NFTs applied to the art sector: Legal issues and recent jurisprudence

Abstract

Responding to the necessity of scarcity and uniqueness in the digital format, NFTs (Non-Fungible Tokens) have recently gained much attention in cultural industries, especially video games and the art market. Faced with the digital paradigm shift and the challenge of dematerialization, creators started to use NTFs in order to emulate the concept of rarity for displaying, promoting, and monetizing their works in digital environments. An NFT is a certificate of ownership implemented through encrypted metadata pointing to a unique copy of a digital file. Likewise, NFTs enable the tokenization of a large array of digital, or even physical, assets. For this reason, they are used to facilitate the digitalization of contents heavily dependent on copyright and scarcity. Non-Fungible Tokens represent an emerging reality of significant economic, social, and cultural importance, which also raises important legal issues especially concerning the very nature of the NFT, as property or license, and the usage of copyrighted contents or trademarks. Indeed, the most frequent legal issues with NFTs are related to the attribution and exploitation of the Intellectual Property (IP) rights of the underlying content or litigations about non-contractual matters (i.e., theft). Litigious cases affecting NFTs most often take on an international dimension due to the decentralized nature of the technology on which they are developed, distributed on servers hosted in a multitude of countries, as well as the business practices of trading platforms that connect users from all over the world. Consequently, the principles of Private International Law (PIL) are applied to solve legal conflicts. This study focuses on the resolution of litigations related to NFTs in the three countries leading the global art markets: the US, the UK, and China. The analysis focuses on the application of international private law in relation to recent jurisprudence concerning conflicts involving NFTs and artworks.