By Tapan Sangal
One of the brightest stars on the digital horizon today, undoubtedly, is the NFT phenomenon. From fetching baffling valuations to enticing every major industry into embracing it to capturing the imagination of investors, athletes, and artists alike, the NFT phenomenon has, indeed, garnered enviable success. Yet, it finds itself at an awkward place in the current spectrum of IP laws.
NFTs, in essence, are unique digital certificates of ownership/legal rights, of usually a digital asset, that exists on blockchain networks. These digital assets represent a creator’s imagination ranging from design to art, to clips, to quotes to pictures to literary work to music notes to symbols, and even names and anything that could be imagined. The proof of ownership of collector’s items and their uniqueness ensures that no two NFTs are the same, bespoke items if you please. In the real world, these creations are regulated and protected under legal and regulatory frameworks, aka the intellectual property rights encompassing trademark, copyright, and patent laws of the land.
Through a simple screenshot function, a person could acquire a copy of NFT displayed digitally but could never provide proof of originality and ownership of the said NFT and there lies its value. The unique nature of NFTs is one of the factors that necessitates their protection from potential infringement issues and preventing third parties from passing off NFTs of works that are not theirs. The answer to this issue lies in the concept of smart contracts.
The sale of NFTs between seller and buyer is initiated through smart contracts that are self-executing codes, running on a blockchain, ensuring that the terms of the sale have been satisfied.
These smart contracts could be engineered in such a way that once the NFT gets transferred to the buyer, the seller and/or the original creator will not be able to reproduce, make copies, publicly perform, exhibit, or generate inspiration from the original work of art. External data triggers like ‘IPR search reports’ could also be pushed into a smart contract (‘Oracle data into a smart contract through an API’ in tech language), validated by a trusted third party, and based on such pushed data, the smart contracts would bridge the chasm between the real and digital worlds.
The IP offices must include specific NFT protection strategies as part of the IP protection protocols to address the gaps between digital and real worlds. The evolving NFT space is filled with ambiguity and uncertainty which can be dealt with if the nuances at the intersection with IPR are competently addressed.
The author is founder and chief evangelist, P2E Pro Pvt Ltd