In 2021, Collins Dictionary named “NFT”, short for non-fungible token, its word of the year. In 2017, the US-based Association of National Advertisers named AI (artificial intelligence) its marketing word of the year. As the recent increase in the use of both tools is evident, one wonders if they can work together. In particular, the main question for intellectual property rights holders and practitioners is currently: does AI illustrate an obstacle or rather a beneficial tool for the protection of intellectual property in the field of NFTs?
The (IP) issues behind NFTs so far
In essence, NFTs illustrate unique, non-interchangeable units of data that can be sold and traded. These units are stored on a digital ledger using blockchain technology, a system already widely known for its use for cryptocurrencies, such as Bitcoin.
As NFTs are completely unique and cannot be traded identically, selling and trading them has recently gained prominence following the “tokenization” or minting of virtual works of art on NFT platforms. Paintings, internet memes or even tweets have been tokenized and “collected” by users on digital marketplaces like OpenSea, SuperRare and Myth Market.
Apart from its negative impact on the climate due to the enormous amount of computing power used to create blockchain assets, the trend towards tokenization has been deemed particularly problematic from an intellectual property perspective. For example, trademark words, logos, designs or silhouettes belonging to brands such as Adidas, Hermès, PlayStation, Gucci, Ford or IKEA have been transformed or incorporated into various NFTs without the prior approval of the rights holder. Copyrighted works like “Mona Lisa”, “Dune” or Spider-Man characters have shared the same fate.
However, as trademark and copyright owners are the exclusive rights holders who may use, reproduce or distribute the original and therefore also its reproduction as an NFT, anyone else who mints and sells NFTs is in breach of these intellectual property rights. Since the original work or trademark remains unaltered and is commercially distributed on NFT platforms, an exception to trademark or copyright infringement based on explicit legal provisions or the doctrine of the fair use seems outlandish.
Another twist caused by AI?
The relationship between NFTs and IP protection can be further complicated by AI interference. For example, AI technology can now be used to create NFTs by entering keywords which are then transformed into artistic-like images. The AI thus makes it possible to generate tokens without any coding skills of the users.
Given the counterfeiting issues described above, another question arises. Owners of intellectual property rights must now be concerned not only with the unlicensed use of their works or trademarks; they must also solve the riddle of who or what is responsible. It is conceivable that the developer of the AI, the entity owning the AI technology, the users of the software, or the AI itself could be held liable. Courts and legislators may therefore soon have to provide clarifications in order to resolve the prevailing legal uncertainty.
In addition, the implementation of AI brings into question the protection of intellectual property with regard to ownership aspects. At the beginning of February, the US Copyright Office decided that only a human being could be considered the author of a work. This decision could have consequences for digital creations such as NFTs where an AI system produces the work after processing the various codes and algorithms. As the program “does the lion’s share of the work” (as noted in Reardon LLC v. The Walt Disney Co., 293 F. Supp. 3d 963 (ND Cal. 2018)), it currently remains unclear who else” merit” to enforce the copyright of the NFT.
The potential of AI to prevent misappropriation of intellectual property
Although AI can further complicate the IP landscape surrounding NFTs, it can also help NFT platforms achieve positive development. On the one hand, start-ups are currently creating and optimizing AIs that can detect already existing NFTs that infringe the works of third parties. On the other hand, misappropriation of IP can also be avoided before the NFT is minted. AI software can be deployed to score similarities and verify the originality of digital works so that NFT creators are required to upload only original content.
Therefore, these bridges between AI and blockchain technology can successfully protect intellectual property rights holders. Overall, AI can be used intelligently to reconcile the interests of NFT coiners, platform operators and IP rights holders.