NFT Disputes, Litigation & Copyright Issues

At Saunders Law, we are able to advise and act for third parties seeking to enforce IP rights infringed by NFTs and for other parties to IP disputes arising out of the sale/purchase and creation of NFTs.

We have substantial experience in supporting a wide range of individuals and organisations and are well-known for our high-profile work and for providing robust representation for our clients. We provide practical advice on handling NFT disputes, as well as advising in general NFT law and legislation.

Speak to our NFT dispute lawyers in London

For expert assistance with NFT disputes, litigation and copyright issues, contact Saunders Law today for a free, no obligation initial discussion about how we may be able to help.

Call us on 0207 632 4300 or make an enquiry online.

IP Rights and NFTs

NFTs (Non-Fungible Tokens) have risen to prominence in recent times as a must-have crypto asset. The size of the NFT marketplace is quickly approaching that of the global art market.

You can think of an NFT as a record, like a certificate/receipt, that is stored on an unchangeable digital ledger called the blockchain. When you buy an NFT, you acquire a unique class of crypto asset; it is a set of digital code that represents uniqueness and singularity (this is the “non-fungible” element). An NFT is, therefore, different to a ‘crypto currency’, which is “fungible” i.e. replaceable and mutually interchangeable.

Whilst being an asset itself, an NFT also represents or points to another digital or physical asset, commonly a digital or physical work: a meme, a sports clip, or a digital artwork; you may be familiar with the now ubiquitous ‘Bored Ape Yacht Club’ digital characters who have come to typify NFTs.

IP disputes can arise, however, when an NFT has been minted (created) using work (an image, for example) that infringes a third-party’s copyright or trade mark rights. For an NFT buyer and/or its creator, IP disputes may arise around the extent of the IP rights and contractual obligations that are provided for in the NFT.

Despite a greater awareness of NFTs, they are still commonly misunderstood by both buyers and creators alike, leading to confusion, uncertainty, and an increased risk of litigation.

A recent example of our IP and NFT advice

• Advising a major NFT project as to the IP rights in artwork created by international artists, facilitating the assignment of IP rights, advising on regulatory matters, contractual and corporate issues and the drafting of paperwork required to complete the NFT drop.

NFT Copyright Issues & Infringement

The most common IP rights infringed in respect of NFTs are Copyright, Moral and Trade Mark rights, with rights owners having to take enforcement action to protect their rights.

Our NFT lawyers can support the following with NFT disputes:

Copyright Owners

The owner of copyright in a piece of work (for example, an illustration, a video, a photograph) has the right to protect their work by stopping others from using it (copying, displaying, exploiting it) without permission.

NFT copyright issues can occur when the NFT represents or directs to a work that copies the whole, or a substantial part, of an original work without the copyright owner’s permission.

The remedies available to copyright owners following instances of NFT copyright infringement include having the work removed from the platform hosting the NFT, a claim in court seeking damages, an order for destruction or delivery-up of the infringing work, or in urgent cases, an injunction.

If you have experienced NFT copyright infringement, instructing the right legal counsel (experienced and knowledgeable in IP law and NFTs) is critical; an IP claim must be made precisely, decisively and without delay.

We have extensive experience in acting for copyright owners on NFT copyright issues, enforcing their rights against infringers. We are happy to discuss this further with you – contact us.

Moral Rights

Moral rights sit alongside copyright, protecting the integrity and ownership of the work, and include:

• the right to be recognised as the author of the work (paternity right);
• the right to object to the derogatory treatment of the work (this would broadly include any unauthorised editing and adaptation of the work); and
• the right to object to false attribution of the work; and
• the right not to be identified or named as the author of a work which they did not create.

Like copyright, moral rights arise on creation of a work (and belong to the author of an original work), however unlike copyright, moral rights cannot be transferred. Importantly, they remain with the creator of the works even if the copyright does not.

In the UK, moral rights may be waived – i.e. given up – but cannot be assigned or sold to a third party. In agreeing to waive moral rights, an author would no longer obtain the benefits moral rights provide.

Under UK law, remedies for infringement of moral rights could include damages, which is a financial reward, or an injunction preventing further infringing uses depending on the circumstances.

It is vital therefore to consider moral rights along with copyright.

Trade Mark Owners

The use of a third party’s trade mark (registered or unregistered) with an NFT without their permission (taking unfair advantage of the mark) can cause considerable damage to the goodwill in a trade mark, and correspondingly, its owner.

A complaint can be made to the platform hosting the NFT. However, it will also be necessary to engage with the creator and/or owner of the NFT in an effort to avoid litigation, if possible. The remedies available for trade mark owners against infringers include obtaining: an injunction to prevent further infringement; an order that the infringing goods/materials are delivered up or destroyed; an order for damages (financial compensation), and the payment of legal costs.

Trade Mark law is complex, with many traps to snare the unwary and inexperienced. If you believe your trade mark rights have been infringed in the creation of an NFT, it is important to consult IP specialists at the earliest opportunity. We have extensive experience in acting for trade mark owners, enforcing their rights against infringers. We are happy to discuss this further with you – contact us.

NFT Buyers

When acquiring an NFT, the buyer enters into a contract (a smart contract) with the seller, and the terms of that contract determine what rights are acquired in the asset connected with the NFT (if any). To protect the buyer, it is important to determine whether they are acquiring: only the NFT, the NFT and a digital representation of the connected work, or the NFT and the actual physical connected work.

The standard-form contracts often used with NFTs can lack certainty or may be opaque in the rights they purport to grant or not grant the rights the buyer assumes. Why is this relevant? A buyer should have certainty as to what rights and obligations they are acquiring.

There are also multiple cases of NFTs being created using work that infringes copyright or the trade mark rights of third parties. The risk in buying an infringing NFT is that it becomes worthless, and the buyer may become a party to infringement proceedings; holding an infringing copy of artwork can result in liability for an unwitting buyer.

If you have purchased an NFT and the rights conferred are not as represented, you suspect the NFT may infringe third party rights, or a claim of infringement has been made against you, it is important to seek urgent legal advice; we have the expertise and experience to advise you, please contact us.

NFT Creators

Despite the relative ease with which NFTs can be created, there are still some important legal issues of which creators should be aware of to reduce the potential for NFT litigation:

Third-Party Rights

If a third party’s work is copied in order to create an NFT without the permission of the owner of copyright in the work, it’s likely that the copyright in that work will be infringed. This can lead to legal action being brought against the NFT’s creator.

NFT copyright infringement can lead to not only the removal of the NFT from the hosting platform but can also trigger a copyright infringement claim against the creator.

The creator of an NFT should also be aware of any trade mark rights which may be infringed in the creation of the NFT. If an NFT reproduces and takes unfair advantage of, or is detrimental to, an existing mark, it may constitute trade mark infringement.

NFT law in respect of trade marks and copyright is complex, and so it is recommended that legal advice is sought if there is any uncertainty or a dispute arises on this point, particularly if a claim of infringement of third-party rights is made against you as a creator. We are able to assist and advise as required.

Clarity on Rights

Smart contracts (which determine the terms under which the NFT is sold and the rights and obligations that accompany the NFT) should set out and provide for the IP rights (copyright) being sold/retained/licensed. However, standard form smart contracts may not provide sufficient clarity to protect a creator – rights may be inadvertently disposed of or waived.

Also, if an NFT is misrepresented, a creator also risks falling foul of advertising and other ‘sale of goods’ regulations.

If you are accused of infringing a third party’s rights in your creation of an NFT, or you are concerned that it is not clear what IP rights are provided with an NFT you have created, we would recommend contacting us without delay.

NFT Documentary - The Great Digital Art Heist

Thousands of pieces of digital art are being stolen as unauthorised NFTs every day. This is the story of the artists being affected and whether anything can be done to stop it.'

Frequently asked questions about NFT litigation

Are NFTs refundable?

Whether or not an NFT is refundable will ultimately depend on what the NFT is and whether an NFT marketplace offers an Ethereum Request for Comments (ERC). This is a smart contract which can provide a collector with the opportunity to request a refund within a given timeframe – offering proof of security and greater protection against security. This is not something that is offered across the board for NFTs, however.

Is an NFT copyright protected?

Most NFTs are metadata files that are encoded using a work that may or may not be subject to copyright protection.

However, NFT copyright issues can certainly occur when the NFT represents or directs to a work that copies the whole, or a substantial part, of an original work without the copyright owner’s permission.

Can I make an NFT from someone else's art?

If you mint a piece of non-original artwork from someone else’s work without their permission, it risks being considered copyright infringement, and could lead to potential NFT litigation being brought.

NFTs and Intellectual Property Rights; Friend or Foe - Podcasts

In these Podcasts we discuss the intellectual property issues surrounding non-fungible tokens or NFTs - the must have new cryptoasset.

Speak to our NFT dispute lawyers in London

If you wish to discuss any of the above issues, we recommend that you do not delay in contacting our specialist IP Team.