Nigeria: The Age Of NFTs: Copyright Prospects And Challenges

INTRODUCTION

In April 2021, the artwork of an important 20th-century African-American artist, named Jean-Michel Basquiat drew huge public attention, at least in the United States. A non-fungible token (NFT) had been made of the work and was put up for sale by Daystorm, an art collection agency.¹ The attention received was however due to the accompanying announcement that the sale would also give the new owner the choice to destroy the original work if so desired. These concerns led the agency managing the artwork on behalf of Basquiat's estate to declare that the Daystorm only owned the physical copy, not the copyright of the work.

The buzz around NFTs suggests legal questions as to the rights of owners of these NFTs under copyright laws. To explore this, this article examines the nature of an NFT in a bid to understand the technical aspect that would enable law enthusiasts to correctly analyze IP concerns and, how this technology affects common copyright ownership.

2. THE ANATOMY OF NFT

NFT is an acronym for "Non-Fungible Token." A token is a unit of value that is recorded on the blockchain thus making it easily identifiable by anyone. Being non-fungible implies that this token is unique and cannot be interchangeable with a similar token or asset or item.

To relate with this perfectly, consider physical non-fungible items like an art piece or a piece of land. The art piece cannot be exchanged with another even if the other bears the same copy; there would always be the original and copy/copies whose price value would differ in the eyes of one who knew the difference. The land cannot also be exchanged for another piece of land without owning something fundamentally different. Fungible items, in contrast, include a currency note (a hundred naira note, for instance) whose unit of value is identical to another currency note with the same unit of value (another a hundred naira note). Another fundamental feature of an NFT is the involvement of an underlying asset or item which is linked to and thus represented by it through a code.

Hence, an NFT is a token or, in a less technical sense, a digital file with a unique identity verified on the blockchain.² It is linked to and represents a unique asset or one of the limited copies of a particular asset. The asset could be a digital item or a physical item (that can be represented in some digital form as a photo, video, or scan). Assets so far that have been linked to NFTs include physical and digital artworks, tradable and collectible cards in games, memes, tweets, videos, and music albums amongst others.

Actions involving NFTs require blockchain technology whether it is the creation, sale or mere transfer of the token. The blockchain is a public digital ledger within which transactions that occur on it are recorded and accessible for all to see. It is also non-proprietary hence anyone can create his own blockchain network or join an existing one. Though many blockchains exist, Ethereum is most popularly used for NFT projects and thus used by most platforms.

CREATING AN NFT

The creation of an NFT involves either of two processes. These are:

1. Encoding the digital asset into the token or NFT. In other words, the work is uploaded in its entirety to the blockchain.³ This is rarely used due to the humongous cost it incurs.
2. Using the digital work to create a unique code on the blockchain which would in turn link to and identify the digital work.⁴ In this process known as minting, the creator must have a unique and private digital signature which he uses to create the code and write the same in the blockchain in the form of a smart contract. The code consists of a tokenID and a contract address available, both of which combine to make the NFT unique. The smart contract is a self-executory contract and identifies important elements of the NFT such as the wallet address of the creator, a URL link to the location of the digital asset, information about the asset, the author, copyright status and other information that the creator would want to be included. With this anatomy and creation process of the NFT, it is deducible that the NFT is simply a digital file containing encoded information that is linked to an underlying asset, yet distinct from the asset.

COPYRIGHT OWNERSHIP AND INFRINGEMENT OCCASIONED BY NFTs

Intellectual property refers to the creations of the mind from which specific rights are accrued to the creators. These intellectual property rights include trademarks, copyrights, patents, trade secrets, design rights and a host of others. Interestingly, with the evolution of NFTs arose allegations of and concern over infringement of popular rights such as trademarks, copyrights and patents in addition to the dearth of laws and judicial precedents to regulate the wide scope of these technological evolutions.

One of the key issues arising from NFT transactions is the rights purchasers get from an NFT. Does the buyer acquire the copyright of the NFT and even the underlying asset? This question can be answered through two premises.

Under premise one, it is ordinarily the case that when the sale of a copyrighted item occurs, such as an artwork, a music album or a movie, no copyright is automatically exchanged except with an agreement stipulating such exchange between the author and the buyer. For instance, the purchase of a music album does not make me the creator of the album nor the copyright owner. So certain exclusive rights arising from copyright, like the right to sue and be sued for infringement relating to that item, the right to duplicate the items and sell them, among others, would remain with the author of that work.

In the same vein, the sale or transfer of an NFT does not transfer the copyright of the underlying work to the new owner; he only can sell the NFT and claim the so-called 'bragging rights' of having such a valuable item if the NFT sale also involves the transfer of the possession of the underlying work.

The second premise is underscored by the creation process of an NFT from which we realized that an NFT is distinct from the asset to which it is linked. Some brands have created NFTs of their physical goods to enable buyers to earn the perk of owing and proving the authenticity of the goods to which, it is tied.⁵ Still, the NFT is not the item itself but a string of codes or metadata that links to the digitized form of the physical item or a digital item itself. Hence, the sale of the NFT of a tweet, for instance, is not the sale of the tweet itself, contrary to how the media depicts popular NFT sales.

As to whether one can claim copyright of the NFT itself, recall that the NFT is a string of numbers and letters making up a code. It is thus some form of data, and copyright laws do not recognize data as being copyrightable.

Moreover, copyright infringements have become rife in media reports through NFT creations and sales. Examples include a report by an artist, Aja Trier who claimed to have seen nearly 86 thousand unauthorized NFTs of her paintings up for sale on Opensea, a popular NFT selling platform.⁶ This is possible as the creation process of an NFT above showed that anything that could be or is digitized could be tokenized into an NFT as long as the digital copy could be gotten. In other words, copyright infringers need only acquire the digital copy of the item with or without the author's permission or acquire items in the public domain to create a unique NFT.

Despite this, it may be the case that such an NFT created would most likely be valueless and attract no buyer. This is because being that all transactions involving an NFT are viewable on the blockchain, one can easily identify the source of the NFT and realize that the NFT was not issued by the author/owner of the underlying work at any point. With regards to an NFT of work in the public domain, people would not be interested in purchasing an item that can be easily accessible with a Google search.

CONCLUSION

As we wait for the law to evolve alongside these technologies, NFT marketplaces and platforms can also spearhead the fight against IP theft and infringement by setting up proper monitoring and verification standards like what popular social media apps like Instagram and Twitter do. In doing this, they ensure that NFT projects shared and traded on their online platforms are not infringing on any others' work.

On the other hand, lawyers can bring this possibility and other innovative solutions to the attention of the legislators, the media and the world through their public opinions shared to ignite the emergence of contemporary copyright laws that account for contemporary innovations like NFT.

BIBLIOGRAPHY

Dazed. "Jean-Michel Basquiat's Estate Forbids the Sale of Controversial NFT." April 2021. Accessed June 8th, 2022, https://www.dazeddigital.com/art-photography/article/52631/1/jean-michel-basquiat-estate-forbids-the-sale-of-controversial-nft-drawing.

Guadamuz, Andres. "The Treachery of Images: Non-Fungible Tokens and Copyright," Journal of Intellectual Property Law & Practice 16, no. 12 (2021): 1370.

Mazza, Valentine. "Intellectual Property Rights in the Metaverse: NFTs and Fashion." Lexology. February 2022. Accessed June 4, 2022. https://www.lexology.com/library/detail.aspx?g=e8127d6d-837d-4607-81b7-7aa2f92705da.

Peltz, Moise, Esq."IP and Non-fungibility: The Intersection of Intellectual Property and NFTs." Falcon Rappaport & Berkman PLLC. March 2021. Accessed June 4, 2021. https://frblaw.com/2021/03/15/intellectual-property-and-nfts/.

Reed, Jonathan. "How to Protect your Intellectual Property in the Metaverse." Security Intelligence. April 2022. Accessed June 4, 2022. https://securityintelligence.com/articles/how-protect-intellectual-property-metaverse/.

Footnotes

^{1. Dazed, "Jean-Michel Basquiat's Estate Forbids the Sale of Controversial NFT," April 2021, accessed June 8th, 2022, https://www.dazeddigital.com/art-photography/article/52631/1/jean-michel-basquiat-estate-forbids-the-sale-of-controversial-nft-drawing}

^{2. Moise Peltz, Esq., "IP and Non-fungibility: The Intersection of Intellectual Property and NFTs," Falcon Rappaport & Berkman PLLC, March 15 2021, accessed June 4 2021, https://frblaw.com/2021/03/15/intellectual-property-and-nfts/}

^{3. Andres Guadamuz, "The Treachery of Images: Non-Fungible Tokens and Copyright," Journal of Intellectual Property Law & Practice 16, no. 12 (2021): 1370.}

^{4. Ibid}

^{5. Valentina Mazza, "Intellectual Property Rights in the Metaverse: NFTs and Fashion," Lexology, February 22, 2022, accessed June 4, 2022, https://www.lexology.com/library/detail.aspx?g=e8127d6d-837d-4607-81b7-7aa2f92705da}

^{6. Jonathan Reed, "How to Protect your Intellectual Property in the Metaverse," Security Intelligence, April 14, 2022, accessed June 4, 2022, https://securityintelligence.com/articles/how-protect-intellectual-property-metaverse/}