More on NFTs and Copyright

Just the other day, we talked about what’s actually inside an NFT, and what you get when you “buy” one.

One of the things I wondered was whether there are any NFTs that, when you buy them, you actually get full control and ownership of the digital content associated with it; as in an actual transfer of copyright.

This turns out to be a variously interesting question! In the US, we have Title 17, chapter 2, paragraph (or whatever) 204.a which reads:

A transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.

US Copyright Law

Here in the Age of Digital Everythings, it is naturally unclear just what “in writing and signed” means. Does email count as “in writing”? Does some sort of random “e-signature” thing count as “signed”? Does someone having clicked “Okay” on a box saying “Do you hereby sign this?” count?

There appears to be a limited amount of case law on this subject. You got your Metropolitan Regional Information Systems, Inc. v. American Home Realty Network, Inc., Appeal No. 12-2102 (4th Cir. July 17, 2013), which considered inter alia

whether a subscriber, who “clicks yes” in response to MRIS’s electronic TOU prior to uploading copyrighted photographs, has signed a written transfer of the exclusive rights of copyright ownership in those photographs consistent with Section 204(a).

and noted that

Although the Copyright Act itself does not contain a definition of a writing or a signature, much less address our specific inquiry, Congress has provided clear guidance on this point elsewhere, in the E-Sign Act.

Basically the E-Sign Act says of various legal transactions that “a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation”, and qualifies that with some definitions and exceptions and stuff.

The Met. Reg’l. Inf. Sys. decision further references yer Vergara Hermosilla v. Coca-Cola Co., 2011 WL 744098, (S.D. Fla. Feb. 23, 2011), which rather casually and in passing “reasoned that allowing the transfer of copyright ownership via e-mail pursuant to the E-Sign Act accorded with, rather than conflicted with” the purpose of Section 204 up there, and was therefore okay.

Given this rather sparse case law, it seems like simply being online / electronic / digital doesn’t prevent a transaction causing a transfer of copyright. The further question, then, is whether the specific online action of buying (selling) an NFT, can do that.

I will boldly state here that the answer is No. The simple fact that an API request came into some server (however well digitally signed and authenticated it was) that caused a block to be posted to some blockchain (however decentrally and securely) that led to some Solidity code being executed that in turn caused a different ID to be associated with a particular NFT, is not sufficient by itself to transfer any copyright ownership from one person (or other entity) to another.

Why not? Because what a court looks at to determine whether a copyright transfer (or other things, like assent to license terms) actually occurred isn’t anything about what happened with some bits inside a computer; rather, it’s the actual intent of some human somewhere when they took some action.

In the moderately famous Specht v. Netscape Communications Corp. – 306 F.3d 17 (2d Cir. 2002), for instance, the court was asked to decide if someone pushing the “download” button on a web page was bound by certain license terms, when those license terms were visible only if the user scrolled further down the page and clicked on a link leading to a copy of the license agreement. The license agreement started (sorry for the shouting):


In the analysis of this case, the court noted various prior decisions, holding that various “shinkwrap” and “click-wrap” and “browse-wrap” licenses (love the terms) either were or weren’t valid in various circumstances.

The basic finding in Specht here is that

The case law on software licensing has not eroded the importance of assent in contract formation. Mutual assent is the bedrock of any agreement to which the law will give force.

And I would claim that the fact that a particular request came into a particular server, can never in itself prove any human’s assent to anything.

(I can imagine some argument that, because the request was signed with some human’s private key, and because that human had reason to know that they should be very careful that no other person and no piece of software ever has access to that key without their consent, that by allowing the human and/or programmatic sender of the request access to their key, they implicitly assented to anything that that key was used for. But I hope and trust that auch an argument would fail, because it’s silly.)

It depends on the User Experience

On the other hand, given what we found earlier in this post, it seems very likely that a human action that results in the programmatic transfer of an NFT, can also result in the legal transfer of copyright ownership. The human action just has to be in writing and signed (within the still-somewhat-squishy meaning of the E-Sign Act), and has to be an action that actually indicates intent and assent to that copyright transfer.

So for instance (and like everything else in this post, I am not a lawyer and this is not legal advice and you can never sue me for anything and if you do I automatically win), say that when I went to buy an NFT I got a popup saying “Do you realize that by buying this NFT you will become the copyright owner of Thing X?” and it wouldn’t go through until I pressed Yes, and also the copyright owner would get a popup saying “Ceoln wants to buy your NFT for $D and do you want to allow this, realizing that if you do you will be transferring total ownership of Thing X to them?” and it also wouldn’t go through until they pressed Yes.

In this case, I would imagine that a court would be likely, if asked, to find that copyright transfer had actually occurred if we both pressed Yes and there was nothing weird going on.

Note that this has nothing whatever to do with there being an NFT involved; that system would successfully effectuate a copyright transfer if the owner of the copyright on Thing X was recorded in a MySQL database somewhere, or even not formally recorded at all. (Although in the latter case it would be harder to prove it had happened if one party denied it.)

A more convenient and less clear case would be if the person owning the copyright clicked Okay on a popup when the NFT was minted, saying “By clicking Okay, you agree to transfer complete ownership of the copyright on Thing X to whoever buys this NFT from you in the future”, and then when someone bought it they got a popup as above, and then the NFT changed hands without any further action by the copyright owner. Is a contract like that valid and enforceable? Can you make a contract with someone unknown and unspecified, such that it takes effect without any further action by you in the future when the other party becomes known? I don’t know! One interpretation would be that the creator is actually entering into a contract with the NFT marketplace operator, agreeing that in the future they will assign copyright; but could that actually make the assignment happen automatically in the future?

Further reading

There are a few documents here and there about copyright and electronic transfer and NFTs, most of them brief, acknowledging that everything is untested, and citing various possibly-relevant cases. There are various issues that we haven’t considered here (for instance “what happens when someone mints an NFT pointing at some text or image that they don’t own the copyright on themselves?”).

Copyright transfers by email and website terms of use
You can transfer a copyright without saying ‘copyright’
What are the copyright implications of NFTs?
No, NFTs aren’t copyrights
The Rise of Non-Fungible Tokens (NFTs) and the Role of Copyright Law – Part I Part II

Or, really, you could just do a web search on “NFTs and Copyright”.

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