Non – Fungible Tokens, or NFTs, are certainly the new buzzword. James McCarthy takes time to answer some NFT related questions in the South African legal context.
What is an NFT:
An NFT is a non- fungible token.
What does that mean?
“Non fungible” means unique, unable to be copied or replaced with something else. For example; a bitcoin is fungible because it can be replaced with another bitcoin. A one-of-a-kind original Paul Du Toit artwork is, for example, non-fungible.
Why are NFTs useful:
Generally speaking, traditional works of art that are one of a kind are valuable for this precise reason. They are one of a kind. Digital artworks are capable of endless duplication – come in NFTs – NFTs create a way of proving ownership over a certain digital art work. Fair enough, there may be duplicates made of that original NFT, but the NFT will show which the original is.
How do NFTs prove originality and ownership?
To put it simply, NFTs are part of a certain blockchain – the biggest being the Ethereum chain – which means that when they are exchanged or sold there is a ‘ledger documenting exactly when and for how much they were traded. In this way, NFTs are a way of proving digital ownership.
What kind of work can I turn into an NFT:
An NFT can be anything digital. – music / a drawing / a digital version of a painting / a tweet / a short video etc. New NFTs are being created daily – one only has to google ‘most recent NFT sales’ to get an idea of what NFTs are being sold and for how much.
Are NFTs here today/ gone tomorrow?
We don’t think so- there has definitely been an NFT bubble resulting in some super inflated prices but as a concept, we believe that they are here to stay. The technology behind an NFT allows one to prove who created a digital art work and to track its history of ownership. This, we believe, will change the way that digital art is sold for ever.
NFTs and intellectual property rights.
NFTs are an obvious way of protecting an artist’s proprietary interest in an artwork. One could say that they give certainty to digital Intellectual Property. A few South African artists have recently jumped onto the bandwagon and created NFTs (See Norman Catherine and Paul Du Toit).
Is there interplay between Copyright Law and NFTs?
As far as creation (or ‘minting’ as it is known) of the NFT goes, it is of course the copyright owner that has the right to create an NFT based on his/her original work.
A South African client of mine has recently created a run of digital prints based on original works from her collection. Interestingly, some of the original artworks had been sold and so the question was whether she could legally make NFTs of those works.
The works were not commissioned and the Copyright was not assigned to the owners of the pieces so the artist was able to rely on section 7 of the Copyright Act to “reproduce the artwork in any manner or form …” (she also received permission from the owners of the paintings).
South African courts have not had to grapple with NFTs and intellectual property rights but we do believe that there are interesting times ahead.
For more information or guidance on the creation or trading of NFTs, please send an email to james@mccarthylegal.co.za