(This article is written by Pratik Kumar, LL.B, 3rd Year, Modern Degree College of Law Duhai Muradnagar Ghaziabad Uttar Pradesh, during his internship at LeDroit India.)
Keywords
- Blockchain
- Non-Fungible Token (NFT)
- Intellectual Property (IP)
- Ownership Rights
- Licensing
- Digital Asset Transfer
Abstract
Blockchain technology, combined with the emergence of Non-Fungible Tokens (NFTs), has transformed the way digital assets are identified, traded, and owned, introducing new complexities into intellectual property (IP) law. NFTs are blockchain-based tokens that provide each digital item with a unique identifier, ensuring authenticity, traceability, and an immutable record of ownership. While this innovation has revolutionized digital asset transactions, it raises critical legal questions regarding the extent to which purchasing an NFT equates to acquiring rights over the underlying intellectual property.
In most jurisdictions, owning an NFT represents control over the token itself rather than automatic ownership of associated copyrights, trademarks, or other IP rights. The creator typically retains these rights unless an explicit legal agreement transfers them. This distinction mirrors traditional art sales: purchasing a physical painting grants possession but not the right to reproduce or license the image commercially. Therefore, without clear contractual terms, NFT buyers generally receive only limited rights, often restricted to personal use or resale of the token.
This article examines how various legal systems—particularly India’s—address this intersection of blockchain technology and IP law. It analyzes statutory requirements, such as the need for written copyright assignments under the Indian Copyright Act, the role of smart contracts under the Information Technology Act, and the broader global approach. Additionally, it considers licensing models, emerging case law, and disputes that reveal gaps between technological capabilities and existing legal frameworks.
While NFTs provide secure mechanisms for proving ownership and establishing provenance, they do not independently alter or replace established intellectual property regimes. To ensure valid transfer of rights, parties must combine blockchain transactions with traditional legal instruments, clearly defining the scope of ownership, licensing, and usage. This evolving landscape demands legislative clarity and standardized contractual practices for future certainty.
Introduction: Blockchain and NFTs in Context
Understanding Blockchain
Blockchain is a type of distributed ledger technology designed to record and verify transactions across a network of computers rather than relying on a single central authority. Each transaction is stored within a “block,” which contains three key elements: the data being recorded, a precise timestamp of when that transaction occurred, and a cryptographic hash—a unique digital signature that links each block to the one before it. These blocks connect sequentially to form a “chain.”
This structural design ensures a high degree of immutability. Once information is entered into the blockchain and confirmed by the network, it cannot be modified without altering all subsequent blocks, which would require the consensus of the majority of the network’s participants. As a result, blockchain acts as a tamper-resistant, transparent ledger that participants can trust even in the absence of an overseeing intermediary.
From a legal and regulatory perspective, blockchain is more than just a technological innovation. It functions as a trust infrastructure—a decentralized system where transparency, verifiability, and security are built into its core protocol. These characteristics make blockchain particularly valuable in areas where proof of authenticity and permanence are essential. For example, financial institutions use blockchain to streamline cross-border payments, reduce fraud, and maintain accurate transaction histories. Supply chain networks deploy it to trace the origin and movement of goods, ensuring that data on sourcing, manufacturing, and delivery remains accurate and auditable.
One of the most transformative applications of blockchain technology has emerged in the field of digital asset tokenization, where physical or virtual assets are converted into digital tokens recorded on a blockchain. Among these tokenized assets, Non-Fungible Tokens (NFTs) have become the most widely recognized, especially in the worlds of digital art, entertainment, and collectibles.
What Are NFTs?
A Non-Fungible Token (NFT) is a blockchain token that is intended to prove ownership of a one-of-a-kind asset, either digital (such as art, a music file, or a video) or a digital certificate linked to a physical object. The “non-fungible” part is that each token is distinct and can’t be exchanged one-for-one for another token. As opposed to cryptos such as Bitcoin or Ethereum, which are fungible—each unit is equal in value and can be exchanged for any other unit.
An NFT contains some metadata, such as the author’s name, a serial number, and occasionally an ownership history. The metadata is placed directly onto the blockchain, creating an indestructible, traceable record that is difficult to forge or alter.
It is worth noting that an NFT is not the artwork, music, video, or file it is referencing. Instead, it is a digital proof of ownership and authenticity. The original content—whether a high-resolution image, MP3, or 3D model—typically exists off the blockchain in decentralized storage networks like the InterPlanetary File System (IPFS) or centralized servers and cloud infrastructure. The NFT contains a reference to that content, typically simplest a URL or a cryptographic hash referencing where it is stored.
Example: Suppose an artist creates a digital painting as a work of art. When the artist mints this artwork as an NFT, the blockchain stores a token with significant data: who created it, when it was created, and the unique code linking it to that specific work of art. With each sale, gift, or transfer of the NFT, the blockchain stores the transaction, forming a publicly auditable chain of ownership. This process, known as provenance tracking, provides buyers and collectors with confidence in the authenticity and uniqueness of the digital art.
NFTs thereby created a technological framework for determining uniqueness and ownership in an internet age in which digital data is replicable without end. Even if theoretically anybody could download a copy of an image that is an NFT, the NFT owner alone has blockchain-verified proof that they have the original token for the piece.
Intellectual Property Rights in NFTs
Token Ownership vs. Ownership of the IP
Legally, there is a critical distinction between having an NFT (a digital certificate tokenized) and having intellectual property rights in the content.
- Rights of NFT Buyer: They own the token, which is evidence that they are the valid owner of that blockchain entry.
- Creator’s Rights: The creator has copyright and neighbouring rights pursuant to the relevant law, unless assigned explicitly.
This is parallel to physical art buys. The sale of a Picasso painting will not transfer the rights to reproduce or license its image for commercial use. Likewise, the sale of an NFT does not necessarily transfer the copyright, trademark, or publicity right to the artwork.
Key Point: Transfer of copyright generally requires a written agreement (in accordance with Section 19 of the Indian Copyright Act, 1957 and comparable laws everywhere). Smart contracts alone may not satisfy statutory provisions of writing unless the courts consider them as valid digital signatures.
Licensing in NFT Sales
The majority of NFT marketplaces issue purchasers with limited licenses. Standard conditions include:
- Personal, non-commercial display rights.
- Resale rights on the NFT.
- No right to derivative works or modify.
Example: With the Bored Ape Yacht Club (BAYC) NFT venture, purchasers are given unusually widespread commercial rights, so that they may use their purchased Ape photos on merchandise or in the press. On the other hand, NBA Top Shot NFTs limit purchasers to personal use.
Indian Legal Perspective
India currently lacks a specific statute regulating NFTs, but existing IP frameworks apply:
- Copyright Act, 1957: Regulates written contracts for assignment of copyright; licenses to specify duration, area, and scope.
- Information Technology Act, 2000: Provides a legal status to digital signatures and electronic records, which can validate smart contracts.
- Contract Act, 1872: Governs general principles of offer, acceptance, and enforceability of NFT contracts.
There is no Indian case law so far that conclusively asserts that a record in a blockchain by itself qualifies as a valid assignment of copyright. Courts will likely insist on explicit written terms until there is legislative reform.
Transfer of IP in Blockchain Transactions
In order to transfer IP rights validly together with an NFT, the parties should:
- Complete a Written Assignment: Electronic or paper contract satisfying copyright/trademark legislation requirements.
- Connect the Assignment to the Token: The contract must be linked by the NFT metadata or smart contract.
- Record Provenance: Utilize blockchain to verify the ownership and transfer sequence.
Without doing so, the sale of the NFT merely transfers token—not IP.
Illustration:
Alice creates a song as an NFT. She sells it to Bob on OpenSea. Bob owns the token but has no legal entitlement to resell the song for its commercial use unless Alice transfers such rights to him in a separate license or assignment.
Case Laws and International Litigation
Osborne v. Persons Unknown (UK, 2022)
In this High Court case, NFTs were treated as property, allowing the claimant to be issued an injunction against hackers. The case established standards for NFTs as recognized assets under English law.
Miramax LLC v. Tarantino (US, 2022)
Quentin Tarantino attempted to sell Pulp Fiction NFTs. Miramax sued for contractual rights. The case settled but established the precedent that contractual ownership of IP can be asserted even in blockchain cases.
Hermès International v. Rothschild (US, 2023)
MetaBirkin” Hermès handbag NFTs were found to infringe on trademarks. The court rejected arguments that NFTs are simply expressive art.
Yuga Labs v. Ryder Ripps (US, 2023)
The court ruled that “RR/BAYC” NFTs violated Yuga Labs’ trademarks, which signifies the strong hold on brand rights on digital assets.
Rario v. Mobile Premier League (India, 2023)
Delhi High Court has held that the use of publicly available player names and statistics in fantasy NFT cards is no violation of personality rights.
Comparative Jurisdictional Views
United States
NFTs are already protected under current copyright, trademark, and contract law. NFTs are viewed by courts as digital property, not legal oddities. In addition, certain NFT designs may be regulated by the SEC as securities when they are investment-like vehicles.
European Union
NFTs fall under the jurisdiction of the Copyright Directive and GDPR. Smart contracts will have to adhere to data laws. MiCA regulation will soon enforce crypto asset standards that will presumably impact NFT issuance.
India
Indian laws mandatorily assign formalities for transferring copyrights. The IT Act can perhaps accept blockchain signatures, but judicial approval is still awaited.
Statutory Interpretation and Practical Consequences
- Copyright Transfer: Sale of an NFT ≠ transfer of copyright.
- Moral Rights: Authors maintain prerogatives for attribution and integrity.
- Smart Contract Limitations: Automation can neither override legal writing and signature requirements.
Possible Regulatory Future
- Laws may explicitly ratify smart contracts as written agreements.
- Industry groups could introduce standard NFT licenses.
- International agreements may standardize IP protection across borders.
Further Examples
- Music NFT: Purchasing an NFT of a tune does not entitle commercial replication without a specific license.
- Fractional NFT: Each of several owners of a fractionalized NFT cannot individually profit from the art work unless specifically agreed in writing.
Common Misunderstandings
- “Purchasing an NFT = purchasing the artwork.”
- ”Smart contracts supersede legal contracts.”
- “NFTs exist beyond law.”
Key Conclusion
NFTs, Blockchain, and Intellectual Property: Understanding Ownership in the Digital World
Blockchain and Non-Fungible Tokens (NFTs) have ignited a revolution in how we purchase, sell, and verify digital items. From artwork and music to collectibles in games and virtual land, these technologies are disrupting how ownership is marked in the digital space. But though blockchain brings revolution, it hasn’t re-written the rulebook when it comes to intellectual property (IP) rights. Actually, courts and regulators globally have left one thing clear: owning an NFT does not necessarily mean owning the IP rights that are behind it.
Break it down.
Owning an NFT ≠ Owning the IP
An NFT is actually a digital certificate, on a blockchain, which guarantees that you own a specific token. That token might be a work of art, music, or a type of digital file—but what you hold is the token, not the content. It is the same as when you purchase a painting from a gallery. You have possession of the physical canvas, but without the permission of the artist, you are not allowed to make copies, sell merchandise, or use it commercially. That is the same principle behind NFTs.
This distinction has been validated in legal systems globally. Courts in Osborne v. Persons Unknown in the UK, for instance, recognized NFTs as digital property that can be legally secured. Nevertheless, however, the court stopped short of equating NFT ownership with IP ownership.
Why IP Law Still Matters
In India, as in many countries, copyright law requires a formal, written agreement to transfer ownership. Section 19 of the Indian Copyright Act, 1957 makes it clear: unless there’s a signed document detailing the scope, duration, and territory of use, the copyright stays with the original creator. The same principle applies under U.S. law (17 U.S.C. §204) and in the European Union.
That is, even if you purchase an NFT for a digital song, video, or work of art, you generally only receive a limited license—usually just to show it privately or resell the NFT. Yourself. Smart Contracts: Powerful, But Not a Legal Shortcut
Most NFT sites make use of smart contracts—computer programs that automatically carry out provisions such as sending tokens or paying royalties. Though these are ingenious and cost-effective, they don’t necessarily qualify under the law to transfer IP. Without having a legally binding, correctly signed agreement backing them up, smart contracts typically won’t transfer copyright or trademark rights.
That’s why attorneys and platforms both are now striving to connect smart contracts with electronic agreements that are consistent with local digital signature legislation, such as India’s Information Technology Act, 2000 or the U.S. ESIGN Act.
Why Buyers Need to Read the Fine Print?
Here’s the twist: not all NFTs include the same rights. Certain collections of NFTs—such as the popular Bored Ape Yacht Club—enable the buyer to commercialize the image on their token. Others are only for personal use. Most buyers think they’re receiving complete rights to the music or art, but then discover later that their rights are relatively limited.
The takeaway? Always verify the license. Don’t depend on what is presented visually on the marketplace. Check for advanced terms of use or legal documentation.
So Where Do We Go From Here?
Until legislators enact new statutes customized for blockchain and NFTs, classic IP law remains the dominant force. Blockchain provides us with a robust means to track and demonstrate digital ownership, but it is not a substitute for contracts, laws, or legal diligence.
In the future, we’ll likely witness legal reforms that acknowledge smart contracts or incorporate IP transfers in blockchain transactions. But for now, if you’re selling, buying, or producing NFTs, you’ll still require classic legal safeguards—just like in the physical world.
Final Conclusion
NFTs and blockchain have opened up amazing opportunities for collectors and creators. But they have not replaced the legal systems that safeguard creative labor. In order to navigate this digital frontier safely, we must both have the technology and the law—side by side.
References
- Norton Rose Fulbright, NFTs and Intellectual Property Rights – https://www.nortonrosefulbright.com/en-in/knowledge/publications/cc0ad143/nfts-and-intellectual-property-rights
- Venable LLP, Intellectual Property Considerations for NFTs – https://www.venable.com/insights/publications/2023/12/intellectual-property-considerations-for-nfts
- IBM, What is Blockchain? – https://www.ibm.com/topics/what-is-blockchain
- Rario v. MPL, Indian Kanoon – https://indiankanoon.org/doc/157640585/
- Reuters, Hermès Succeeds in Trademark Infringement Suit Against MetaBirkins NFTs –
