NFTs and Artists: Understanding Intellectual Property Laws in the Metaverse
The metaverse encompasses technologies that once were only possible in science fiction movies. The past two decades have seen an unprecedented increase in e-commerce. The virtual marketplace continues to expand and grow beyond what we thought was imaginable. How we interact with cyberspace has also changed, causing a change in how we protect intellectual property and digital assets.
As technology progresses, protecting information and creative works in the metaverse becomes more important. Our Maryland business attorney and the legal team at our law office help you use intellectual property laws to protect your assets in the real world and the virtual world.
What Are NFTs and Why Do Artists Need to Be Aware of Them?
NFT is the abbreviation for “non-fungible token.” A token is a unit of information recorded on a blockchain about an item. Therefore, we are discussing something that is digital. It exists in the cyber world or metaverse.
The “non-fungible” part of the word means that the good or service is unique. It cannot be replaced with something identical. For example, you can trade a bitcoin for another bitcoin, and you have precisely the same thing you had before you made the trade. However, if you traded a work of art for another work of art, you would have something different. The two works of art are unique.
NFTs can be anything digital, including music, drawings, videos, stories, and artwork. As with most works of art, the value depends on what a willing buyer will pay for the item. An NFT of a tweet sold for $2.9 million in 2021. However, when the collector tried to resell the NFT, the top bid was a few thousand dollars.
The blockchain records each transfer or sale of the NFT to create a chain of ownership and price history. The item's provenance can be traced to authenticate ownership of the digital item. NFTs are one of the fastest-growing areas of the crypto industry.
How Do Intellectual Property Laws Apply to Digital Art and Virtual Property?
Digital art can include illustrations, animations, digital paintings, photographs, videos, music, and other works created using software and electronic devices. It is not a tangible item you can hold or display on your walls. It exists in the metaverse. However, it is “real” in the sense it requires the skills and creative technique of a digital artist to create.
Digital art can be used for commercial purposes. However, digital art is increasingly being sold as collectible items. Thus, digital artists increasingly seek to protect their intellectual property rights in digital artwork.
However, most digital artists desire their work to be distributed and shared across various platforms. The more their work is shared and viewed online, their brand becomes more valuable. As their reputation grows, their ability to monetize their digital artwork increases. The problem becomes how do brand owners protect their intellectual property rights while allowing their digital art to be distributed and viewed to increase their brand recognition and reputation as valued digital artists.
How Can Artists Protect Their Intellectual Property in the Virtual World?
For many digital artists, a primary concern in protecting intellectual property in the virtual world is receiving acknowledgment of their authorship. If a company uses its NFT on its website or media campaign, the artist wants to receive credit for their creation. Having their artwork attributed to another party diminishes their value as digital artists.
Therefore, a primary goal of protecting a digital artist’s intellectual property rights is ensuring they have the right to claim their artwork. In other words, the artist receives attribution for the artwork whenever someone uses the artwork.
The Visual Artists Rights Act of 1990 (VARA) provides some protections for digital artists. However, the Act is limited in the scope of the artwork it protects. Furthermore, the artwork must be used for public display instead of advertising or publication. The Lanham Act (Trademark Act) and the Copyright Act also provide limited protections for digital artists.
Therefore, a digital artist should work with an experienced intellectual property rights lawyer to determine the best way to protect their rights in the works they create.
Copyright Considerations in the Realm of NFTs and the Metaverse
As NFTs become more popular to own, copyright considerations become an issue. You might purchase an NFT and have ownership rights for the NFT, but copyright law might limit what you can do with your NFT.
For example, United States copyright laws automatically give the creator of a copyrighted work the exclusive right to copy, reproduce, or modify the work they created. It also gives the creator the exclusive right to display the work publicly. The digital artist may also license the artwork to govern how others can use copyrighted work.
Therefore, you might purchase an NFT, but unless you obtain permission from the copyright owner, you might not be able to use the NFT in advertising material or allow the NFT to be viewed online without obtaining a license from the copyright owner. Before purchasing an NFT, a person needs to understand what they are purchasing and the limitations of the digital asset. The terms set by the NFT vender, and the copyright restrictions may make the NFT something the owner can only view privately as an item in their “digital collection” of items.
It remains to be seen how copyright laws impact NFTs as the digital assets are transferred without the appropriate licenses from the digital artists. The law will likely evolve to adapt to copyright protections for NFTs.
Trademark Considerations in the Realm of NFTs and the Metaverse
Many companies use NFTs as part of their branding. They use digital works to increase brand awareness, retain customers, and create new revenue streams. They may offer NFTs as part of the campaign for a new line of products. Companies may offer NFTs for consumers who want to own a unique creation related to the business.
Businesses need to adapt to thrive in a digital economy. An important consideration is registering trademarks for use in virtual reality, even if a company does not want to offer NFTs at this time. The USPTO (U.S. Trademark and Patent Office) has experienced an increase in trademark applications for NFT names.
Trademarking an NFT name prevents consumers from confusing a company’s brand with competitors because competitors cannot use similar symbols or names to identify their goods or services. This aspect of a trademark is especially valuable for an NFT because part of the value of an NFT is the trust in the authenticity of the digital asset. Trademarking an NFT name also prevents other parties from using your NFT brand, which could diminish buyers' trust in the authenticity of your NFTs.
When you trademark your NFT, it protects you from unauthorized use of logos and names by another party for their NFTs. The value of an NFT rests on its uniqueness. Trademarking the NFT protects the uniqueness to ensure your NFT remains valuable.
What Are Some Best Practices for Working With NFTs and Protecting Your Artistry?
Trademarking is the best way for companies to protect their NFT rights for branding purposes. Artists can also trademark an NFT name or design to provide a higher degree of trust for buyers who want to purchase an NFT using blockchain technology. In addition, trademarking an NFT ensures that no other artist or company can use a logo or a name similar to your NFT.
Even though copyright laws automatically invest the creator with specific rights, registering a copyright also provides additional protection for digital artists and companies. Registering a copyright for an NFT can give the creator increased rights to pursue damages for copyright infringements, as registration is prima facie evidence in court if it occurs within the first five years of publication.
Are There Any Other Considerations Artists Should Keep in Mind When It Comes to NFTs and Intellectual Property Law?
Almost any digital work can be monetized through an NFT. For digital artists and companies, the risks of NFTs include the misuse of intellectual property and the ability of another party to use your NFT without your permission to make money. NFT creators and owners of licenses may need to engage in litigation to pursue copyright and trademark infringements for NFTs.
Therefore, it is crucial to take steps to protect your rights in an NFT you create. Intellectual property lawyers are the best sources of information and legal advice about IP rights related to NFTs. An attorney can also assist buyers and sellers of NFTs in clearly defining the IP rights for an NFT transaction to ensure all parties understand what is permitted and prohibited regarding NFT intellectual property rights.
Contact Our Maryland Business Attorney for More Information
Intellectual property rights in NFTs can be confusing for many small businesses and digital artists. Contact Steve to schedule a consultation with an experienced Maryland business lawyer to discuss the steps you need to take to ensure other parties cannot infringe on our intellectual property rights.
