By: Mary Kate Campbell
On March 11, 2021 Christie’s made a head-turning sale of $69 million. What did they sell? A virtual piece of artwork as a non-fungible token.
Non-fungible tokens (“NFTs’), are verifiable digital assets vouchsafed by blockchain technology. Once an NFT is created, it can be digitally traced forever. Additionally, NFTs are not exchangeable and cannot be replicated. Similar to an original piece of artwork or sports trading card, an NFT can have only one real owner as it has a unique identification code.
Blockchain is the technology ledger that supports cryptocurrencies such as bitcoin. These databases are used to record ownership or transactions of a product. However, NTFs differ from cryptocurrencies due to their uniqueness. Cryptocurrencies are interchangeable and can be divided into smaller fractions, whereas NFTs are one of a kind.
NFTs have most notably made their mark on the art scene, providing a virtual sense of authenticity in a screenshot world that is inherent in tangible art. Additionally, NFTs are giving artists the opportunity to remove the middleman and simplify transactions on new markets.
The NBA has also taken advantage of NFTs with its platform, NBA Top Shot. Since debuting in October 2020, Top Shot has conducted over $230 million in transactions. The online site is a marketplace where users can buy, sell, and trade NBA highlights. These highlights are NFTs as they each have a unique number, and are essentially virtual sports cards, but in lieu of a picture of an athlete, the NFT is a notable video moment of the player’s career. A recent sale was a clip of LeBron James that sold for $208,000. The prices and rarity of the Top Shot NFTs vary depending on the popularity of the player and how many highlights Top Shot is going to release of the player.
Another notable NFT that was on the market is Twitter CEO Jack Dorsey’s first tweet ever from 2006. The tweet was up for auction and sold for $2.9 million. The winner of the auction received a “digital certificate of the tweet, unique because it has been signed and verified by the creator.” The winner additionally got the metadata of the tweet which includes when the tweet was posted, a timestamp of the tweet, and a digital signature of the creator’s crypto wallet address. While most NFTs are sold for profit, Dorsey stated that the proceeds will be donated to COVID-19 relief in Africa.
There is a problem that arises, however, in terms of intellectual property rights. Foremost, owning an NFT does not automatically grant you ownership of the artwork or moment underpinning the NFT. Essentially, an NFT is a digital receipt that allows you to claim ownership of the work. This lack of clarity is specifically arising within the terms and conditions of marketplace sites through which NFTs can be purchased. For example, Decentraland, a virtual world that offers NFTs, claims its users have ownership, yet their Terms of Use provides that their holdings company owns “all title, ownership, and Intellectual Property Rights” on their site.
CryptoKitties, a well-known site that first popularized NFTs, has created an NFT License to help resolve some of these issues, specifically to help buyers understand they are not purchasing copyrights, but rather the original digital content. In general, regulations and standards regarding NFTs are underdeveloped and therefore it is important to understand your rights as a buyer as well as what you are granting and creating as the seller.
At first glance, NFTs seem a bit impracticable and conceptually hard to imagine why someone would spend thousands or millions of dollars on a piece of art that can only be appreciated on a computer screen or a sports highlight that can be viewed on YouTube for free. However, NFTs also seem to be the future of collecting and curating that will just take time for people to normalize and make mainstream. As seen with Dorsey’s tweet, NFTs are also a viable and innovative way to raise money for charity. With already millions spent on NFTs, these digital assets and their online marketplaces are only at the dawn of their potential, as well as a dawn of first-impression IP legal issues.
Student Bio: Mary Kate Campbell is a second-year law student at Suffolk University Law School and a current staff member on the Journal of High Technology Law. Mary Kate received a Bachelor of Business Administration in Finance from Cleveland State University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
