Non fungible tokens (NFTs), the latest vehicle for capturing, linking to and licensing  intellectual property. NFTs are being used in all forms of entertainment, gaming, art and science. The tokenization of digital files so that a single owner of that file can be recorded on the blockchain and identified is an important breakthrough in IP protection.  

Intellectual property should be registered with the USPTO or Copyright office to receive maximum protection.. Linking your copyrighted work to a NFT and recording ownership on the blockchain shows provenance or immutable ownership. That NFT can be transferred or licensed to subsequent NFT owners, all of which is recorded on the blockchain. 

Owners of NFTs linked to copyright protected works, whether buying or selling, need to be aware of both copyright and trademark law. You bought a Bored Ape NFT.  But can you use the words “Bored Ape” when that brand is registered as a trademark by the project owner Yuga Labs?  The Bored Ape image you bought, as linked from your NFT, feels like it is yours.  But is it?  You need to check Yuga lab’s licensing terms to determine what rights you received in the image, when you bought the NFT.

You as an NFT owner may – or may not- have received the rights you need to make a commercial use of your digital work.  If you don’t own the NFT, you might still wonder how you can use the image which appears on Google search or at the OpenSea marketplace.  Can I copy and use a digital asset linked to an NFT? What if I ‘right click’ and save a NFT linked digital image?  

Trademark infringement and Copyright Infringement are risks which you need to assess before you buy an NFT or use a linked digital asset. This post is going to discuss the defense of “Fair Use” to a copyright infringement lawsuit or threat letter.  Like all other copyrighted works, the issue of “Fair Use” also arises in the Eeb3 and NFT space.

What is a Fair Use Defense to a Copyright Infringement Claim?

The argument for fair use is a legal defense to a claim of copyright infringement. There is no hard and fast rule on what can be considered fair use of copyrighted items, but there are a few factors that can help determine if fair use will apply. 

• Purpose of use: Is the intellectual property being used commercially or for non-profit educational purposes?

• Portion of copyrighted work used: How much of the protected work was used and how substantial was it?

• Effect on market value: Has the use of the intellectual property affected its market value?

• Nature of use: In what context is the IP being used?

A few examples of what may be considered fair use includes: teaching, journalistic reporting, criticism, comment, or research. This list is not all inclusive, each scenario is different. 

Does “Fair Use” Apply to NFTs? 

Fair use applies to any copyrighted intellectual property, that can include digital files (images, videos, artwork, documents, audio files, etc) linked from non fungible tokens. The newness of NFTs and how they can potentially be used in the future creates some instability and legal confusion for individuals. 

A digital work linked to an NFT can be for personal use or for commercial use. The Fair Use defense works better when the use is non-commercial.  

NFT Copyright Infringement Issues

Before any type of fair use determination can be made, there must be a colorable claim of copyright infringement.  The digital files linked to NFTs are sometimes protected by copyright laws. You may be guilty of copyright infringement if you are misusing an NFT you purchased or if you are creating an NFT from copyrighted work which you do not own. It cannot be stressed enough to know what you are purchasing and what rights of use come with it. If you are not infringing on the copyright, fair use does not need to be considered and is not required. 

NFT legal information online can be inconsistent and outdated. When it comes to NFTs, copyright infringement and the defense of fair use , each case is different. Legal counsel will have the knowledge and experience to navigate each factor of the fair use clause to help you determine if your prospective use of an NFT linked file is protected under the fair use doctrine.

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