A non-fungible token (NFT) is a unique digital file which is stored on a blockchain network. It can be used to represent any digital file in a variety of modes such as video, photo, and audio.
A common use of NFTs is for the commodification of digital assets in music, art, sports, and other forms of entertainment. All blockchains work to ensure that the digital item represented by the NFT is both authentic and unique.
There is a close relationship between NFTs and intellectual property. The unique characteristics of NFTs necessitate that intellectual property owners who deal with NFTs must reconsider intellectual property licensing and protection strategies. NFT creators should also seek ample protection for their NFTs.
NFT creators must also be certain that they avoid committing any intellectual property infringements. Just like anyone else, NFT creators are liable to severe legal punishments should they be found guilty of doing so.
The Most Common Misconception About NFTs and Intellectual Property
Before any further discussion, the most common misconception about NFTs in relation to intellectual property must be debunked. This misconception is the belief that an NFT is a form of intellectual property. This is not the case. It is neither subject to copyright; it is also neither a trademark nor a patentable item. An NFT also does not belong to any other category of intellectual property such as geographical indication or industrial design.
An NFT plays a role similar to that of a form of deed, receipt, or certificate of authenticity. It provides verification that the owner of the NFT is the owner of the original version of an item which may have any number of digital copies. This is because blockchain technology verifies all NFTs. The verification process is completed by a large network of computers. This network records all NFT transactions, allowing buyers to receive proof of ownership and authenticity.
Trademark Applications for NFTs
It is both possible and advisable for an NFT owner to submit a trademark application for the NFT. Doing so provides suitable protection for both the brand and content associated with the NFT. NFT owners who operate under a pseudonym are particularly advised to make a trademark application as soon as possible. Such an application prevents anyone else from using the same pseudonym, allowing the NFT owner to enforce intellectual property rights against anyone who would violate them.
NFT owners who have completed the process of trademark application are permitted to sue infringers without having to prove any actual damages. The owner can then claim statutory damages.
Those who have applied for a trademark for an NFT are permitted to use other trademarked images or text in the NFT upon receiving due consent. However, before anyone does so, it must be obvious that the content in question is trademarked by a third party. If that content has been significantly modified or redesigned, it is unlikely that any infringements or violations have been committed.
NFTs, Intellectual Property, and Licensing
Intellectual property owners who provide licenses to other entities who will use this intellectual property ought to consider how NFTs relate to the licensing agreement. The use of strategic licensing practices for intellectual property can do a great deal to increase the profile and visibility of any NFT. Most of these entities are blockchain developers.
When issuing licensing rights related to NFTs, intellectual property owners must explicitly define what is and is not being licensed. The licensing of intellectual property in conjunction with an NFT should have a scope which is limited to the relevant purpose. Other restrictions should be applied as required.
One common restriction is an upper limit on the number of NFTs based on any specific copyrighted work. This limit guards the scarcity and therefore value of the copyrighted work. Another restriction is the limiting or banning of modifications made to a licensed work for the purposes of the NFT and its owner.
NFTs in the Intellectual Property Field
NFTs can even be used within the field of intellectual property itself. Such can be the case when NFTs are stored and shared on a cloud platform designed for intellectual property purposes. Such a platform would facilitate the development of a global environment which assists with the licensing, financing, and commercializing of any type of intellectual property.
Through the use of NFTs on these intellectual property platforms, the cost-efficiency of trading intellectual property is greatly increased. There is no longer a need to make use of contracts, the services of an attorney, or any paper-based process. NFTs do much to simplify the entire model.
This article is brought to you by Exy Intellectual Property Malaysia and Singapore