The Complete Guide to Copyright in NFTs
Copyright is widely misunderstood across the NFT industry. Whether as a creator or a collector, here’s what you should know.
JULY 31, 2023. GUIDES. WRITTEN BY SASKIA WARTNABY.
Whilst this article has been proofed by legal experts, the NFT Insider team are not lawyers, and this is not a substitute for legal advice. NFT Insider cannot provide legal advice or make legal determinations.
We focus solely on U.S. copyright law and their definition of ‘fair use’ in this article. ‘Fair use’ may go by ‘fair dealing’ or similar terms in other countries, and may be applied differently.
It is your responsibility to understand the laws relevant to you, and whether they protect the uses for copyrighted work you have in mind. If you’re considering using copyrighted material in your own work, we’d strongly advise you to establish contact with the copyright holder and to seek legal advice first.
I had a wake-up call recently.
Throughout my years of being an NFT artist, I’ve often wanted to create NFTs of my favourite pop-culture characters – but as cats (as one does). From TV personalities or book characters to famous figures; my general approach has been; “well, it’s a cat, and I drew it, so it must be fine, right?”
Though I’ve taken this stance for some time, I’ve always had doubt in the back of my mind if what I was doing was okay.
It wasn’t until recently that, after seeing an NFT that included a character I recognised from a TV show, I suddenly had a slew of questions; is this allowed? Could the artist get in trouble for this? Can I get in trouble?! *heavy breathing intensifies*
I took it upon myself to do some research and, well, down the rabbit hole I fell.
As much as many would love to think that web3 is an ungovernable, lawless land, that simply isn’t the case. When it comes to copyright law, it’s always better to be aware of what is and isn’t allowed to avoid any unpleasant, and potentially financially damning, legal scenarios.
After educating myself, I’d like to share my findings with you, as a fellow creator and buyer of NFTs, in the hopes that it might open your eyes too.
What is Copyright?
Before learning how to be a law-abiding, NFT-creating citizen, I needed to understand what I was dealing with. I thought copyright was something you registered with an institution so you could say “I made this, it’s mine, and you can’t use it”, with a document to back it up.
I quickly found out this isn’t the case.
Copyright is a type of Intellectual Property that protects original works, such as books, music, photos, movies – and art!
If I hold a copyright, I can copy, sell, lend, display, perform or recreate the copyrighted material. I own it, so I can do what I like with it. You, the person that doesn’t own the copyright, can do none of these things – unless I grant you explicit permission, a written licence, or it’s (typically) been 70 years since my death.
Copyright protection is automatically applied to any original intellectual property as soon as it’s in a tangible form – the key words being original and tangible. Let’s clarify what these mean.
In order for work to qualify for copyright protection, your work must be:
- Original: the work must have been created using a minimal degree of creativity, and it must not be a duplication of an existing work
- Tangible/Fixed: the work must be in a “tangible medium of expression” – i.e. written down or recorded
It’s important to note that facts, brand names, logos, slogans, phrases, domain names and titles cannot be copyrighted (though they can be trademarked), and copyrights can expire.
What is a Trademark?
We mentioned that anything pertaining to a business and brand cannot be copyrighted. So how do you protect your brand assets? This is where trademarks come in.
A trademark is typically registered to cover a name, logo or slogan that is used to differentiate your products and services from your competitors. If I own a bakery, I’d want to trademark my bakery’s name and logo so that another bakery cannot open next door to me using the same name and logo (without threat of legal recourse).
Brand names, logos and slogans are better protected when they’re legally registered.
The Grey Area
This is where it gets complicated.
Understanding what a copyright is and what it applies to is quite straightforward, but understanding what qualifies as copyright infringement – when you use copyrighted material without permission – is much more difficult.
If someone screenshots your digital art and posts it online claiming it’s theirs, that’s clearly copyright infringement – but more often than not, we tend to use other’s work as inspiration for our own, perhaps even reproducing someone else’s characters in our own style as a form of flattery (e.g. fan art).
As an NFT artist, when is our artwork deemed to be infringing on copyrights, and when is it not? To answer this, we need to look at the concept of ‘fair use’.
What is Fair Use?
Fair use is an aspect of copyright law that allows you to use copyrighted material without permission, within reason. This ensures that copyright law doesn’t control or prohibit freedom of expression or criticism, whilst protecting the rights of the copyright holder.
Fair use is complex, unspecific and often misunderstood, so you have to tread carefully.
Typically, a judge will consider four factors when making a decision regarding fair use.
1. Purpose and Character of Use
When copyrighted material is used for the purpose of news reporting, commentary, education, non-commercial use, direct parody or critique, it’s generally considered fair use.
As an artist, “parody” is important, as it’s typically the strongest case for fair use, especially if your work is being sold for profit – although this is often questionable. For a work to be considered a parody, it must directly make fun of, critique, or comment on the original work, otherwise, it does not fall under fair use.
It’s important for your work to be “transformative”. Does your art give new meaning to the original? Have you taken the original and created something distinctly new? Again, a copy is a copy. You need to add something meaningful to the original for it to be considered fair use.
2. Nature of the Original Work
Using copyrighted material from factual works is more likely to be fair use than using copyrighted material from purely fictional works – such as films, songs or art.
This isn’t to say that it’s impossible to create new work from fictional material (think 50 Shades of Grey, which was originally a Twilight fan fiction), it just makes it a lot harder.
3. Amount and Substance of the Work Used
How much of the original work are you using in your piece? The larger the portion, the less likely it is to be fair use. There are cases where a whole artwork has been used for a parody which has been considered fair use, but this is the exception, not the rule.
You also need to consider what it is you’ve used from the original. Is it the “heart” of the piece? Does it contain the core message? It’ll be easier to claim fair use if you’ve used a less important part of a copyrighted work on your own.
As a rule of thumb, only use the bare minimum necessary to make your point!
4. Effect of Use on the Value of the Work
You need to consider how your work will impact the value of the copyrighted work – not just now, but in the future too.
Is your work a substitute for the original? Are you creating NFTs based on a copyrighted piece, when the copyright holders may want to make NFTs themselves? Any effect your work may have on the value of the copyrighted work severely diminishes your fair use case.
It’s important to note that fair use is subjective, and is often judged on a case-by-case basis. What you might strongly believe is fair use may be judged in court to be copyright infringement, so we strongly advise you to seek independent legal advice if you have any concerns.
What About Fan Art?
Fan art is any art that draws its main inspiration from popular characters or works of fiction. It’s everywhere, especially online, and is a huge part of the fandom of many TV shows, films, games and more. So, is fan art considered copyright infringement?
Most of the time, it is.
Typically, fan art is a redrawing of a popular character or scene. Changing the art style of a work does not make it fair use, and whilst you might be okay if your art is purely for your own enjoyment, you might run into trouble if you try to sell it online.
This could especially be a problem if you turn your art into an NFT – more on that later.
What About GIFs?
When The Mandalorian debuted in November 2019, popular GIF creation site GIPHY temporarily removed GIFs of The Child (commonly known as Baby Yoda) from their site, fearing the wrath of the copyright holder, Disney.
The situation was clarified and the GIFs returned. Many believe GIFs fall under fair use, but by the letter of the law, this isn’t the case.
Images in GIFs are widely understood to fall under “fair use”, but a case concerning the use of copyrighted material in GIFs has never gone before a court – holders often turn a blind eye in exchange for the free publicity – but that doesn’t make the practice legal.
What does this mean as an NFT artist? Whether your work is a still image, a GIF, a video, a 3D asset or in any other medium, ensure that your work falls within the letter of copyright law to avoid any ugly surprises.
How Do I Obtain a License?
If you’d like to create NFT art using someone else’s copyrighted work, and you’re not sure that your use is fair, you have two options: ask for permission and acquire a license, or risk getting sued. Sounds dramatic, but it’s all fun and games until you receive a hefty fine for copyright infringement!
A license is permission from a copyright holder to use their work and/or create derivative works.
To get a license, you’ll need to reach out to the copyright holder and ask for their permission. If they agree, they may give you a formal license document, but permission in writing is often sufficient. The copyright holder may or may not charge you for this, depending on your use case. It’s important that you keep a copy of this license, in case of any disputes later.
Contacting the copyright holder can be easier said than done. For small brands or individuals, you may be able to contact the copyright holder directly, but for large companies and brands, you may need to contact their legal team to acquire a formal license. These licenses can be incredibly expensive however, and may be out of reach for many smaller artists.
Some works may have a Creative Commons (CC) license. These are granted by the copyright holder, and outline exactly how you may use their work. There are many different types, with the most common in NFTs being a “CC0″ license, effectively placing the work in the public domain (more on this below). Another is the “CC BY” license, which allows you to create derivative works for sale, so long as you credit the copyright holder.
If you can’t acquire a licence/permission, you open yourself to the risk of being sued, especially if you’re selling your art. If you believe your work falls under fair use, getting legal advice is highly suggested, but not 100% risk-free.
At the end of the day, if the copyright holder believes infringement has taken place, they are fully within their right to send you a cease & desist or takedown notice – and the only way to dispute that is in court, which could cost mountains of time and money, and you may still lose out.
What About Work in the Public Domain?
There is a special case that allows anyone to use previously-copyrighted work without permission, and that is if the work is in public domain.
The public domain is a catch-all phrase for work where the copyright has either expired, been forfeited, waived or isn’t inapplicable. Remember when I mentioned waiting until 70 years after my death? This is one instance in which my copyrighted work would fall into public domain, and you’d be able to freely use it without permission from the previous copyright holders.
As a result, work by prominent artists such as Vincent Van Gogh and Leonardo da Vinci is free for anyone to use and make derivatives of. Keep in mind that not all NFT sites will be happy with you creating and selling NFTs with art from the public domain, so be sure to check the rules of the services you use to ensure you’re compliant.
What if I’ve Minted Art that Infringes on Copyright?
The problem for NFT artists is the nature of blockchains.
When a cease & desist or takedown notice arrives at the feet of a regular artist, they can simply stop selling the art, or delete it from where it’s uploaded. As the data from NFTs is immutable, complying with these requests is much harder – and can easily land you in hot water.
The only options currently available to an NFT artist are to replace the art in question (only possible on some chains), buy back and burn the infringing NFTs, or to contact the relevant marketplaces, wallets and IPFS providers to hide the NFTs from public view – though all of these options still leave you open to legal risk.
This is why it’s incredibly important that NFT artists ensure that their work doesn’t infringe on anyone else’s copyright. If the worst should happen, you’ll have one hell of a time scrambling to fix the problem!
What Should I Know as a Collector?
As an NFT collector, it’s crucial that you err on the side of caution when purchasing NFTs.
If you believe an NFT may infringe on copyright, ask the creator. Whether they produce evidence of a licence from the copyright holders, permission from the copyright holders, or they have a strong argument for fair use, it is up to you to determine if those NFTs are ones that you’d like to collect.
In a worst-case scenario, NFTs that you purchase may be affected by a cease & desist letter or takedown notice delivered to the artist, which could result in those NFTs being hidden from public view, severely damaging the value of your purchase.
Final Thoughts
Copyright law is a lot to take in, but it’s vitally important for every NFT artist. Those minting NFT art should have as firm a grasp of these laws as possible, in order to prevent – unintentionally or otherwise – creating immutable work that infringes on copyright.
The best option is to always create fully-original art, but if you really want to create something based on another’s work, I would encourage you to obtain permissions or a licence from the copyright holder, and obtain legal advice to best inform your decision. NFTs are still digital art, and all art falls under copyright law.
To borrow a phrase from Tom Scott; I’m not saying this is how it should be, I’m saying this is how it is.
With all that said, I wish you all the best in your NFT journey!
It is your responsibility to understand the laws relevant to you, and whether they protect the uses for copyrighted work you have in mind. If you’re considering using copyrighted material in your own work, we’d strongly advise you to establish contact with the copyright holder and seek legal advice first.
NFT Insider cannot provide legal advice or make legal determinations.
Further Reading
- U.S. Copyright Law, and the U.S. Fair Use Index
- UK Copyright Law, and the UK Fair Dealing Overview
- Tom Scott’s terrific video on copyright law, with multiple real-world examples
