Web3 IP law: What can you make into an NFT?

With countless cases of counterfeit NFTs, illegally tokenized artwork, NFT copyright infringement, and a vast grey area within intellectual property law (IP law) in the NFT space, many people are (rightly) confused about what they can and can’t make an NFT from, and what rights they are licensing when they sell it.

Let’s go back to basics and clarify exactly what you can and can’t make into an NFT, what happens when you sell it, and how to avoid legal disputes when launching and selling your collection.

Can I make anything into an NFT?

Technically, yes, anything can be tokenized and sold as an NFT. Any digital works can be included in the metadata of NFTs, and even physical items can be represented by NFTs and bought and sold. 

So how are copyright and NFT related?

Essentially, NFT intellectual property law is largely the same as traditional intellectual property law. Therefore, you can’t tokenize and profit from anything to which you don’t own the necessary IP rights. 

You may have already heard about scams whereby NFT creators tokenize and sell famous artworks as digital assets, leaving the original creators without any income from the sale, the NFT owners with an illegitimate piece of artwork, and the scammers with a fatter pocketbook. Or how recently, a group of scammers tokenized and sold hundreds of electronic music pieces as NFTs, posing as a legitimate operation officially cooperating with the associated artists, and then disappearing from the face of the Earth after selling out.

These collection sales were clearly illegal and blatantly infringed upon IP laws, but there are many cases where the legality is less clear cut. Is making a slightly different copy of a work acceptable? Or if the artwork is very old, haven’t the copyright owner’s claims expired? In that case, could you gain the rights to it?

NFTs and intellectual property may seem complicated, but they are not so dissimilar from traditional copyright law. Perhaps an analogy would be the most effective way to break this down. If I make prints of the Mona Lisa and sell them at a premium price, I do not somehow gain rights to the Mona Lisa (even if they're my own photos of the work), and selling my prints would be infringing the IP rights executed by the Louvre Museum (among others). It’s important to mention that even selling your own photographs of the Mona Lisa, which are technically your own creation, could entitle the Louvre to some portion of sales. The exact same principle applies to NFTs: you do not somehow gain any IP rights, copyright privileges, or circumvent copyright protection because you have minted an original work as an NFT.

The copyright ownership still lies with the original creator, even if the NFT is sold to a new owner. Therefore, you can’t launch an NFT collection of, for example, Iron Man characters, you are not allowed to sell a collection of celebrity headshots as NFTs, and you can’t even sell your own artwork depicting your favorite sports cars without first carefully clearing the rights to the work in question.

What is rights clearing?

Rights clearing is the process of establishing your legal ability to license a given work. Before you tokenize anything and sell it as an NFT, it is absolutely necessary to consult with legal experts to verify that you hold the appropriate IP rights to the work being tokenized, or that you are able to tokenize it based on a different legal title (personal use exception, etc.). Otherwise, sooner or later, legal disputes could very easily arise with the true owners of the IP. Even with comprehensive rights clearing, it’s possible for legal disputes to arise from third parties claiming to own the copyrights to the work. However, if you’ve done your homework, you’ll have firm legal ground to stand on if anyone tries to claim they are the actual owners of the IP in question.

Want to release your IP into the public domain? Find out more about cc0 and what it means for your as a creator in our article.

How do I clear the rights for my NFT collection?

Clearing rights is not a job for novice legal enthusiasts. When it comes to IP law, you can’t assume anything, and it’s crucial to consult with IP experts. There are different state laws and policies from various patent and trademark offices, so calculating your exposure to potential legal issues is highly complex. With regards to NFTs, it’s also imperative that you find IP experts who are well versed in web3 compliance and blockchain technology.

Luckily, at Artiffine, we have a legal team who fits the bill perfectly. As founding members of the Harvard NFT Task Force, we are uniquely qualified to clear rights for tokenizing and licensing intellectual property and deal with compliance and additional legal issues, as we are actively contributors to creating frameworks and establishing legal precedent in the budding NFT space.

If you need help clearing the rights for your collection, creating NFT licenses, or with any other legal or compliance issues in web3, get in touch, and we’ll be happy to assist.