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The Intellectual Property StrategistFeaturesIntellectual PropertyTechnology Media and Telecom

NFTs and IP Protection

By Gregory Baker, Anne-Laure Alléhaut and Catherine J. Djang
July 01, 2022

Non-fungible tokens (NFTs) are the latest trend to sweep markets from the art industry to professional sports leagues. These digital assets have existed for several years but have achieved explosive popularity only recently. In fact, the global market for NFTs reportedly hit over $40 billion in 2021. Despite this, the legal frameworks governing NFTs — which could significantly impact the risks and rewards of buying or selling NFTs — are still catching up. This article addresses another key legal dimension of NFTs: intellectual property protections.

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What Are NFTs?

If you have not yet familiarized yourself with the basics of blockchain technology, that is the place to start. At its core, a blockchain is meant to be an immutable ledger that records one or a series of transactions, with each transaction verified by a peer-to-peer network rather than a centralized organization. The network constantly checks and validates the accuracy of the blockchain. Once on the blockchain, the record cannot be reversed or erased; one can only add a new blockchain recording the new information. Within that ledger technology, there are: 1) fungible tokens, meaning that one token can be replaced by any other token — a typical example is a cryptocurrency; and 2) non-fungible tokens (NFTs).

NFTs are completely unique digital assets and cannot be exchanged for one another. Instead, they primarily serve as digital tokens of ownership rendering the chain of custody more transparent for both NFT creators and purchasers. NFT purchasers can do due diligence by looking at the ledger. NFT creators can not only track the buyers or collectors interested in his or her work, but also benefit from it by, for example, embedding the provision of automatic resale royalties.

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