NFTs and Copyright: The Evolution of Digital Copyright Protection?

Non-Fungible Tokens NFTs are digitally scarce, non-exchangeable cryptographic tokens that represent an underlying work such as a picture or video and exist on a blockchain, mostly used to trade in digital art and collectibles. They are the most recent blockchain development and offer a great deal of promise for the future in numerous sectors. Despite this they are unregulated and suffer from a bad reputation and illegitimacy that exists across current public blockchains and cryptocurrency, due to fraudulent actors and misconceptions of what is owned with an NFT. In this paper I posit that NFTs could be used to upgrade Digital Rights Management (DRM) through two possible solutions; a copyright register on a blockchain or moving DRM to blockchain – Distributed Digital Rights Management (DDRM). The objective of these solutions is to solve the ongoing problem of digital piracy, which DRM has never been successful in stopping through present-day encryption or content-blocking services. The other benefit is for authors to be guaranteed fair remuneration for their works by cutting out some unnecessary intermediaries and issuing licences through smart contracts. I consider that if successful, these solutions constitute an evolution of digital copyright protection, though they must first overcome legal, practical, and logistical problems. For either solution to be successful, smart contracts must be able to constitute valid legal contracts with binding obligations as all NFTs contain these to execute terms set by the person creating the token (minter). I show that under current Scots law and under England and Wales contract law smart contracts can satisfy formation requirements of a contract, but they still must overcome the challenges presented by blockchain and a lack of intermediaries such as an established dispute resolution mechanism. I demonstrate in this paper that current digital copyright protection could be upgraded with the use of NFTs, specifically in giving authors direct control over the following DRM functions for which previously they were beholden to intermediaries: Assignment; Licensing; Royalty payments; and Registration. Despite this I outline that each solution must overcome some significant challenges, leading me to conclude that a blockchain copyright register utilising NFTs is not likely to be attempted in the near future but could offer huge benefits for exploiters as well as authors. DDRM is a solution already being developed by RAIRtech and is by its nature an idea that numerous companies can compete to develop best. In the final analysis I conclude that despite their issues NFTs are the evolution of digital copyright protection. The bar has been set relatively low with current DRM, meaning an improvement would constitute an evolution, which is evidenced by the lack of reliable ownership information, authors’ options for revenue, and present-day piracy statistics. This working paper is a part of the "Outstanding LLM Dissertations 2022"