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What Do You Own When You Buy An NFT?

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TRANSCRIPT OF VIDEO:

Hello this is attorney Jeremy Hogan and welcome to Legal Briefs and are you in for a treat because today we are going to talk about what you are legally buying when you buy an NFT – a non fungible token. 

As you may have heard, NFTs have been selling like mad recently – this piece of art by an artist called BlackSneakers recently sold for $7,000.

Very nice very nice.  But that’s nothing compared to what an artist who goes by the name Beeple sold recently – this collage of digital art and it sold for 69 million dollars 69 million!

So, not wanting to lose out on this craze..and the money.. I also have made some digital art – just not recently – and so I want to announce that I am going to tokenize it and sell my art on Opensea and here it is –

I call it – MeAndMyAtari and if you want to purchase it, I will be going by my artist name, “Old as Mud.”

Non Fungible Tokens are called “non fungible” because they are unique – not because you can’t make a vegetarian sandwich out of it.

I’m vegetarian and even I don’t find that appetizing.

In any case, in the U.S any unique expression or artwork, including an NFT , carries with it certain intellectual property rights – automatically.  If you sketch your boss as a demon-spawn during a boring meeting, you have copyright of that artwork and that includes the right to copy it, adapt it and distribute it. 

And you have those rights for 120 years!  Yes, that’s longer than you’ll probably live and Disney is partly to blame.  As the copyrights for Mickey Mouse and such keep coming up – the copyright period keeps magically being pushed back by Congress.  Funny how that works.

In any case, the key point here is that copyright protections can be chopped up into small pieces and sold or lent out for a period of time.  For example, NBC might have sole rights to show an NFL football game live but then the NFL can sell the rights to rebroadcast it to ESPN and can further sell the rights to still images from the game to NFL Trading Cards, Inc.

So when you buy an NFT you are entering into a contract for a piece of the copyright but not ALL.  First, certain contractual rights can be written into the smart contract of the NFT itself so of course those rights are part of the purchase – for example – NFTs that automatically give a percentage of future sales back to the purchaser.  Those are usually based on the ERC-721 standard and here it is:

I have no idea what the heck all that programmer stuff is but it has to do with how you get paid for future sales of your NFT and.. I feel smarter just looking at that.

But outside of rights directly written into the NFT, you are USUALLY only purchasing the rights to view and show others the digital art.  It’s actually fairly limited. here’s a summary of one of the earlier versions of the copyright agreement, this from 2 years ago:

Okay, so here you can see, What am I allowed to do with the art associated with my NFT? that if you buy Kitty Art you can look at it, play with it, and at the bottom you can see that you can even make some money from your Kitty as long as you don’t make too much money.

3 years of law school and 20 years in Court and here I am talking about making money from your Kitty.

But be aware, this is an older license and actually very broad.  Most NFTs now are more limited in the copyright license.  Here’s the license from a more recent purchase in March of 2021.

I won’t bore you by reading the legal gobbledygook but you are basically buying the right to Look at the NFT – that’s small roman numeral 1, the right  to sell it on an NFT marketplace – roman numeral ii, and the right to use it in things like virtual worlds that include NFTs.

And THAT’S IT. Remember, when you purchase an NFT you almost never own the underlying art itself. IN other words you can’t take your Kermit NFT and make a meme out of it

No matter how hilarious.  And , you don’t want to get sued by Disney – they are vicious with their IP.

Also, you cannot change your Kitty NTF and stick something like a ridiculous poptart body on it – for sure you will get sued.

Oh, that’s the original version?  Pop Tart body?

Anyways, be careful with what you are buying because it is probably much more limited than you think.

 And I will leave you with this gentleman JMS Vlogs who bought a Beeple NFT and got an actual physical box of goodies from Beeple which … well, I’ll let you watch.  I hope I don’t get a copyright strike from Youtube…

Jeremy Hogan
Jeremy Hogan
Attorney Jeremy Hogan is a partner at Hogan & Hogan.