buying an NFT is buying wind

What do you own when you buy an NFT? This is the question that is asked a study e Galaxy, an investment company, mining, financial advisory and active trading in the blockchain sector, published on August 19. This shows that neither creators nor buyers really know where they are stepping, and that markets voluntarily maintain artistic ambiguity.

No, buying an NFT is not the same as buying a JPeG

Based on an analysis of the leading NFT collections on the market, Galaxy Digital concludes that “The vast majority of NFTs grant zero intellectual property rights to their underlying content”than NFT transmitters “seems to mislead buyers”, and that markets like OpenSea do nothing to clarify the situation. The company summarizes the situation as a “Labyrinth of Obscure, Deceptive, Complex and Restrictive Licensing Agreements”.

“Most people think that buying NFTs is buying jpegs, the image files we see on OpenSea for example. But in reality, the issuers of NFT collections retain full ownership of these images.”, says Galaxy, which has reviewed in detail the licenses attached to these collections. Almost all offer only one usage right, with variable commercial usage rights.

Zero intellectual property rights

Galaxy explains the root of the problem. “The mere fact that an NFT shows an image does not, by itself, give the owner of the NFT any rights to that image, any more than the creation of a Mona Lisa NFT gives its creator any rights to the Mona Lisa.” The law is clear: in the United States, copyright (which differs from French copyright) is the only recognized form of ownership of digital content. Without copyright, the owner of the NFT is not the owner of the content, but a simple holder of a license by which the author grants him certain rights. “What you own is the token that points to a rarity. In this sense, a buyer of the NFT is leasing it to the true owner of that rarity”for example for Yuga Laboratoriestranslated Galaxy.

However, copyright holders have the right to modify or revoke this license when and how they wish. “which is a major flaw in the architecture of NFTs”, Galaxy considers. Proof, Birds of the Moon (pixel headphones, 8e the global collection of NFTs in market value) has moved away from the rhetoric “you own the intellectual property rights” under a Creative Commons CC0 license, which constitutes bringing the works into the public domain. No more copyright, but no more interest in buying NFT!

“Major flaw” in the architecture of NFTs

Yuga Labs (BAYC, Crypto Punks…), which would represent 63% of the capitalization of the 100 largest NFT collections, has also modified its license for Bored Ape Yacht Club. This determines that the buyer of an NFT BAYC “completely mastered the basic work”. For Galaxy, it’s highly contradictory: the mere existence of the license proves that Yuga Labs owns the rights. The company is the only one that can grant the license. If you really own a job, why do you need a license?

Galaxy deals a major blow to the NFT edifice, believing that while rights to use content associated with an NFT are entirely dependent on the permission of the actual copyright holder, “It’s not even certain that a blockchain is required”. Blockchain’s interest in the secondary market remains.

In France, the CSPLA rules: an NFT is a document of ownership in a token

A CSPLA report (High Council for Literary and Artistic Properties) on NFTs, published on July 12, provides additional insight into the thoughts of the Galaxy study. Despite the differences between American and French copyright law, the CSPLA reaches the same conclusions.

The head of the mission and the relator, respectively the lawyer in the Court and the master of claims in the Council of State, conclude that the NFTs cannot be similar, except in exceptional cases, neither “for a work of art in the sense of the intellectual property code, its smart contract not being able, in the state of observable technical capacities, to contain the file which is based on the blockchain (…), nor a certificate of authenticity, in the absence of any third-party verifier of the authenticity of the linked file or its authorship”.

The Mission proposes to consider an NFT “as a deed of ownership for the token registered on the blockchain, to which other rights may be attached to the digital file to which it refers, the purpose, nature and extent of which vary according to the will of its sender.” In other words, what the buyer of an NFT owns is the NFT. Point.

There are no economic rights to the associated digital work

Consistent with the meaning of the American study, the CSPLA adds that the buyer of an NFT “is not necessarily the holder of the economic rights attached to the digital file associated with it, except by contractual grant or license of rights”.

Thus, even if the Council considers that NFTs “raises complex legal issues”writes that they “They are not part of a legal vacuum: by default, the protected files they refer to remain subject to copyright and related rights. In addition to the clear contracting or general conditions offered by the platform, NFTs are not automatically transferred with all associated rights to these files”.

Enough to give cold sweats to speculators who bought their NFTs at the top in early 2022, the market has since literally collapsed in volume and value, in the wake of falling cryptocurrency prices.

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