Legal support of NFT

An NFT (non-fungible token) is a unique token created in relation to a specific digital asset, such as an image, music composition or video clip. The uniqueness of a token lies in its non-fungibility. If you borrowed a ten-penny note from a friend, you can return any other ten-penny note, but this will not work in the case of NFTs, as they are unique and non-fungible.

Where are the digital asset and NFT located?

NFT is stored in a blockchain, namely your personal wallet, and contains information on where the digital asset is located. For this reason, there are risks of deliberate or negligent disappearance of this asset, which can result in the depreciation of the NFT.

NFT Intellectual Property Rights

The first thing to note is that NFTs can be subject to intellectual property protection, so buyers of NFTs should pay attention to what intellectual property rights come with the NFT. Under the Berne Convention for the Protection of Literary and Artistic Works, parties must grant exclusive rights to authors in their works, regardless of the type or form of expression. At the same time, under Article 1(4) of the WIPO Copyright Treaty, storage of a protected work in digital form in an electronic medium (e.g. NFT) is a reproduction that requires the prior approval of the copyright owner. In practice, most NFTs are transferred without author’s rights and in this case there are no legal consequences for such an owner. It should be noted that NFT remains an unregulated area, so there are risks that can be avoided by seeking proper legal assistance.

NFT royalties

NFT royalties are payments to the author expressed as a percentage of each sale, referred to as the resale right. They are supplied by means of smart contract codes on a blockchain. Each time a new sale takes place, the smart contract guarantees a royalty payment to the author in accordance with the terms. This payment ensures that the author is properly paid for the work done on a daily basis and in the future.

What should I consider before buying an NFT?

1. Familiarize yourself with the site’s terms of use. As described above, buying NFT is not a simple procedure, so when you choose NFT, you should review the terms of use of the platform where you want to make such a transaction, as different platforms provide different features of its implementation.
2. Familiarize yourself with the legal framework. Learn about the specifics of NFT regulation in your chosen jurisdiction, your rights, responsibilities, liabilities and defenses to avoid future contingencies.
3. Find out what rights and intellectual property are being transferred to you. It should again be emphasized, NFT platforms do not automatically transfer NFT to the new owner, so you should check with your counterparty what intellectual property rights you intend to obtain.