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NFTs have been a hot topic in the fashion world lately. We take a closer look at their copyright relevance in this article.

We probably don’t need to explain to anyone that NFTs have been a hot topic in recent years. Many fashion brands have jumped headfirst into the NFT game. Just think of Gucci releasing NFT to shoe originals, or Adidas’ collaboration with the Bored Ape Yacht Club. There are also already the first genuine fashion law NFT disputes, such as the case of Hermès against Mason Rothschild or Nike against StockX. In the former, an American artist created digital, artistically edited versions of the famous Hermès Birkin bag and sold them as NFTs, whereupon he was sued.

To recap briefly, “NFT” stands for “non-fungible” token. Token means that it is about the representation of something on the blockchain. These are uniquely designed and therefore not interchangeable. The blockchain is a continuously expandable list of data records in individual blocks. It is advisable to read more about this on the relevant websites, as a more detailed explanation of what the blockchain is and how it works would go beyond the scope of this article. However, it is necessary to be at least somewhat familiar with the individual steps, as we will take a closer look at the individual steps of the lifecycle of an NFT.

From a legal perspective, NFTs raise a whole series of questions, especially in copyright law.

First of all, it should be noted that NFTs themselves are very largely not protected by copyright. It is true that software and information databases can enjoy this protection. As a rule, however, NFTs do not have the necessarylevel of creation within the meaning of § 2 (2) of the German
Copyright Act (UrhG).
This is because they only consist of relatively short, simple code.

However, an NFT can have copyright relevance primarily in relation to the product linked to the token. If the product is protected by copyright, a copyright-relevant act may exist throughout the entire lifetime of the NFT, from its creation to its final sale.

Minting refers to the technical process of creating a token. A specific piece of information is written to the blockchain by code. The tokenised work is incorporated into this entry or (usually) linked. You can do this yourself or with the help of the relevant platforms such as OpenSea.

NFTs often use the ERC-721 standard of a specific blockchain (the Ethereum blockchain) and consist of a token ID and a contact address that is assigned to the respective smart contract. This contact address refers to the holder’s “wallet” (the digital wallet, so to speak, in which a user can hold his token). In this context, smart contracts are not computerised contracts, but simply codes with some instructions. Furthermore, metadata, a link to the digital content and a wallet address of the miner can be stored.

If a copyrightable work is written into the Smart Contract, the minting constitutes a reproduction within the meaning of § 16 UrhG. Reproduction is any physical or incorporeal fixing of the work that makes it perceptible to the human senses in any way, at least indirectly.

In practice, however, most people are content with linking to the work, if only to save the minting costs (so-called “gas fees”), which vary depending on the file size. The usual recording of the unique hash value assigned to the work during the minting process does not constitute a reproduction either, since the work cannot be made visually perceptible indirectly from it. The hash value merely serves to associate the token and the work.

According to European case law, the setting of hyperlinks does not constitute reproduction, since the work is not reproduced by the mere “reference” in link form, but only by the user clicking on it.

However, hyperlinking can also be considered as making available to the public pursuant to § 19a UrhG only under special circumstances. To put it simply, this provision covers uploads of all kinds. However, it presupposes that a new audience is reached by the linking. This is the case, for example, if the link overcomes technical protection measures of the right holder.

However, if the work itself or an image of it is uploaded to the platform for visualisation, this constitutes copyright exploitation. However, there are indications that in such cases the so-called catalogue freedom (§ 58 UrhG) applies, which – in short – allows sales-related advertising measures for the work used. However, the prerequisite is that the rights holder has authorised the sale of the NFT.

Furthermore, if an NFT is resold, this does not constitute an infringement of theright of distribution under § 17 UrhG, as this is also linked to tangible objects of work.

In principle, an infringement of the right to recognition of authorship (§ 13 UrhG) is also conceivable. This is because the person who mines an NFT is indicated as its “creator”. However, since NFT and work are not the same thing, as mentioned above, the original creator is not denied authorship, so that the right under § 13 UrhG is not violated.

The extent to which the platforms on which NFTs are traded are subject to copyright liability as intermediaries will be determined in the near future. In any case, in the case of infringement of intellectual property rights, a “Störerhaftung” (Breach of Duty of Care) aimed at removal and injunction is likely. This legal figure, developed by the courts, is often applied, for example, when action is taken against file-sharing platforms on the internet because copyrighted material is uploaded (think of burningseries or The parallels are obvious.

The resale right according to § 26 UrhG, which is supposed to secure the authors a part of the proceeds every time a work of visual art is resold, does not apply directly to NFTs due to the lack of physicality. With the help of the smart contract, however, it is technically possible to ensure that a certain amount of money flows back to the original owner each time the NFT is resold.

If the use is illegal, artists can in any case demand injunctive relief, removal and damages pursuant to § 97 UrhG.