NFTs often represent digital assets like images, videos, and songs. All of these are intellectual property protected under copyright. Given that NFTs signify ownership, it might be tempting to assume that this ownership extends to intellectual property rights. It would appear that a couple of NFT investors have also made this assumption in the past. For instance, last year, an anonymous NFT group, Spice DAO, acquired the rare book Jodorowsky’s Dune for $3 million. Now it is not unusual for certain NFTs to sell at such prices. However, Spice DAO may have overvalued the NFT on the belief that they would acquire the copyright to it through the sale.
Therefore, an important question is whether NFTs grant intellectual property rights to their underlying assets. The answer is quite simple. NFTs are better imagined as a unique copy of an asset rather than the asset itself. An apt analogy would be the purchase of a limited-edition book. While the book remains valuable because of its scarcity, the owners do not acquire the copyright to the original book. Instead, that right would likely belong to the book’s creator unless transferred.
However, it is crucial to remember that NFTs are essentially smart contracts. Like any other contract, an owner can vary the terms of an NFT to grant additional rights. In addition, intellectual property rights like copyright are also transferrable. Thus, in theory, an owner can expressly transfer the IP rights to the underlying asset in an NFT to the buyer. Such person can do this either through an assignment or licensing of the rights. The only possible problem with such a transfer is the legal status of smart contracts. In most jurisdictions, courts are yet to address the validity of smart contracts. Thus, even such an explicit transfer of IP through a smart contract may be considered void.