We’ve all seen the headlines. Jack Dorsey, Twitter’s founder, sold an autographed tweet as an NFT for nearly $3 million. Popular artist Beeple auctioned off a JPG of his ‘everydays’ for $69 million as an NFT. What is going on here?

NFTs amount to the same thing as owning an original piece of artwork bought at auction. Technically speaking, this means the buyer owns the digital work in the same way she would own a physical painting. She will not, however, own the copyright. But like all things on the internet, things can get a little bit murky. 

Before proceeding, I need to disclose I am not an attorney. Consult with an attorney with your legal questions. This is a blog, after all, dedicated to digital art and poster design…but I think you will find I bring up some good points.

What is an NFT?

NFT stands for ‘non-fungible token.’

Bitcoin and dollars are fungible tokens. Fungibility means that one bitcoin and one dollar are equal in value to every other bitcoin or dollar. I could trade my dollar for your dollar, and it would make no difference. Each would be a dollar of the same value. 

If something is ‘non-fungible,’ then each separate item will be unique in and of itself. Original artwork is an excellent example of something that is ‘non-fungible.’ It’s one-of-a-kind. It can’t be traded for another artwork and have the same equivalency in that all dollars are interchangeable.

If you are interested in making living selling your digital artwork then you will find this article on becoming an NFT artist very helpful.

Beeple

How do NFTs work?

NFTs are primarily part of the Ethereum blockchain. Like dogecoin or bitcoin, Ethereum is a cryptocurrency. However, Ethereum’s blockchains support NFTs in addition to an ETH coin. Other blockchains are beginning to have their own NFTs.

The code that makes NFTs work contains the artists’ signature and the proof of sale built right into it. 

What does this mean? It means there is no way to forge, fake, or replicate the artwork so long as the NFT is part of the work. It confers uniqueness to the digital asset, and it is this fact in particular that has led to the recent boom in the collectibility of digital art. 

NFT’s and Art

If you buy an NFT, you possess a digital certificate indicating you own that piece of art. 

NFTs make the verification of ownership much more manageable because it proves that such an individual owns that particular digital asset. As a result, digital art is easier to buy and sell. 

Currently, the digital art market is exploding because of NFTs, with people like Beeple selling individual digital assets for record amounts. But it’s not just individual artists; big brand names and organizations are getting involved too. The NBA, for example, sells its licensed digital collections as NFTs.

If you are somewhat new to collecting NFTs then you must read this article before getting started:

Copyright Infringement

Copyright law and art

So how does copyright law come into all of this?

Copyright is separate from the work of art itself as a physical or digital object. It’s abstracted away from it. 

U.S. law states that the creator of a work of art has automatic first rights (work for hire is a separate story). The copyright is born and attached to the work of art at the moment of its creation. This goes for oil paintings, sound recordings, digital art, or any other creative medium.

There are multiple ‘rights’ involved when we talk about copyright. They include the following:

  • Right to control the manufacture of copies of the original piece.
  • Right to control the sale, licensing, or transferring of the copyright itself.
  • Right to control who can produce ‘derivatives’ (new works based on the original).

Purchasing a physical piece of art, like an original painting, means that you are only purchasing the object, not the copyright of the work itself. Those remain with the artist or whoever owns them (like an estate). 

Owning the physical object means that you can display it, sell it, loan it, but not make copies of it. You couldn’t, for example, sell prints of it. The right to do that remains with the copyright owner. 

Sure, you could try to buy those rights from the original owner, but that would be a separate transaction.

Not only is copyright important to the NFT art world but also when dealing with fan art which brings us to this article which may be of help because the situations are so similar.

Applying Copyright to NFTs 

Digital art is no different than physical, non-digital art. The same copyright and ownership rules apply, in theory. But they are made murky and muddled by the fact that NFT’s are not regulated at the moment by a governing body. 

This means that enforcing copyright infringement of digital assets is an ongoing headache for artists and has been long before NFTs came around (look at the issue of digital piracy in the film, music, and ebook industry).

Most of the time, you will be buying your digital art NFT through a marketplace that serves the same function as an auction house, or eBay, for that matter. Auction houses and eBay connect sellers with potential buys with physical assets, such as an individual oil painting or statue.

NFT marketplaces do the same thing but with digital assets. 

In both cases, buyer and seller agree upon terms of sale. If you are buying your physical artwork from the artists in a first-time sale, the artist herself creates the terms and conditions. In most cases, this will not include the sale of copyright.

Buying an NFT of original digital art from the artist means the same that as buying a physical artwork from its owner. Unless the terms of sale specifically say so, you are not purchasing the copyright but ownership of a digital asset.

This is why, if you are buying, selling, or minting (creating) an NFT, you must read the terms of sale so that you know exactly what you are buying. If the seller does not explicitly state that you are assigned the copyright, you presumably own the NFT artwork in the same way that a physical painting’s purchaser does. 

In other words, you would have the right to own the NFT itself (the digital asset), as well as the right to sell or otherwise transfer it to someone else. But you would not have the right to make copies or derivatives or transfer the digital asset’s copyright. 

XCOPY
Artwork by XCOPY

The Right to Make Copies in a Digital World

This is where things get a bit messy and difficult to enforce. 

If you buy an NFT and then post a picture of the digital artwork to your social media account, you have essentially created a digital copy of it.

Technically this is copyright infringement unless the terms of sale state explicitly you own the copyright. Therefore, the artist or copyright holder could file a takedown notice, and you would presumably be legally obligated to do so.

But many issues need to be ironed out between digital art NFTs and copyright law. What happens, for example, when someone mints or sells a piece of art that they don’t own?

A phenomenon occurring with more and more frequency. Fortunately, artists do have legal protections under copyright law if this happens. 

How would a smart contract apply to an NFT, and how could those benefit artists in future sales? 

Smart contracts enable copyright holders to specify exactly what rights are transferred during the sale of the NFT. The NFTs attached to Beeples artworks, for example, have a smart contract connected to them that enables him to collect a 10% royalty every time someone re-sells one of his digital artworks.

We go way more into detail with how you can really make money with NFTs here.

Conclusion 

Regardless of whether you are an artist, collector, or investor, ensure that you know your rights. 

If you are the creator, make sure the terms of sale for your NFT only transfer the rights you want them to. If you are a buyer, read the terms of sale carefully to make sure you know what you are getting.

If you are thinking of investing a lot of money in an NFT, consult an intellectual property attorney before making your purchase or sale.

We should mention, if you are wanting to get into digital art and poster design, you will surely want to sign up for our newsletter as we are currently creating an online course dedicated to such. However, subscribers will be the first to be told when classes arrive, so sign up today. (We don’t spam!)

Also, we have an amazing collection of free Photoshop tutorials up on our Poster Grind YouTube channel, so check that out too!