December 1, 2021—Non-Fungible Tokens (NFTs) are digital files with a unique identity that is verified on a blockchain, which is a system of recording information in a decentralized manner that makes it difficult to impossible to change, hack or cheat the system. Unlike cryptocurrency, such as Bitcoin, NFTs are not interchangeable, which is why they are identified as non-fungible. Therefore, when comparing cryptocurrency to NFTs, cryptocurrency is fungible because it is entirely interchangeable where it can be used for payments whereas NFTs are each unique and therefore non-fungible.
NFTs generally represent a one-of-one original, or a fixed number of copies in a limited series that is a digital version with a certificate of authenticity that is maintained within the blockchain. Item that can be NFTs include unique works of art, music, video, collectible, trading card, video game virtual item, real estate (where a real estate owner could sell part of their property to a large number of small investors by issuing tokens on the blockchain. Investors could hold these tokens and receive a rental income for doing so, profit split on capital appreciation upon sale or both), etc.
Owning a NFT does not mean that you have rights to do whatever you want with your NFT. For example, unless expressly included, you likely will not own the copyright. An acquirer should investigate the legal rights and implications of each NFT platform and each specific NFT before purchasing.
With this realization, business should also be mindful of agreements where rights in technical drawings, pictures, artwork, music, video, collectibles, etc. are included. If such data, either digital or not, is being shared or licensed with another, limiting the use of such information should be considered when drafting agreements. This data may have value as NFTs and if not properly protected in the agreement, the other entity to the agreement could take actions that may devalue the NFT value of this data.
Though there is currently a growing market for NFTs, the future is still an unknown. But, with the continued advances with blockchain technology, NFTs likely are here to stay in one form or another.
In today’s times, businesses are better served by attorneys who remain on the cutting edge of technology. Hiring an attorney understands the intersection of NFTs, their potential value and copyright law is important. Attorneys at Beusse Sanks possess such abilities. Call us to allow us to assist you.
