Law Office of Jason H. Rosenblum, PLLC

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The NFT I Purchased Was Removed For ‘Copyright Infringement.’ How Is That Possible? **Attorney Advertising**

NFT marketplaces are exploding in 2022, offering new and exciting opportunities for investors and artists alike.  On the flip side, NFTs, cryptocurrencies, and blockchain technology are still very much operating under “Wild Wild West” rules, and new legal issues are emerging as these platforms continue to grow and experience mass adoption.

One huge issue that we’re seeing right now relates to Intellectual Property infringement.  Unfortunately, people are paying hundreds and sometimes thousands of dollars for an NFT only to find that the link to their investment is removed due to copyright, trademark, or patent infringement.  It leads investors to wonder how this could be possible, especially since they paid for the work in question that’s allegedly unique and verifiable on a blockchain.

Taking a Step Back 

NFT stands for non-fungible token, which is supposed to be a one-of-a-kind digital asset that can only belong to one person.  Yet there’s still a key distinction when it comes to NFTs and intellectual property rights: the owner of a digital asset doesn’t necessarily own the copyright to the work of art.

Instead, the copyright remains with the owner or creator of the work, unless they specifically transfer the rights to the buyer.  In most marketplaces, there’s still a lack of transparency about intellectual property rights and who-gets-what at an NFT auction. As such, it’s possible that consumers could be sold a digital file that is in violation of someone else’s copyright.

If this occurs, the copyright holder is well within his or her rights to demand that the link to the file is removed, no matter how much the investor paid for it. I imagine that we’re going to see a lot of lawsuits involving NFTs and IP infringement until the technology evolves to deal with this issue.

How Should I Protect Myself?

I believe that in the future, artists offering NFTs for sale on a blockchain will need to verify their copyright and transparently disclose which rights may transfer to the new owner, if any.

Until that technology exists, it’s important to understand what you are purchasing. You should carefully review any contracts that come along with the purchase so that you fully understand the rights that you may or may not have. Do you obtain any rights in the copyright? If the piece is infringing, will the seller indemnify you? What percent of subsequent sales does the creator get? Are there any limitations on your ability to transfer the NFT?

The bottom line is that when it comes to buying NFTs, the rule as of today is BUYER BEWARE. It is absolutely possible to infringe on someone else’s intellectual property rights, which could cause you to lose your investment or tie you up in a lawsuit.  If you have additional questions or you need help clearing an NFT that you would like to buy, please feel free to call our law firm at (888) 666-0062 for assistance.

DISCLAIMER: The information contained in this article is for informational purposes only and is not legal advice or a substitute for obtaining legal advice from an attorney.