Last year, we published an article outlining some of the risk when buying Non-Fungible Tokens (NFTs). We minted our own NFT to demonstrate that the purchase of an NFT may not include all intellectual property rights associated with the work.
Our Founding Partner sailed up the west coast of Greenland in 2019. During this voyage, he photographed an incredibly large and uniquely formed iceberg. We minted this photograph on the Ethereum blockchain as an NFT.
Anyone on the OpenSea NFT marketplace with a connected cryptocurrency wallet can make an offer to purchase this NFT. However, we programmed a disclaimer into the collection to which the NFT belongs: "Owner receives ownership of NFT only. All other intellectual property rights associated with depicted works are reserved by the creator."
This disclaimer attempts to make the conveyance of the NFT akin to the sale of a physical print of the photograph. The buyer receives the NFT of the photograph but does not receive any intellectual property in the image - such as the right to reproduce the image or make derivative works. Hidden in this deprivation of rights is the possibility that the creator could mint more NFTs of the same photograph.
Considering that the perceived value of an NFT is in its non-fungibility and exclusiveness, it quickly becomes apparent that terms and disclaimers programmed into the NFT are paramount in determining (or diminishing) its value - at least until such terms are tested by the courts or NFTs create a place among traditional classes of intellectual property.
Despite being backed by immutable blockchain ledgers, NFTs still carry certain risks. Before buying an NFT:
Verify that the seller is the owner of the work; and
Check the terms programmed into the NFT and the associated collection.
It also wouldn't hurt to check the prevailing gas prices at the time of purchase.
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