With more and more of the world’s most powerful corporations and eccentric billionaires embracing Bitcoin in the recent weeks and months, clearly blockchain-based services have well and truly found their way into the mainstream of international business transactions. But while cryptocurrencies may be the first thing we think of when we hear the world “blockchain”, the recent boom in popularity of NFTs prove that blockchain is about more than secure but potentially environmentally hazardous financial transactions, but also has the potential to have a direct impact on the future of the commercialization of intellectual property.
Non-fungible tokens, better known as NFTs, are unique digital assets whose veracity is secured through blockchain systems. What differentiates NFTs from contemporary assets such as Bitcoin is their lack of fungibility—unlike a currency where any single unit could be exchanged for any other unit and retain the same value, each NFT is verifiably unique and representative of some digital asset whose ownership is tracked through the blockchain.
But what does any of this have to do with intellectual property? Well, much of the recent NFT boom has surrounded digital art, with some NFTs representing various pieces of art selling for thousands or even millions of dollars. While there is debate as to whether this demand for NFTs represents a bubble that will soon burst, for the purposes of this article we are more interested in what NFTs represent. Digital art, unlike its physical counterpart, has always suffered from the limits of its medium. While any number of reproductions of a physical painting could exist, there typically remains but a single original piece which can contain significant value. There is no digital equivalent to owning the “original” piece, as there has never been a way to “own” exclusively an original copy of a digital work. Of course, Copyright laws are designed to prevent the unauthorized copying of substantial parts of artistic works, but owning the right to prevent the creation of copies of the work is very different than owning the original work. NFTs, in a way, bridge this divide.
By creating and selling NFTs that are representative of their work, artists and creators now have an entirely new way to commercialize their intellectual property. Creators have already begun to test the waters by selling NFTs of individual moments of larger videos, and this is certainly only the beginning of creative ways to profit from NFTs. Selling an NFT of a work does not prevent the owner of that work from licensing or otherwise exploiting the intellectual property inherent in that work, not unlike how a piece of art can exist in a gallery but its image can be used commercially. It is clear that the advent of NFTs represent a brand new way for creators to gain value from their intellectual property, and it will be interesting to see whether the demand for these NFTs continues to rise, or if they will go back to simply being a niche way to trade virtual cats.
Written by Keir Strickland-Murphy, JD Candidate 2022, enrolled in Professor D'Agostino's Directed Reading: IP Innovation Clinic course at Osgoode Hall Law School. As part of the course requirements, students were asked to write a blog on a topic of their choice.