A US federal court judge has dismissed claims by Canadian firm Free Holdings Inc that a work by NFT artist Kevin McCoy was his property.
The judge noted that the plaintiffs’ claims seek to exploit unclear legal areas surrounding NFT ownership.
Quantum ownership transfer not available, rules judge
According to Free Holdings, McCoy had no claim to the artwork he created because he failed to renew his ownership rights to the piece. This failure to act allowed Free Holdings to purchase the registration and claim ownership.
Auction house Sotheby’s sold the artwork titled “Quantum” in 2021 for approximately $1.5 million.
Free Holdings previously alleged that McCoy “recorded” Quantum on the Namecoin blockchain in 2014. Namecoin is a blockchain made of bitcoin.
A Namecoin user can use a record like a domain name. This may include certain metadata establishing an artist’s ownership of the digital item.
Free Holdings alleged that McCoy ceded ownership of the records by failing to “update” his “records” around January 2015.
The judge dismissed the case. He ruled that Free Holdings had failed to prove ownership and was seeking to capitalize on obscure laws.
In another NFT ownership development, PlayStation manufacturer Sony filed a patent to allow movement of in-game NFT assets between consoles and games.
Gamers can transfer assets acquired on PlayStation’s platform to Xbox, negating the need to re-acquire them when migrating to the new platform.
Experts Say Clear Rules Are Needed For NFT Ownership
An NFT, or non-fungible token, is an immutable record of ownership of a digital or physical item on a blockchain. In the case of digital assets, an NFT does not contain the item whose ownership it records, but the Internet address where the file resides.
Intellectual property attorney Nelson Rosario weighed in on McCoy’s decision, saying, “It’s a window into the challenges ahead for the NFT industry. An artist needs to understand how to clear the rules of ownership in order to avoid a dispute.” A federal judge in the U.S. could identify them.
Rosario’s statements echo earlier findings from Cornell University that a creator does not automatically have control of an NFT artwork. Creators must enforce their copyright rather than let the law automatically protect their work. These rights link art to property.
“Unless an NFT expressly grants owners copyright interests in conflict with access to the artwork, owners should not assume that they have a right to use the artwork or to prevent others from using it.” has any right,” the researchers say.
The Ethereum ERC-721 standard is used to create NFTs on Ethereum. While ownership rights remain with the original creator indefinitely as long as certain conditions are met, NFT marketplaces allow creators to charge royalty fees for future sales.
Doodle, a popular NFT project, requires holders to obtain a commercial license if revenue from the project exceeds $100,000.
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