For a long time, NFTs were known only to a few initiated lovers of cat motifs, but this would change abruptly when the first spectacular auctions aroused media interest. Meanwhile, the NFT market has broken away from its CryptoKitties niche. Artists like Beeple sell their digital works in token form by the millions, and collections like Bored Ape Yacht Club are bursting at the seams. NFTs hit a nerve. In the spirit of the age of digitization, non-fungible tokens form the ideal interface for the marketing and distribution of art, music, and memes: Internet culture can be monetized. They represent an investment for speculators and investors, artists expect a bit of financial freedom, and platforms diligently earn money from trading. But the NFT craze could end up being a zero-sum game in the long run.
NFT and the problem of copyright
Because one question remains unanswered in the unmanageable tangle of NFTs: Can the tokens really deliver what they promise? Finally, a key argument for the purchase of NFT lies in the transfer of ownership and exploitation rights of the images and musical titles represented. The metadata of a Beeple NFT guarantees the owner that it is a unique work, signed by the artist and authorized for further use.
However, this promise of values could clash with German law. Because all artistic content, be it images, musical works or naive pixel art, is protected by copyright. And that has a half-life: 70 years after the death of the author, the term of protection expires, the exploitation rights automatically pass into the public domain.
Sure: very few buyers will face such loss of rights in their lifetime. However, this makes inheritance obsolete. Even if NFTs survive on the blockchain, their value in the form of usage rights will erode in the long run. So is there a mighty sword of Damocles hanging over the NFT market?
Clearly ambiguous legal position
The fact is that anyone who thinks that an NFT also gives them exclusive and permanent ownership of a digital work of art is wrong. The legal situation is clear. As Urban Pappi, CEO of the Bild-Kunst collecting society, confirms to BTC-ECHO, “a work whose copyright protection period has expired falls into the public domain according to the law.” NFT is no exception: “Token or not, a third party could use it, for example by taking a screenshot and then printing it on a mug and marketing it.”
But as clear as the situation is regarding the term of protection, there are still some loopholes in copyright law, dating back to a time when typewriters were all the rage.
The legal question of what is meant by ownership is interesting. In the mainstream art market, this refers to the art object itself, and usage copyright often remains with the artist, so can be exercised through the visual arts as well. With NFT, ownership could be seen as a transfer of exclusive copyright to the new “owner”. I write in the subjunctive because final exams are pending.
Urban Pappi, CEO of VG Bild-Kunst
As long as lawmakers don’t readjust, much of the NFT industry is likely to remain in the subjunctive. The originality criterion could also be problematic. Because only works that have a degree of “creative height” – one could also say: a personal touch – are subject to copyright. It is obvious that this already vague criterion is reaching its limits in the copy and paste era of digital art. Therefore, AI-generated NFTs appear to fall outside copyright per se. NFT generators can also be dismissed as a neat hack with no added value.
With a race to the wall?
Precisely because of the many unanswered questions, the NFT sector is at risk of a huge bubble forming. The mix of crisis-ridden artists looking for new sources of income, champagne-soaked art patrons wanting to call the next Beeple their own, and performance-obsessed crypto investors creates a dangerous downturn.
However: the immense potential cannot be swept under the table, despite all the justified skepticism. Especially from an artist’s perspective, tokens create new foundations to secure one’s livelihood. Urban Pappi also emphasizes these effects:
On the one hand, there are advantages for artists through the distribution of NFT works: this can be configured in such a way that a part is credited to the artist’s account with each resale of the work. This mechanism corresponds to the effect of the right of participation.
But here, too, buyers could eventually be left behind. Then:
The granting of exclusive rights to the “buyer” would have a disadvantageous effect, since it would prevent the subsequent commercialization of the copyright in the work by the author himself.
A classification for the music industry would also have been interesting. However, GEMA did not want to respond to a request. The news of the NFT trend does not seem to have reached all the management companies.
This article was previously published in April 2021. It has been revised and updated accordingly for republishing.
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