such as threats from patent assertion entities (PAEs, or "patent trolls"), for which new industries offer a land grab of patent assets to potentially use in lawsuits.


Guy President

Guy President

Guy is the Co-Owner of Freespace.io. In 2014, At 19 years old, Guy started his career in digital marketing, which opened his doors up to a large list of private clients. He built his first full-service marketing agency by the age of 21, which he sold, and he then went on to be the founder of 'Digilism.' He scaled Digilism to $500,000 in just under 6 months.

"Unfortunately, in the NFT space right now, there is a lot of fraud and copyright infringement happening, as well as..."

IP being stolen left and right from small and large projects.

For example, anyone can go on BAYC OpenSea, pick a Bored Ape PFP, copy it, save it, then post it on social media and claim it as their own. If the person who actually owns it is anonymous, then there's no trail that could prove that person's claim right or wrong.

This happens hundreds of times a day all around the world when it comes to these projects, and there's only so much a project can do to take legal ramifications. I believe in the next three years we will see progression in fixing this issue to some capacity, preventing such IP infringement from being so common, but unfortunately, it's still currently the "Mega Wild West" out there.


NFTs are one of the latest blockchain trends, and while the market is still immature, businesses are realizing their potential for monetization and for creating secure, immutable transaction records. But it's crucial for businesses interested in creating or investing in NFTs to understand how they work, particularly in relation to intellectual property. For instance, businesses should know that the sale or transfer of an NFT does not transfer IP rights to the underlying asset. There's also potential for copycats, and some businesses have filed lawsuits against NFT creators that infringed on their trademarks. This guide provides a detailed overview of what your business needs to know about NFTs so you can enter the NFT market well-prepared to protect your intellectual property.

Tags:  IP theft IP Protection

Chris Brook

Chris Brook

Chris Brook is the editor of Data Insider. He is a technology journalist with a decade of experience writing about information security, hackers, and privacy. Chris has attended many infosec conferences and has interviewed hackers and security researchers. Prior to joining Digital Guardian he helped launch Threatpost, an independent news site which is a leading source of information about IT and business security for hundreds of thousands of professionals worldwide.

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