The popularity of NFTs is on the rise and more and more artists are asking questions about how they are relevant to their practice.

Non-Fungible Tokens or NFTs are unique cryptographic tokens that are stored on the blockchain (if you are already feeling lost then you may want to take a look at our FAQs that explain some of these terms). Essentially, NFTs serve as a digital authentication certificate and provenance record for a digital asset represented by the NFT; this enables versions of digital artworks to be sold and resold in a similar way to physical artworks.

This factsheet covers the following:

• The status of an NFT
• Smart Contracts
• Copyright and NFTs

Status of an NFT

An NFT can be used to represent an artwork, but it should not be confused with the artwork itself. An NFT is in fact a collection of code that is written on to the blockchain - an indelible digital ledger that can be used to record transactions in blocks of computer code that are time stamped; this code can include information about the owner of a digital artwork as well as the location of the digital artwork represented by the NFT.

This means an NFT can serve as a digital authentication certificate and provenance record for a specific version of a digital artwork, allowing that version to be sold and resold in a similar way to physical artworks.

Smart Contracts

Smart contracts are self executing contracts, meaning that no action is required by the parties once the contract has been triggered. A regularly used example is that of a vending machine that dispenses a snack once the correct sum of money has been inserted; smart contracts are now being used in NFT transactions.

These contracts are created using the blockchain in the form of computer code which embeds the terms of the contract within the NFT. Smart contracts are usually programmed to operate automatically once predefined conditions have been met; for example, an artist selling an NFT could set a condition for a contractual resale right that is triggered when the NFT is resold, automatically paying the artist a share of the sale on each resale of the NFT.

Many people view smart contracts as a way of increasing the speed and efficiency of transactions as the automated process provides certainty to the parties and avoids error in execution of the contract. There are however questions around the enforceability of these contracts, as there is very little case law or legislation that touches on the issue of smart contracts.

In theory there is no reason why smart contracts cannot be legally binding so long as the usual key elements are present: offer, acceptance, consideration and intention to create legal relations.

The Law Commission has recently concluded that ‘the current legal framework in England and Wales is clearly able to facilitate and support the use of smart legal contracts’.

You can read more about the Law Commission’s findings on smart legal contracts here. This document also provides a useful summary about the different types of smart contracts in use.

As with entering any regular contract, it is important that all parties understand the terms of the contract they are entering into. This applies to both the terms of the smart contract and the standard terms and conditions of NFT marketplaces. It is possible that there could be conflicts between these terms, so it is important that you understand the implications of them, as they could have an impact on things such as your copyright ownership in an artwork connected to an NFT. 

Copyright and NFTs

Intellectual property laws such as copyright and moral rights apply to NFTs in the same way as for physical artworks. 

For example, if a third party minted an NFT using one of your artworks, claiming the work as their own, then this would infringe both your copyright and moral rights in the original work used by that third party. If you come across this situation then it can be dealt with in the same way as any other copyright infringement. You can read more about dealing with copyright infringements here.

Most NFT marketplace platforms operate a notice and takedown procedure for requesting removal of infringing content from their platforms. These takedown procedures are usually described within each platforms’ terms and conditions and they usually include the contact details for submitting takedown requests. You can read more about Notice and Takedown procedures here.

Creating an NFT that is connected to one of your artworks would not prevent you from continuing to make and sell physical prints of the artwork so long as you are the copyright owner and there is no other agreement preventing you from doing so. This position could change if your copyright in the artwork is transferred when the NFT is sold, so it is important to be aware of any terms in smart contracts or the standard terms and conditions of NFT marketplaces that may affect your copyright.  

Disclaimer: This factsheet is offered as a general guide to the issues surrounding copyright in this area. It does not represent an exhaustive account. It is not intended to offer legal advice and should not be relied upon as such. We strongly recommend you seek specialist advice for any specific circumstances.