A cure for copyright problems? NFTs promise to empower creative economies

If you’ve had anything to do with digital art, digital assets, or both in the past few months, it has been virtually impossible to escape the barrage of news about how non-fungible tokens or NFTs are the rules of the game for the creative industries. Since Kings of Leon released their new album as NFT, until digital artist Beeple closed a Christie’s auction for a staggering price for a piece of his work, the trend has moved at an amazing rate.

Many believe that NFTs are not simply a flashy new medium for artistic work. It is a vehicle that can generate new efficiencies and redefine the relationships between creators, their audiences, and traditional executives, as well as the music and art industries.

Better intellectual property rights management and streamlining the diffusion of copyrights are some of the most frequently cited use cases. Established copyright management companies such as the Italian Society of Authors and Publishers are joining the movement and aiming for IP registries in blockchain, while musicians are offering shares of their works for sale to keep investors from later commercial use of the discs. To what extent are these solutions feasible and what obstacles might their proponents encounter?

The search for authenticity

A cure for copyright problems?  NFTs promise to empower creative economies
A cure for copyright problems? NFTs promise to empower creative economies

One of the greatest challenges in creating digital content is the ease with which a perfect digital copy of its creation can be made at low cost. Since a digital image or digital soundtrack can be instantly copied and distributed an infinite number of times, it is a challenge for developers to keep track of how and who is using their work and, consequently, benefit from that use.

The main value proposition of NFTs is that by creating a single data set backed by a blockchain, they can not only encode each unit of creative work the sense of its authenticity and scarcity, but also allow artists to set rules regarding the create and enforce the transfer, use and monetization of copyright. GJ van Rooyen, co-founder of blockchain content protection company Custos Media Technologies, told Cointelegraph:

“First, NFTs allow us to securely track the transfer of rights, just as a Bitcoin payment securely tracks the transfer of funds. Second, NFTs can provide ongoing support to creators. For example, an NFT could specify that this will be the creators rewarded every time an asset is resold at a higher value. “

One notable improvement over the traditional world of IPR protection offered by NFTs is the automatic enforcement in particular. Daniel Daboczy, CEO of tech company Technicorum Holdings, told Cointelegraph that by leveraging smart contracts at their core, NFTs can empower artists to distribute copyrights and protect intellectual property without resorting to legal action and execution.

However, In many cases, the relationship between smart contract technology and existing legal frameworks may not be clear.

What do NFT owners really own?

In most cases, ownership of an NFT does not by default entitle a person to ownership of the underlying work. Rather, it can be thought of as a digital certificate that confirms that you have a unique and collectable version of it. Burr Eckstut, special advisor to the law firm Covington Burling LLP, told Cointelegraph:

“NFTs differ from digital content in that there can only be one owner of a particular NFT. However, NFTs typically do not” contain “digital content and may not be tied to a rights management technology that prevents content from being copied to digital content. The connection between the NFT and the content may even be conceptual, but it can still have value as long as NFTs are scarce. “

Gunther Sonnenfeld, CEO of digital real estate solutions provider RAIR Technologies, told Cointelegraph: “Without digital rights management, there really is no protection of intellectual property rights“An NFT is nothing more than a serial number on its own, and an extra layer of functionality needs to be set up so that users can re-share the underlying asset while ensuring that both the creator and sharer get their share. “

There are several aspects of using creative work that can be controlled by NFT smart contracts. Perhaps the strictest option is to block access to encrypted content. William Honaker, an intellectual property and patent attorney with Dickinson Wright law firm, told Cointelegraph::

“When the NFT controls access, it increases copyright protection. If the work is protected from copying and redistribution by the NFT and accessed, for example, by code for a view for viewing, then it is protected beyond copyright law.”

NFTs can also be used as licenses, giving those who purchase them the right to use the content for commercial or other purposes, but not ownership.

Copyrights and Broken Property

In today’s creative industry, most of the value generated by digital art goes to intermediaries such as record labels and distribution platforms. Thanks to blockchain technology, the balance of economic power in this area could soon shift in a direction that is more favorable to the creators.

Gaurang Torvekar, CEO and co-founder of the blockchain-based workflow platform Indorse, told Cointelegraph: “In addition to providing immutable evidence of ownership and provenance of assets, NFTs also allow buyers to have a fraction of the ownership of assets.“”

This mechanism allows unprecedented flexibility in the use of copyright. Edmund McCormack, founder and CEO of the cryptocurrency-focused education platform Dchained, spoke to Cointelegraph on the subject:

“When a song is created by a group of artists and registered in the blockchain in the form of NFT, each of them can claim a relevant fraction of this token, either 90% or 1%. To get benefits for its creation, they can grant They also license NFTs and sell them to interested parties while still owning the piece. They can also sell fractions of their rights to their followers for direct investment. “

Sonnenfeld added that he hopes that as rights are more mature, various monetization models based on NFTs will emerge. This can include licensing, preferred subscriptions, and data redistribution through proper identity management.

Relationship to Copyright

The legal aspect of many of the processes described above remains unclear The introduction of NFT-based mechanisms for managing intellectual property rights needs to be brought into line with the protection and enforcement measures that exist in current copyright law.

According to Lokesh Rao, CEO of the NFT-based Trace Network Protocol, asset ownership recognition has yet to be agreed in court. and unless the NFTs are recognized as equivalent to a paper or digital certificate, the scope of this concept is limited to digital property and consumer goods.

D’vorah Graeser, CEO of the IA patent search tool KISSPlatform, told Cointelegraph: “The main bottleneck is that almost all property rights are intellectuals, which means that the owner of the rights must register with a government agency. This creates a public record in the event of further questions or disputes. It would be difficult to use NFTs to create a similar situation in which all parties – especially rightsholders and the Judicial system – be united“.

Graeser added that such reconciliation is not impossible and that ultimately a combination of NFTs, legal regulations and judicial enforcement would be very effective.

Covington Burling’s Eckstut mentioned other potential legal issues that could arise in connection with the NFT’s enforcement of copyright interests. One of these relates to the “first sale doctrine,” which generally prevents copyright owners from restricting (and benefiting from) the later sale of physical copies of their work, which NFTs can allow creators to do. Another cause for concern is that under applicable law, U.S. copyright law can only be conveyed through a written instrument. This rule may not be able to be met by transmitting a digital token.

In conclusion, it is clear that the inclusion of NFT in the large-scale copyright protection business will require several years of precedent as well as changing the codes and laws governing intellectual property law.

Technological infrastructure

While there have been technical solutions for protecting intellectual property rights in the blockchain area for years, Most commentators who have spoken with Cointelegraph on the matter agree that the NFT industry as a whole is in the early days of its path to grabbing the copyright arm of the creative economy..

W. Sean Ford, COO of the blockchain platform Algorand, believed that the technology required to power these assets and the economies that build on them must meet a very specific set of requirements and list them for Cointelegraph:

“Easy tools to build and launch NFTs, strong smart contracts to use NFTs for more complex applications, immunity to branching to ensure the original build can’t be replicated, low transaction fees for healthy participation, scalability to support billions creative assets; and a low carbon footprint for the sustainability of the communities these assets serve. “

A major concern right now is the fragmented landscape of NFT platforms that are designed to allow artists to obtain royalties. According to McCormack, in many cases license fees only apply to purchases made on each platform separately. However, he noted that protocols are already emerging that offer scalable solutions: “With EIP-2981, content creators can embed smart contracts that automate the license fee payment process right into the NFT. The result would be that artists could get the copyright regardless of where the customer purchased the NFT.“”

There is no doubt that non-fungible tokens have the potential to destroy current models of IPR management in the creative industry. But it is also true that the integration will not be perfect or instantaneous as the multiple tensions between the old systems and the NFTs need to be resolved.

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