Monetization with NFTs – Legal issues, best practices, and perspectives

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To keep up with the times, artists in the music world cannot fail to consider the opportunity to sell their work as NFTs, Non Fungible Tokens, using DLT technology.

As for legal issues, we should not be mistaken in thinking that where there are no specific regulations regarding NFTs, there are no rules to be respected. The technology that embodies or incorporates this right may change, but the incorporated right (copyright, specifically, to music content) and the need to protect it remain the same. This is an application of the principleTechnological neutrality ”, which is well known in the financial sector and today is one of the basic principles of the European digital agenda and which is expressed in the warning“ Same service, same risks, same rules“.

The regulation already exists and is contained in the copyright law. On the other hand, we are witnessing the first jurisprudence rulings regarding the application of copyright in NFTs and no regulatory loophole has been made by the interpreters.

So, the legal issues an artist faces if they want to monetize with NFTs are the same as they might face in the real world. Obviously, it is necessary to take into account the unpublished nature or lack thereof of the Creative Content or the presence of any third parties involved in the creation of the Work.

Let’s take some concrete examples. If the artist has signed a contract with a record company, it will have reasonably granted him exclusive rights to economic exploitation of this content, presumably also exploitation via the Internet (network), and nine times out of ten, will give him the right to exploit on Any infrastructure in the future can also be invented.. So, beyond the controversy of whether or not NFT is a new use and whether such use of the work can be considered included in the rights acquired by the publisher in the usual publishing contracts or if it is beneficial (which I suggest) for publishers to take urgent steps to merge titles that legitimizes its exploitation of protected works with the explicit reference to the use of the work in the form of an NFT I’d say further if I want to create a musical NFT that is a copy of the work on which I’ve already assigned the rights to one Majors, I have to worry about asking the record company for permission and possibly negotiating custom fees for a particular drop or for a single NFT. Then there’s the alternative: that is, the artist self-promoting and selling music NFTs. In this case, the economic exploitation will be free and it will not be necessary to obtain releases from the label.

However, it must still be verified, before any work is used, that there are no third parties who can claim rights to the work. I’m thinking of the co-authors or the authors themselves if the NFT was created by an artist/performer/performer.

Then there are the general problems with the use of NFTs related to the use of Digital currencies which is not subject to FIAT and therefore is not a legal tender to which it is subject Big and sudden fluctuations. Moreover, it must be converted into a legal tender to be used as a means of payment because acceptance as a means of payment is on a voluntary basis.

Another sensitive aspect concerns the access keys. The important issue is who owns the private keys.

best practices.

In projects involving NFTs, it is usual to find three topics on the table:ArtistThe partner Technology (required to configure NFTs to access digital works (the so-called “coinage), creating smart contracts, (3) managing metadata and the society Who would be interested in promoting/offering a single drop or NFT to the public.

It is necessary to count on a serious technical partner, who is able to properly program smart contracts, as well as to generate Clever–a necklace Audited, that is, it goes beyond the IT security boundaries that protect (through continuous testing and monitoring) against possible system vulnerabilities and above all against the risk of being denied NFTs (remember that OpenSea itself has been “cracked”). Regarding the wallet, on the other hand, it is best not to take out the wallet to the company that provides technology services, as there will be a risk of losing effective control.

The artist, who is the owner of the NFT, must also be the owner of the wallet through which the proceeds from the sale or use of the NFT pass. And if this is not possible, then it should be borne in mind that there are always so-called multi-signature wallets, which are a kind of joint account, where the transfer of revenue to personal wallets will be possible only with the permission of all subscribers. account holders from Pocket wallet.

As a final concern: it is recommended not to include NFT exploitation rights for commercial use but only those rights Personal use and resale That is, the rights of economic exploitation must necessarily remain with the artist so that he does not lose control of his work which could instead be reproduced by third parties. Finally with Marketing/promotional companythe artist must be demanding: not content with asking for a fee (usually proceeds on transactions related to NFTs) solely to create a website to upload artist content to.

The artist – especially the already well-known one – already has a fan base. What we need next is to get the existence of Fall out to the fan base and create one social communication From admirer Who could recognize these new tools, trace them back to the artist and perform transactions origins Artist’s digital. Well, this requires careful promotional work.

What will be the 2023 reserve for the NFT market

I don’t know if there will be simplification next year. From an organizational standpoint, I don’t think regulation is necessary Dedicated. I said it at the beginning: in Italy, in Europe we already have all the tools to adequately protect copyright and this regardless of the technology that helps it.

Instead, in my opinion, 2023 will be the year that collectors’ associations and record companies consolidate the investments made to make the most of the opportunities offered by blockchain technology. I’m thinking of the Siae project with Algorand. I’m also thinking about projects Majors already launched abroad. I think these players They will have to play an important match in the near future.

Since it is true that DLT technology naturally tends to trump intermediation forms (I recall in this regard the European Parliament Resolution of October 3, 2018 on distributed ledger and blockchain technologies: “Building Trust Through Non-Mediation (2017/2772 (RSP)”Regarding the creative industries and copyrights, but there is an unavoidable theme: users and operators in general need bodies/bodies that they can trust. In the liberated wilds of the market platforms There is a need to create topics that communities can rely on for certainty. guarantees of originality, originality, privacy, and computer security, but also guarantees of collection of copyrights that may be lost, or become aware of persons other than the rights holders.

* By Attorney Daniela De Bellis – Founder of the law firm Elled Scordino De Bellis