What are NFTs and why should trademark and copyright lawyers know about them?

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You’ve probably heard recently of so-called “NFTs” and various digital artworks and videos that are “sold” for large sums. According to Nonfungible.com, over US$2 billion was spent on NFTs in the first quarter of 2021 alone. And it’s growing!

Some examples in the media:

  • Charlie’s Last Bite (video) – US$760,999
  • Disaster Girl (image) – US$500,000
  • Too attached girlfriend (image) – 411,000 USD

That alone should be enough to raise your head and make you ask questions. But what questions should you ask yourself? Well, for trademark attorneys, you should know that there is currently a huge land grab to register trademarks related to NFT. Your customers need to ask themselves if this is just a temporary fad or something they need.

The first question is, what is an NFT? Well, it means “non-fungible tokens”. Basically just a bit of data sitting on a blockchain somewhere. I hope you already know what a blockchain is? Otherwise, it is a computer file stored on many different computers (online). It is used to track things like financial transactions or, in this case, “ownership” of certain digital assets. Think of it as a digital version of a ledger that an accountant would use to keep track of all your money. Think of that “ledger” that was used to catch Al Capone for tax evasion. It’s a software version of that. And the NFT, or “non-fungible token,” is like an entry in that ledger that shows who owns a particular asset, in this case a video, image, or any other digital asset you can think of.

The next question is, what do you own if you buy an NFT? The answer is that it depends. You may own a single copy of a limited run of a digital asset, or perhaps you own the only copy. A more interesting question is whether you own the copyright to the image, or perhaps a license to use the copyright to that digital asset for some purpose such as displaying or marketing it. The important thing is to know what you are buying and price it accordingly.

Over the next few weeks, I will provide some suggestions on how companies that deal with NFTs should protect their NFT-related brands. It’s a little different from your usual business!

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