January 27, 2023

Cracking NFTs and Intellectual Property

I.            Introduction

Out of 18.400 cases filed in the federal court of the United States each year, around 12.000 are intellectual property cases[1]. Intellectual property infringements are more common than one would expect. Artists’ eagerness to prosper and fulfill their artistic career is eclipsed by these transgressions. Nevertheless, technology has advanced up to a certain point that it has led the way to a different and more effective automated protection of authors’ economic and moral rights over their own creation. Non-fungible tokens (NFTs) might be a solution for these challenges

As we will see throughout the article, NFTs can be a mayor ally of lawyers since they can help certify the ownership of an artwork and since, in conjunction with smart contracts, NFTs can favor the automatization of different processes, such as the buying, selling and transferring ownership of digital assets.

II.            What are NFTs?

An NFT is a “cryptographic tool that uses a blockchain to create a unique, non-fungible digital asset which can be owned and traded”[2]. In this manner, the blockchain serves as an immutable ledger of ownership of the NFT. Thus, in simple terms, an NFT is a non-fungible digital asset minted on a specific blockchain and owned by whoever mints it or receives it, through an onerous or free transaction. It can also be defined as a “type of digital certificate for authenticating asset ownership using blockchain technology”[3].

What does non-fungible mean? Non-fungibility is the opposite of exchangeability. It stands for uniqueness, rarity and scarcity. In that regard, non-fungible assets, items, or goods are not easily interchangeable, since there is only one existing or limited amount of its type or characteristics[4].

III.            Technical composition of NFTs

NFTs consist of a tokenID (ID number) and an alphanumeric code of a smart contract (contract address). A tokenID is the identifier code for an NFT that allows viewers to distinguish one NFT from another. A tokenID and contract address are both stored on the Blockchain. Their combination shapes the uniqueness and originality of the NFT, providing it with its non-fungibility.

What’s a smart contract? Smart contracts “can be identified as programs that execute tasks based on specified logic and agreements. These programs run on decentralized networks whose ledgers cannot be altered or changed after a transaction is pushed”[5]. Analogically, a smart contract can be compared to a real-life, non-digital, contract, which is a set of agreed-upon clauses that are enforceable by law and described in human language, with the only difference that smart contracts self-execute and are expressed in layers of code. In the context of an NFTs, smart contracts are key to understand what rights withholds the buyer and which rights are reserved for the creator. Therefore, for example, a function within the smart contract can be to enable an automatic transfer of ownership of the NFT when payment is made by the buyer to the seller. Another common function is that, with each resale, the author of the digital work automatically receives resale royalties. If you would like to know more about smart contracts, please check the article Introduction to Smart Contracts prepared by LexRatio researcher Hossam Hesham.

However, problems arose on the intersection between NFTs arrival and previously signed contracts. For example, Quantin Tarantino had granted broad rights to Miramax over the iconic film ‘Pulp Fiction’. However, he retained some rights over the film, including “soundtrack album, music publishing, live performance, print publication (including, without limitation, screenplay publication, ‘making of’ books, comic books and novelization, in audio and electronic formats as well, as applicable), interactive media, theatrical and television sequel and remake rights, and television series and spinoff rights”.[6] In this manner, he argued he was acting within those reserved rights while making NFTs of the movie scenes; whilst Miramax disagreed, leading to a judicial process. After 2 years, Miramax decided to withdraw the demand and started collaborating with Tarantino on the NFTs’ selling[7].

Furthermore, smart contracts can also store immutable data on the Blockchain. However, this content may vary depending on the type of NFT being assessed.

There are 2 types of NFTs: (i) the ones that represent a digital artwork or file and (ii) the ones that represent a physical asset[8].

On the one hand, NFTs that represent a digital artwork or file usually preserve on their smart contract a combination of the artwork or file itself and its metadata. The latter can include the information given by the creator about the artwork, its title, author, description, etc.

This is the case of Board Apes, which is a limited NFT collection[9]. Having this Ape, allows you to have a membership for the Bored Ape Yacht Club.

On the other hand, a physical asset represented by an NFT only contains the metadata of the asset and maybe an image of the physical asset. However, this image only has a descriptive function as it is not part of the NFT itself. This is where the blockchain encounters real life assets, which leads us to wonder whether houses, cars or other physical assets could eventually be sold through this mechanism.

As we will examine through the rest of this article, this latter use case is one of the greatest potentials this technology exhibits. For example, several italian museums have sold digital replicas of valuable and fragile masterpieces –such as the ones from Leonardo Da Vinci– as NFTs[10].

In fact, what’s even more interesting is that blue chip tokens allow for a person to buy part of the artwork or specific rights, granting the possibility of tokenizing parts of the artwork and selling it in different pieces or of selling a specific right over the artwork, such as distribution rights, and not the artwork per se.

One example of this is the platform ‘Maecenas’, which allows art collectors to purchase fractional ownership of valuable works of art using blockchain technology. The platform allows for the creation of digital certificates of ownership, called ART tokens, which represent ownership of a fraction of an artwork. These tokens can be bought and sold on the platform’s marketplace, providing a new way for collectors to invest in art.

IV.            NFTs use cases

The NFT market exploded in March 2021 with the sale of Michael Winkelmann’s piece “The First 5000 Days” at the online auction of the famous art gallery Christie’s for 69,346,250 million dollars[11]. However, NFTs have proven to be much more than just a simple reproduction of digital artworks or files.

Currently, the expansive advancement of the Metaverse has created a parallel market of virtual goods, such as clothing or accessories, for game avatars. Most of these goods are also represented through NFTs as its technology is vital for trading and certificating the uniqueness and existence of these goods in the virtual world[12].

In the last couple of months, NFTs use cases have propagated and grown up to the point that nowadays NFT tokens are minted to access mental health services[13], to solve cryptocurrencies inheritance problems[14] and to finance scientific research (IP-NFTs)[15]. This shows the importance of NFTs and their greater potential.

V.            The inseparable connection between NFTs and copyright law

The transparent and immutable chain of information on the Blockchain represents the breakthrough to renovating the intellectual property rights registry and the exercise of the creators’ rights[16].

Nevertheless, several concerns have been expressed regarding the protection of copyrighted work and the rights NFT buyers acquire. As regards this latter concern, it is essential to bear in mind that the smart contract will be the one that determines and exhibits which rights withholds the buyer and which rights are reserved for the author.

Hence, owning an NFT does not necessarily mean the buyer acquires the asset it represents. Through the purchase of the NFT, the buyer gains a token entered on a Blockchain and has ownership-like rights over it, in the sense that he or she can dispose of it[17].

A highly known example are Bored Apes whose acquisition grants the buyer special rights, such as communication to the public. Thus, actor and director Seth Green used his own Bored Ape for an NFT TV Show, taking advantage of those rights he was granted through the purchase of the NFT. Nonetheless, the story took a turn side-ways since his NFT was stolen and transferred to a third party acting in good faith, which automatically took from him the rights he had previously obtained and forced the canceling of the show until the legal process was carried out.[18]

In this manner, leaving this concern as regards the rights the buyer acquires behind, along the rest of this article, the relation between NFTs and copyright law will be fully developed in order to understand what it hinders.

Copyright is the “law that protects and regulates the creators’ rights”[19]. In this manner, creators’ rights can be categorized in 2 types: (i) economic rights and (ii) moral rights.The economic rights are reproduction rights, right to communicate to the public, and the resale right; whilst the moral rights are paternity rights, right of disclosure and integrity rights. However, the exercise of these rights varies according to the specific regulations of the different countries. For instance, in the US there’s a requirement to register the work in order to be able to file a lawsuit in the future to defend it; meanwhile the European Union does not have any copyright registration requirement[20].

V.1            NFT’s creation process

In order to analyze possible infringements or protections of creators’ rights through the blockchain technology, the analysis will be performed focusing on each stage of NFTs creation process. NFTs first transaction creation process consists of: (i) Offering an NFT, (ii) Transacting the NFT and (iii) Rights of the acquirer.

           (i) Offering an NFT

The first stage of the process is the offering of an NFT. This stage is composed of 3 milestones, which are: (a) An initial upload of the source or minting of the NFT, (b) The presentation of the image the NFT represents on the NFT marketplace, and (c) The actual transaction.

Minting the NFT consists of “the process of validating information, creating a new block, and recording that information into the blockchain”[21]. In other words, it means adding the information of this token to the Blockchain. At this point, the essential role the copyright law would hinder is to verify this artwork or file the person is minting is actually his or hers. In other words, that is an original work.

When a person attributes material or content that does not belong to him or that he is not authorized to use, there’s an unlawful acquisition of copyrighted content and the entire NFT minting process would be a violation of the rights the creator owns over the original work.

In this manner, both economic and moral rights of the author would be transgressed.

The economic rights transgressed would be: (i) reproduction rights and (ii) right to communicate to the public; and the moral rights transgressed would be: (i) paternity rights, (ii) right of disclosure and (iii) integrity rights.

Reproduction rights convey that when an artist generates an artwork, he or she automatically acquires the exclusive right to decide how this creation is going to be exploited. Moving on to the positive aspects this technology embodies, it allows for the traceability of the artwork in order to prove the ownership and authenticity of the work; allowing the protection of the authors’ reproduction rights.

As regards the right to communicate to the public, according to article 3 of Directive 2001/29/EC of the European Parliament, it “consists of the exclusive act of the author to make a work available to the public by any means, and that such public can have access to it”. This right allows copyright holders to “[…] restrict actions such as posting […]” their creations on the internet without authorization. The publishing of NFTs allow authors to access a wider, global marketplace as they can sell their work to anyone around the globe without any territorial barrier.

 Paternity rights deploy author’s right of entitlement to authorship of their work. This right is perpetual and it extends until after the death of the author. When it comes to digital assets, it has always been easy to steal other’s work with a simple CTRL + C and CTRL + V. Likewise, it has always been complicated to identify an original file from a copy. This was until NFTs and their underlying technology emerged to enable the verification of the owner and creator of the original piece through blockchain’s traceability. 

The right of disclosure allows artists to have complete authority over decision-making as regards their artwork, be it in the physical or virtual world.The automation of smart contracts and traceability of the artwork on the Blockchain contribute to create a more secure and transparent environment for artists’ to safeguard their rights and calmly offer their work.

The integrity right under the Berne Convention consists of “the right to prevent any type of alteration, damage, or other adaptation to the work that could eventually harm the artist’s honor or reputation”.

 NFTs technology allows artists to trace the works that have been subject to modifications without permission. In this manner, the immutability of the Blockchain asserts the right to integrity by allowing artists to access the open registry it portrays and assess whether their artwork has been modified without their consent.

(ii) Transacting the NFT

At this point, it is essential to differentiate between the underlying work and the token. The sale of the token doesn’t always hinder the sale of the underlying work as was previously explained.

According to Article 4 (1) of the InfoSoc Directive, if the sale does not include the sale of the underlying work itself, it doesn’t fall under the distribution right because it is not linked to a tangible object. Nevertheless, if the sale involves the transition of the underlying work, then it is subject to the right of distribution.

In this manner, offering the NFT with the subsequent sale of the token and underlying ‘original’ work is relevant from a copyright perspective. Hence, if the process is not licensed by the author, it would infringe his or hers right of reproduction.

(iii) Rights of the acquirer

Before dwelling into the rights of the acquirer, it is necessary to analyze whether NFTs can be owned in the sense of property laws. In the absence of harmonization of property laws, the answer to our question may vary depending on the country’s regime.

For instance, in Germany NFTs are not considered legal property since they are not tangible; however, according to the UK High Court, NFTs are legal property.

According to this ruling there are 4 principles of property: “(1) Being definable, (2) being identifiable by third parties, (3) being capable by their nature of assumption by third parties, and (4) having some degree of permanence”.[22] This ruling could remove the uncertainty that NFTs convey as being recognized as legal property would allow their owners to seek court injunction if they are victims of a virtual theft in which “hackers exploit loopholes and poor security skills to capture high-profile NFTs”[23].

Moving on, the rights of the acquirer of an NFT, as was previously stated, can be contained in the smart contract or in the general terms and conditions of the marketplace being used, if the author validaly agreed to such terms.

For instance, OpenSea and Rarible, two of the most known NFT marketplaces, clearly state they are not party to any agreement between users. “Users are specifically prohibited to use the marketplaces to infringe or violate intellectual property rights or any other rights of others”[24]. In this manner, creators of NFTs on OpenSea have to prove that they have, or have obtained, all rights, licenses, consents, permissions, power or authority necessary to grant the rights granted for any content created, promoted or displayed through OpenSea. On the other hand, Rarible explicitly states that there is no “guarantee or assurance of the uniqueness, originality or quality” of any work associated with the NFT or its metadata. Nevertheless, while analyzing these terms and conditions, consumers’ rights must not be forgotten and, hence, any abusive clause present in them must be considered as unwritten.

The European General Directive as regards e-commerce responsibility conveys they have an objective responsibility if they intervene on the transaction, for instance, if the transaction is done through their platform. Hence, I believe this general law could eventually be applied to these marketplaces as well.

Other NFT marketplaces, such as Foundation, clearly state that the buyer “receives a cryptographic token representing the Creator’s Art Content as a piece of property, but does not own the Art Content itself or any intellectual property rights therein”. It clarifies that the buyer “may display and share the Art Content, but the [buyer] does not have any legal ownership, right, or title to any copyrights, trademarks, or other intellectual property rights to the Art Content”.

V.2            NFTs secondary market

In the NFTs secondary market, there’s one final economic right that needs to be analyzed, which is the resale right. The resale right is an inalienable right the author of an artwork bears to receive a royalty based on the sale price obtained for any resale of his or her work[25]. Nevertheless, it is commonly agreed upon the need of the work to be physical in order to have resale rights.

There’s a belief that the application of the resale right is unnecessary as authors’ can ensure a percentage of the resale procedure by programming the smart contract accordingly, finding no enforcement difficulties.

Thus, this technology offers the strengthening of the artists’ and creators’ rights to be compensated for their work since it allows them to obtain royalties for resale indefinitely without having to rely on third parties to receive them or to claim their protection.

Nevertheless, the immediate question that arises is: What happens when someone mints an artwork that does not belong to them and in the process of creating it demands in the smart contract the resale royalties? Would it be possible to say that the right of the artist to receive royalties is being infringed?

As previously mentioned, the resale right under Directive 2001/84/EC does not apply to NFTs because (i) the NFT is just a certificate of the work and (ii) when a sale occurs the transferability of the asset consists in the “[…] reassignment of a dataset in the blockchain.”[26] In this manner, the author doesn’t have a protection on this matter; however, he or she would still be able to pledge some other economic or moral intellectual property right.

VI.            Conclusion

Technology has always emerged in times of need, during wars, pandemics or global crisis, and this is not the exception. Artists’ and creators’ have been struggling since forever to protect their intellectual property rights and avoid infringements. In this manner, NFTs technology has proven to be a possible solution for artists and creators to safely exercise their rights.

Personally, I believe this technology might not fully eliminate illegal copies of work when it comes to physical artworks, but it will eliminate it when it comes to digital artworks. This is assured by the non-fungible characteristics NFTs have.

Nevertheless, it shall not be forgotten that NFTs bear a much greater functionality such as the possibility of subscribing to a specific creator or community[27], or to fund scientific research[28]. Thus, it’s impossible to foresee where this technology will lead us. The only certainty that can be assured is that it will continue to evolve in order to assist us on the journey to protect copyright work.


[1] Lazic, M. (2021, October 22). 29 crucial intellectual property statistics. Find Best Law Jobs in the US in 2022. Retrieved December 20, 2022, from

[2] Garbers-von Boehm, K. (tech.). (E. MIAZGA & G. MUSSA, Eds.) Intellectual Property Rights and Distributed Ledger Technology. European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs.

[3] Demystifying NFTs and intellectual property: What you need to know. Finnegan. Retrieved December 20, 2022, from

[4] Ortiz Ballesteros, M. S. (2022, June 19) The Inseparable Connection between NFTs and Copyright Law. LL.M. digital law and technology, Lyon Catholic University. Retrieved December 20, 2022.

[5] Hesham, H. (2022, December 14). Introduction to smart contracts . LexRatio. Retrieved December 20, 2022, from 

[6] Diaz, J. (2021, November 17). Miramax sues Quentin Tarantino over planned ‘pulp fiction’ NFTs. The New York Times. Retrieved December 20, 2022, from

[7] Pereira, A. P. (2022, September 9). Quentin Tarantino resuelve La Demanda de Miramax por los nft de pulp fiction. Cointelegraph. Retrieved January 10, 2023, from

[8] Garbers-von Boehm, K. Op. Cit.

[9] Bored ape yacht club. BAYC. Retrieved January 16, 2023, from

[10] Jhala, K. (2022, February 11). Eternal return: Italian museums to sell digital copies of masterpieces by Leonardo, Caravaggio and Modigliani. The Art Newspaper – International art news and events. Retrieved December 20, 2022, from

[11]  Ortiz Ballesteros, M. S. Op. Cit.

[12] Ibid.

[13] Reynolds, M. (2022, December 12). Law firm gives staff non fungible tokens for Mental Health Services. ABA Journal. Retrieved December 20, 2022, from

[14] Serenity Shield. Twitter. Retrieved December 20, 2022, from

[15] Molecule. (2022, December 19). Introducing the IP-NFT v2 . Twitter. Retrieved December 20, 2022, from

[16] Ortiz Ballesteros, M. S. Op. Cit.

[17] Garbers-von Boehm, K. Op. Cit.

[18] A stolen bored ape means Seth Green can’t make his NFT TV show. Vivid. Retrieved December 20, 2022, from

[19] Ortiz Ballesteros, M. S. Op. Cit.

[20] Ibid.

[21] Ortiz Ballesteros, M. S. Op. Cit.

[22] National Provincial Bank v Ainsworth [1965]

[23] Garbers-von Boehm, K. Op. Cit.

[24] Ibid.

[25] European Directive 2001/84/EC

[26] Garbers-von Boehm, K. Op. Cit.

[27] Grateful. Twitter. Retrieved December 20, 2022, from

[28] Molecule. (2022, December 19). Introducing the IP-NFT v2 . Twitter. Retrieved December 20, 2022, from 

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About Maria Fiorentini
Maria is a law student from Argentina who has deep interest in LegalTech. She gained knowledge through different courses, such as Legal Tech & Start Ups or The Disruption of Blockchain, etc. Her eagerness to contribute to this industry increased as soon as she started testing this technology by herself on her work, mostly related to future regulations that could be implemented on these technological advances. Thus, she encourages everyone to investigate and test them by themselves in order to discover the potential it hides.

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