Non-fungible tokens popularly known as NFTs are the next big thing after fungible tokens i.e. cryptocurrencies. The start of the current online NFTs frenzy has been linked to the purchase of a video clip capturing Lebron James slam dunk in which an internet user paid $208,000. Recently, we’ve had a purchase for the NFT to an image by an artist named Beeple sell as high as $69,300,000 United States at the Christie’s Auction House.
NFTs are digital tokens created through an entry on blockchain technology in a process called minting which removes the need for third parties or middlemen for verification or validation purposes and contains unique individual identification codes and metadata that distinguishes each and every NFT created. NFTs cannot be divided into smaller denominations like money because they exist in a single unit. The purchase of NFTs on the internet is done through digital currencies (fungible tokens) like Ethereum’s Ether (ETH) or World Asset eXchange (WAX).
Usage of NFTs range from recognizing an individual/internet user’s sole rights to digital music, videos, artwork, online gaming tokens, digital collectibles, online event ticketing which are all forms of digital assets and in certain instances; physical assets. NFTs provides an individual with the right to claim ownership of a digital asset that is accessible to others on the internet.
However, non-fungible tokens do not have the same characteristics of being an exact representation of another unit in value, unlike fungible tokens where one bitcoin in my wallet has the same value with one bitcoin in another individual’s wallet in the sense that there is a uniform acceptance of its value. However, each NFT represents a different value and it is unique to the digital asset in which it was created.
Read Also: Things You Need to Know Before Trading Cryptocurrency in Nigeria
The information for each NFT is usually stored in its smart contract and contained in the NFT’s blockchain, which allows any important detail of the digital asset like the name and signature of the owner to be stored on the NFT’s blockchain.
Several Platforms have emerged for people to create NFT’s over digital assets and for buyers to purchase such NFT’s like the Oxcert, Open Sea, Decentraland’s LAND marketplace, Rarible, Crptokittiesetc.
With the concept in which most NFTs currently exist, questions then arise on what exactly is the right a buyer purchases when the NFT of a digital asset is bought, most especially when the asset is an artistic work or musical work.
Some have canvassed that the NFT only gives you the property rights to a digital item and copyright or trademark is not transferred by the creator/author. We have instances where a creator inserts a clause that enables the creator to get a certain percentage of the digital asset whenever it is resold. Taco Bell recently sold its NFTaco Bell collection for 1$ and for every resell of the NFTs, they earn 0.1% in royalties. This buttresses the argument that generally, copyright would not solely vest to the purchaser except it is expressly agreed by the contracting parties. The NFT provides the owner sole access to a piece of code in a blockchain forming the basis of the purchaser’s ownership, which has now become a valuable thing.
NFTs under the Copyright Act
In Nigeria, the Copyright Act Cap C28, LFN 2004 (“The Act”) protects the interests and right of authors/creators over their artistic, musical work etc. Section 51 (1) of the Copyright Act defines artistic work to include paintings, prints, photographs artistic craftmanship etc. while musical work is defined as any musical composition irrespective of quality. This interest of creators/authors protected under the Copyright Act includes the right to reproduce the artistic or musical work in any material form, publish the work, distribute the work to members of the public for commercial purposes, make any adaptation of the work etc. as provided in Section 6 of the Act.
The right of a creator/author to reproduce the work created in any material form infers that such creator of a work can convert same into a digital asset and continues to enjoy its rights as protected under the Act while any subsequent purchaser of the digital asset from the creator shall be entitled to the full protection of the law.
Copyright to digital assets can be assigned to subsequent purchasers from the author/creator protected under the Copyright Act, either in writing or oral but an exclusive assignment of the author/creator’s right shall require a written agreement under the Act. A mere digital transaction might not suffice for a total transfer of copyright and exclusive license to the digital asset. It should be noted that the Copyright Act protects the moral right to claim authorship as stated in Section 11 (3) of the Act, which would be included in the digital asset’s metadata and also object to mutilation of its work in a derogatory manner even after executing an exclusive license and assignment of its rights in the artistic, musical work.
Despite the new fame and early transition of artists into using NFTs for art and music sale, one of the issues currently affecting the usage is that there is no clear guideline for protecting the copyright of a creator/author or cross-checking on whether an individual who has gone online to mint an NFT for a digital asset is indeed the genuine author/creator. In essence, I can go to a nearby sculptor, take pictures of his well-sculpted pot, mint an NFT without his permission and make money off the digital image of the sculptor’s artistic work.
In conclusion, while the use of NFT’s is a welcomed development, there would be a need for drastic changes to some existing laws before the use of NFT’s for certain transactions can be held valid and to prevent disputes that may arise from minting NFT’s for the sale of digital assets. Current enthusiast of NFTs are advised to seek professional advice before committing huge amounts in other to guide and protect their interest in any transaction before purchasing digital assets.
Olateru-Olagbegi is an Associate at Babalakin & Co.
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