NFTs and intellectual property

Non Fungible Tokens (NFTs) are digital assets that are based on a cryptocurrency and linked to a blockchain. They can represent a certificate of authenticity or ownership of a physical or digital asset, of a credit, or even a right or faculty offered by someone. Since blockchain ledgers are immutable, NFTs are unique assets that cannot be replaced, but may circulate in the market. This is comparable with cash or physical certificates of authenticity: in the same way that holograms and reagent inks ensure the authenticity of paper, NFTs are easily accessible digital assets that are at an extremely low – almost nil – risk of fraud, since they use a combination of technologies such as encryption, hashing and decentralized blockchain registration.

Although they are not limited to digital assets, NFTs have gained mainstream media attention in this field since “Bored Ape Yacht Club” NFTs became famous after they were expensively bought by athletes and celebrities from last year to now. These NFTs are linked to an image that is attributed to their “owners,” but also grant them special services provided by the club. NFTs have also been used to sell physical and digital works of art because, since they are unique, they can authenticate purchase chains, making ownership of the works linked to them quick and easily verifiable – even if the works themselves never change hands, and may be exhibited or kept by a third party in the process.

All this has facilitated speculation around physical and digital artworks and collectibles through NFTs. However, it should be clear that acquiring an NFT does not mean acquiring the copyright to the work to which it is connected. An NFT can be bought by means of a smart contract that is registered on a blockchain which formalizes the purchase of this digital asset and whatever else is defined by the parties. Just as the creator of an NFT must own an object to use this technology, Brazil’s Copyright Law (Lei de Direitos Autorais/LDA) establishes that copyright transmission is available to the owner (as a rule, the author), who must do so in contract.

Being the holder of a Non Fungible Token also does not guarantee all exploitation rights – only ownership – of a specific work or product, nor the right to change or exploit it in another shape. Moreover, to create an NFT in reference to an existing work of art or product, the holder of rights over them must authorize this, considering it is a new form of exploitation. NFTs also do not exclude authors’ moral rights, which must be respected regardless of the way in which the work or product is used or sold.

Therefore, it’s crucial, when creating or acquiring an NFT, to know exactly who is the holder of rights – copyright, trademark rights and even property rights over a physical object – over the work of art or product to which it refers, so that there is no violation of rights or anything else to prevent selling or enjoying the work or product. Otherwise, we’re talking about buying and selling a worthless certificate!