Unlocking the digital canvas: exploring the rights transferred in the sale of NFTs

The sale and acquisition of non-fungible tokens (“NFTs”) have ignited immense curiosity and excitement among artists, collectors, and enthusiasts. These unique digital assets have revolutionised the notion of ownership, presenting a novel way to authenticate and trade digital creations. Over the past decade, the marketplace has undergone a notable metamorphosis, witnessing the rapid emergence of innovative technologies and niche sectors.[1] Amidst this transformative landscape, blockchain technology has emerged as a disruptive force, unlocking a multitude of possibilities for industries to explore the potential of digital assets. Among the myriad developments, the rise of NFTs has garnered significant attention not only within industries but also within the legal community.[2]

The allure of NFTs lies in their distinctive ability to confer ownership and authenticity to digital creative works. The increasing number of collectors flocking to NFT marketplaces, some investing millions of dollars, serves as a testament to the market value and allure of these tokens. Diverging from traditional fungible assets, NFTs possess inherent uniqueness and immutability, rendering them indivisible and irreplaceable.[3] Each NFT embodies a singular digital asset, accompanied by algorithms and metadata that distinguish it from existing tokens on the blockchain. So, what precisely constitutes an NFT? Essentially, an NFT represents a digitalised manifestation of an underlying work, encompassing various forms of art, music, memes, and even physical commodities such as shoes or clothing.[4]

The process of “minting” involves tokenising these works and uploading them onto designated platforms or marketplaces. Through the integration of metadata on the blockchain, NFTs establish a secure record of ownership and authenticity, enabling direct transactions between buyers and sellers.[5] However, it is crucial to comprehend that the acquisition of an NFT does not inherently transfer the underlying intellectual property rights associated with the digital work itself. The extent of ownership rights related to an NFT is typically delineated within the smart contract, website terms, or separate agreements with the copyright owner. Primarily, NFTs serve as digital certificates of authenticity, verifying the origin and singular nature of the asset.[6] This article will embark on a comprehensive exploration of NFT sales, delving into the intricacies of the rights involved in their acquisition.

Rights transferred During Sale Of NFTs

During the sale of an NFT, the specific rights being transferred varies from transaction to transaction depending on the terms and conditions set forth by the creator of the NFT or the platform where the NFT is getting sold.[7] Broadly, the rights which are granted by a contract of sale of an NFT can be categorised into the following six categories:

    1. Ownership and Authenticity of the NFT: The primary right transferred through the sale of an NFT is ownership of the token itself. The blockchain technology underlying NFTs ensures the uniqueness and authenticity of the digital asset, providing proof of ownership. Certain contracts may limit the rights obtained by the buyer to just this and nothing more. The buyer will only be permitted to use the NFT to show ownership and use the associated work for personal and non-commercial purposes.[8] An example of this can be NBA TopShot Moments.

      This is an NFT which contains the video highlight clips of different NBA matches. Similar to traditional NBA trading cards, the value of each Moment increases with its rarity. They also derive value because the NBA officially licenses these Moments and then sells them. However, in the process of selling, as can be seen in the terms of sale, NBA continues to retain the copyrights over the video highlight. The buyer will only be getting the claim to ownership and authenticity of the Moment.[9]

    1. Underlying Copyrights: It is important to note that the sale of an NFT does not automatically transfer the underlying copyright of an associated digital artwork or content. According to Section 19 of the Indian Copyright Act, 1957, a transfer of copyright can be considered to be valid if it done in writing and signed by the copyright owner. Therefore, the transfer of copyrights through an NFT requires an explicit mention of the assignment of the copyright as per the different requirements of Section 19.[10] An example of this can be The Fungible Collection.

      This is an NFT which contains artwork made by the digital artist Pak. A perusal of the terms of sale of these NFTs by Pak reveals that along with the claims of ownership and authenticity, the sale also transfers the underlying copyrights of the associated digital artwork.[11]

    1. Usage and Display Rights: In certain cases, the purchase of an NFT can also include certain usage and display rights. These rights may allow the buyer to exhibit the digital asset in virtual galleries, showcase it on social media, or use it as a profile picture or avatar. The specifics of these rights can vary, and it’s crucial to review the terms and conditions of each NFT sale to understand the permissible uses.[12] An example of this can be Everydays: the First 5000 Days.

      This is an NFT containing digital works of art created by Mike Winkelmann, also known as Beeple. The artwork contains 5000 different digital pieces of art created by Beeple and placed side by side. This NFT was sold for $69.3 million in 2021, which made it the most expensive NFT ever sold. This sale only included the rights to ownership and authenticity along with rights to use and display the associated artwork to the public. But since there was no mention of copyrights being transferred or assigned to the buyer, it can be presumed that the creator Beeple retained the copyrights in the work.[13]

    1. Commercial Usage: Certain NFT projects and platforms have explored the concept of granting commercial usage rights to buyers. This means that purchasers may have the ability to utilise the NFT for various commercial purposes, such as merchandising, licensing, or incorporating it into other creative works. However, these rights are often subject to negotiation and have to be explicitly mentioned in the contract of sale. Or sometime, the seller and buyer would have to enter into a separate licensing contract for assigning these rights, without the transfer of copyrights.[14] Example of this can be Doodles and Bored Apes.

      The Bored Apes NFT is a collection of different looking cartoon artworks of apes which are designed in the form of profile pictures. The sale of these NFTs includes a clause which enables owners to commercialise their holding of the particular Bored Ape through merchandise. This sale also includes the rights of claiming ownership, display and usage rights. However, the copyrights have been explicitly vested with the creators, Yuga Labs.[15]

    1. Royalties and Revenue-Sharing: Another interesting development in the NFT space is the implementation of royalty or revenue-sharing mechanisms. Some NFT projects have introduced smart contracts that automatically allocate a percentage of future sales or transactions involving the NFT back to the original creator. This arrangement ensures ongoing support and recognition for the artist, even after the initial sale. Buyers who purchase NFTs with these provisions contribute to the artist’s potential long-term success and can participate in supporting their creative endeavours.[16]

      An example of this can be Azuki. This PFP (“profile picture”) project which contained 10,000 NFTs of anime-inspired artwork, has gained great prominence. This PFP NFT was first sold in January 2021, and since has been traded vigorously on crypto markets. However, the sale of this NFT included a clause within it which required a form of royalty or revenue sharing given to the original creator for any subsequent sale of the NFT. Along with this condition, this NFT, being a PFP, allowed the owner to use and display this.[17]

    1. Access and Membership Rights: In addition to the ownership of the NFT itself, some projects provide additional benefits or access to buyers. This can include exclusive memberships, early access to future releases or events, or participation in the governance of the NFT project. These rights extend beyond the token’s value and create a sense of community and engagement for the buyers.[18] An example of this can be Moonbirds.

      This is a collection of 10,000 NFTs and associated artworks of pixelated owls created by internet entrepreneur Kevin Rose. While the buyer could use and display the artwork, it also provided them with an additional bonus of a Proof Membership Pass. Those owning these Moonbird NFTs had access to the Proof Conference as being its members. This was a 3-day event in Los Angeles featuring leaders in the Web3 movement.[19]

It’s important to note that the NFT market is relatively new and evolving rapidly, resulting in a lack of standardised practices and legal frameworks. The rights associated with NFTs can vary significantly between platforms and projects.[20] Therefore, thoroughly reviewing the terms and conditions associated with each NFT purchase is crucial. If necessary, seeking legal advice can help ensure a clear understanding of the rights and obligations involved in the transaction. As the NFT ecosystem continues to develop, new models and approaches may emerge, expanding the rights transferred during NFT sales. Staying informed about the latest trends, best practices, and legal considerations surrounding NFTs will enable buyers and sellers to navigate this dynamic landscape more effectively. It’s worth noting that the legal implications and enforceability of NFT-related rights may vary across different jurisdictions.[21]

In India, it will mainly be the Copyrights Act, 1957 and the Indian Contracts Act, 1872, and their subsequent principles, which will govern the nuances of these transactions. As the technology and its associated legal frameworks evolve, governments and regulatory bodies are likely to address these issues more comprehensively.[22] Apart from considering NFTs as Virtual Digital Assets under the Income Tax Act, 1961 and imposing a shadow ban on financial institutions from using virtual currencies, the Indian state has not acted much on governing NFTs, their sale and associated rights. Therefore, it’s essential for both buyers and sellers to be extremely careful in reading and understanding the contracts of sale before engaging in the sale and purchase of NFTs.[23]


In conclusion, the sale of NFTs presents a unique set of challenges when it comes to determining the rights being transferred. With the absence of specific regulations governing the NFT market space, uncertainty looms over the extent of ownership and exploitation rights enjoyed by NFT owners. To address this issue, it is crucial to establish clear frameworks and standards that outline the terms and conditions of NFT use. One potential solution lies in ensuring that smart contracts accompanying NFTs are easily interpreted by buyers.[24] By enabling buyers to understand the agreements contained within these contracts, the risks of inadvertently infringing upon someone else’s copyright can be significantly reduced. Additionally, the inclusion of standardised terms and conditions can provide further clarity and transparency.

Under Indian Copyright Law, it is advisable for parties involved in NFT transactions to have written agreements that outline the conditions for the use of NFTs and the underlying works.[25] These agreements, whether in the form of assignment or license agreements, should be signed by both parties. These written agreements can work in tandem with smart contracts, serving as a supplementary layer of protection for buyers. By delineating the rights of the buyer and clearly defining the permissible extent of NFT exploitation, the likelihood of copyright infringement can be minimised. Since copyrights are highly territorial,[26] any dispute concerning the underlying copyright of the associated artwork, would have to be raised in the jurisdiction where the infringing action needs to be curbed, which is usually the place of residence of the buyer.

So, the jurisdiction of such disputes would be the country where the buyer of the NFT resides and where the infringement of the copyrights happens (cause of action). The governing law would also be the domestic law of this country. In the evolving landscape of NFTs, it is crucial to strike a balance between technological innovation and legal safeguards. As the market matures, regulatory bodies should consider adopting comprehensive frameworks that address the unique challenges posed by NFTs. By providing legal clarity and establishing enforceable rights for buyers, the NFT ecosystem can thrive while mitigating the risks associated with intellectual property infringement.

 Photo: 212771355 © Rokas Tenys | Dreamstime.com

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[2] Tiffany M’bodj, ‘Are NFTs for Retailers The Next Big Thing in Retail Innovation?’ (Detego, 17 January 2022) accessed 26 June 2023

[3] Diego Geroni, ‘Understanding The Attributes Of Non-Fungible Tokens (NFTs)’ (101 Blockchains, 01 September 2021) accessed 16 June 2023.

[4] Rakesh Sharma, ‘Non-Fungible Token (NFT): What It Means and How It Works’ (Investopedia, 06 April 2023) accessed 26 June 2023.

[5] ‘What is an NFT (Non Fungible Tokens)? What does NFT Stand for?’ (Blockchain Council) accessed 26 June 2023.

[6] Jamilah Lim, ‘NFTs explained: Here’s why they’re not cryptocurrencies’ (Tech Wire Asia, 07 December 2021) accessed 26 June 2023.

[7] ‘NFTs and Copyrights’ (K Law, 12 July 2022) accessed 26 June 2023.

[8] Steven Ehrlich, ‘What Rights Come With Your NFT’ (Forbes, 13 March 2023) accessed 26 June 2023.

[9] Robyn Conti, ‘Guide To NBA Top Shot’ (Forbes, 30 January 2023) accessed 28 June 2023.

[10] Prashant Kataria, ‘NFTs in India: Legal implications’ (The Hindu Business Line, 18 July 2022) accessed 26 June 2023.

[11] Fang Block, ‘Sotheby’s Embarks on NFTs With Digital Creator Pak’s ‘The Fungible Collection’’ (PENTA, 06 April 2021) accessed 28 June 2023.

[12] Keystone Law, ‘NFT project creators – what you need to know about regulation’ (Lexology, 12 May 2023) accessed 26 June 2023.

[13] Will Gompertz, ‘Everydays: The First 5000 Days – Will Gompertz reviews Beeple’s digital work’ (BBC, 13 March 2021) accessed 28 June 2023.

[14] Karyssa Clark, ‘NFT Copyright License Rights: Due Diligence is Critical’ (Traverse Legal, 17 April 2021) accessed 26 June 2023.

[15] Daniel Van Boom, ‘Bored Ape Yacht Club NFTs Explained’ (CNET, 11 August 2022) accessed 28 June 2023.

[16] Andrew R. Chow, ‘NFTs Are Shaking Up the Art World—But They Could Change So Much More’ (Time, 22 March 2021) accessed 26 June 2023.

[17] Langston Thomas, ‘The Ultimate Guide to Azuki NFTs: Everything You Need to Know’ (NFT Now, 25 April 2023) accessed 28 June 2023.

[18] Oluwademilade Afolabi, ‘NFT Memberships: The New Way to Access Exclusive Communities’ (2022) accessed 26 June 2023.

[19] Langston Thomas & Erika Lee, ‘A Guide to Moonbirds: What Are These PFP Owl NFTs?’ (NFT Now, 30 May 2023) accessed 28 June 2023.

[20] Ahmad Saleh, ‘NFTs, Intellectual Property and Other Legal Considerations: A Wake-Up Call’ (Al Tamimi & Co.) accessed 26 June 2023.

[21] ‘What are the legal issues around NFTs?’ (Osborne Clarke, 14 October 2021) accessed 26 June 2023.

[22] Bipul Kumar, ‘NFT’S And Indian Law’ (Khurana & Khurana, 06 June 2022) accessed 26 June 2023.

[23] BTG Legal, ‘NFTs in India – Where do they fit in?’ (Lexology, 13 October 2022) accessed 26 June 2023.

[24] Stuart D. Levi & Alex B. Lipton, ‘An Introduction to Smart Contracts and Their Potential and Inherent Limitations’ (Harvard Law School Forum on Corporate Governance, 26 May 2018) accessed 26 June 2023.

[25] Anand and Anand, ‘Copyright Ownership and Transfer in India’ (Lexology, 25 May 2022) accessed 26 June 2023.

[26] Radim Polčák, ‘Territoriality of Copyright Law’ in Petr Szczepanik, Pavel Zahrádka, Jakub Macek & Paul Stepan, Digital Peripheries: The Online Circulation of Audiovisual Content from the Small Market Perspective (Springer, 2020).