Unfungible tokens from a legal perspective

A kind Irreplaceable tokens (NFT) can be either a physical asset or a representation of a digital asset that only exists on the Internet-a programmable artwork. It provides ownership of the underlying asset, such as a painting, and it can also represent digital assets in the form of software code.Therefore, I like conceptualization Look at NFT from a more technical perspective:

“NFT is a smart contract model that provides a standardized way to verify who owns the NFT, and a standardized way to’move’ irreplaceable digital assets.”

Before discussing the legality of NFTs, it is necessary to check the digital meaning of non-fungible tokens. In the most general sense, NFT is a digital representation of non-fungible assets in the form of serial numbers. Take a look at the picture below.

In this article, I will try to point out the many legal and judicial issues related to how serial numbers represent assets on digital media and the content contained in that code. It is important to remember that in addition to displaying the properties of a non-fungible asset, the NFT also indicates the position of the content of the asset since its inception.

related: How the NFT market uses blockchain technology to achieve explosive growth

Own NFT

Is owning an NFT different from owning the rights to the underlying assets that make up it?

In our current society, we are accustomed to using a piece of paper to represent or represent property rights and certain jobs. We have all come into contact with such documents in our daily lives: real estate deeds, vehicle ownership certificates or house leases. We have understood the value of these legal documents. This may also be a good way to look at NFTs, although there are some differences in the rights associated with them.

related: Hybrid smart contracts will replace the legal system

It is generally believed that NFT itself is a primitive asset. But is this view correct? Isn’t the NFT a receipt for definite assets? As with everything else in the legal world, the correct answer is: it depends. It depends on what kind of basic asset the NFT represents. NFTs can be original assets or assets that only exist in the digital virtual world, such as CryptoKitties or CryptoPunks. At the same time, the NFT can be a receipt confirming that you have certain assets in the real world, such as real estate, or physical artworks on display at the Louvre Museum in Paris.

With this in mind, let us continue to discuss the problems of creators in the Internet age, which can be solved by registering NFT through blockchain technology.

How does blockchain help content creators represented by NFT?

Since the emergence of the Internet and peer-to-peer (P2P) networks, content creators and the intellectual property industry have been looking for a way to convert assets, copyright protect it and prove its scarcity and property in the digital domain. There must be a registration system that can Provide immutability and priority while demonstrating scarcity on the Internet. But this will only become possible after the invention of blockchain technology has solved the double-spending problem.

related: How NFT, DeFi and Web 3.0 are intertwined

The NFT registered through the blockchain makes the content sold on the Internet immutable and unique, enabling artists to protect their creations from forgery and duplication in the digital realm. Therefore, the blockchain-registered NFT solves the problems of digital piracy and high financial intermediary costs, and makes a new economy possible. One is not managed by traditional trust verifiers, but by people who produce and create value.

What rights does a person need to create or create an NFT?

This is a very recent question.This spring, DC Comics sent out notices to artists who participated in the creation of superhero comics Prohibit Commercialization of art and its characters, including the digital production of NFT. It may be news about former DC comic artist José Delbo, Auction NFT made $1.85 million The depiction of the popular fictional heroine Wonder Woman caught the attention of the company and caused such a reaction.

The reason for the question in this section is simple: not all artists and creators own the copyright to their works. Generally, artists do not need to worry about the property rights or copyrights of their works because they are creators. Initially, they have mastered everything we know in the intellectual property world and the entire concept of rights. However, the general practice of the creator economy is to allocate the rights of works of art, music, etc. to several different parts: one part may have distribution rights, another part has exhibition rights, another part controls performance rights, and another has marketing rights.

What if you create an NFT of a work—assign copyright to everyone involved—the reasonable question will be: which of these right holders has the proper legal status to do so? Can the relevant parties unilaterally perform this operation without other right holders? This will take a lot of time to resolve, both judicially and legally. At the same time, since the hype of NFT has only recently emerged and is still developing in many different fields-such as music, games, the physical art industry and the recently created programmable art-these legal issues have not been resolved.

related: Beyond the hype: the actual value of NFT remains to be determined

Who has the right to encrypt the NFT? What does this mean anyway? Although blockchain technology and decentralized markets are developing in parallel, these issues may become the subject of judicial requirements and will be decided on a case-by-case basis. At the moment, it seems impossible to enact general legislation that covers changing circumstances.

There is still too much confusion in the NFT field, not only what rights are assigned by creators, but also what buyers buy through NFT. Judicial analysis becomes more complicated, especially when we talk about NFT property, which includes several authors and their copyrights.

Another issue that needs to be considered is how the platform publishes content terms and how the content intermediary company handles NFTs. Most intermediary companies between content creators and NFT buyers need to make reasonable efforts to complete their judicial work when building these platforms.

This becomes more complicated when there are co-authors in the identified creations, especially when the copyright holders of these creations are companies. Will NFT be transformed into protecting the intellectual property portfolio owned by these companies, and if so, how exactly?

What rights does buying NFT give the buyer?

When purchasing an NFT, three parties must be considered: the author of the original work, the creator of the NFT, and the purchaser of the purchased NFT. First of all, I need to emphasize that owning an NFT does not mean acquiring the property of the underlying asset, but just acquiring the property of the NFT.

However, since NFTs exist in digital media without borders and exist in multiple jurisdictions at the same time, even in the case of almost no legislation, the platform for listing NFTs must have clear terms. And, for these terms, I mean I want to include them in their smart contracts to define what rights NFT buyers get from creators.

The interesting thing here is that you have not obtained the ownership of the asset itself, or even the intellectual property rights of the work. Moreover, in this sense, reasoning is no different from buying a physical artwork in a traditional market. If a traditional painting is purchased in an auction, the buyer will not obtain the intellectual property rights of the asset itself. The buyer has the right to hang this new painting on their wall, but does not have the intellectual property rights to this painting, unless it has been commissioned. Therefore, it is not allowed to make a poster of that picture on the wall. No one can create or change it.

This is why the terms of use and who you buy from are so important, and silence about the transfer of intellectual property means they cannot be held. It should be noted that most platforms and markets are not very clear about this. Therefore, in order to eliminate any vague doubts, buyers protect themselves by clarifying the information.

All in all, by purchasing an NFT, a person only obtains the right to the purchased NFT, that is, boasting of ownership of the work in some way. However, no one owns the intellectual property rights to use the work-no one has the right to copy, distribute or execute it, unless of course such rights have been specified. Therefore, the legal analysis of NFT is very similar to the legal analysis of traditional intellectual property, as if there is no NFT at all.

How to determine the jurisdiction of NFT?

Hypothetically speaking, imagine that French copyright is permanent (meaning it will always exist) and expires with the death of the author in the United States, while Canada protects the copyright for 50 years after the death of the author. When NFT is registered in the decentralized blockchain network, what is the jurisdiction method? Which laws will apply? For a completely decentralized platform distributed across the Internet, what rights should apply?

Is the jurisdiction based on the original artist’s place of residence, or can it be applied between the platform and the creator of the NFT? In any case, we may see many jurisdictional issues arise, especially when dealing with early development and ongoing matters.

Concluding remarks

We are still in the wild west of overseeing emerging technologies, and the current difficulty in determining how the NFT market will pass the legal protection path explains what is currently happening.

If these new rights are different, how do people determine the intent of these parts when dealing with these new rights? Will NFT be seen as based on a new foundation that already exists and has been contracted? Or will they be treated as something that was not considered in the previous agreement, which might generate more revenue?

Can someone have something that already exists to create something that will be designated as an NFT? Can anyone obtain ownership of an NFT without the consent of the owner of the copyrighted work?

The purpose of this article is not to exhaust this topic, but just to present some legal considerations and ideas about non-fungible tokens. The NFT from the judicial and legal perspective is still evolving, and how to resolve the upcoming legal issues and judicial disputes remains to be considered.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.