Comments of Edward Lee and Nelson Rosario to the Non-Fungible Study by the United States Copyright Office and the United States Patent and Trademark Office (USPTO)

Abstract

These comments address several questions raised by the June 9, 2022 Letter of Senators Patrick Leahy and Thom Tillis, which prompted the Non-Fungible Token Study being conducted by the United States Copyright Office and the United States Patent and Trademark Office (USPTO) (collectively, the “Offices”). We are two of the leading legal experts in copyright law and NFTs, and have extensive knowledge of how NFTs are being used by individual artists, startup companies, and big businesses. We submit these comments to the Offices in our personal capacities. We write to highlight three important uses of NFTs: First, NFTs provide greater sustainability for artists and creators by facilitating their ability to receive resale royalties—a feature that U.S. copyright law lacks. However, this invaluable feature for artists has recently become uncertain because royalties can be easily circumvented if a marketplace does not fully collect them as some marketplaces have chosen. Second, based on our study, a substantial majority of the leading NFT projects have adopted copyright licenses that are far more permissive than the traditional All Rights Reserved approach adopted by major media companies. The NFTs come with commercial licenses that allow the buyers to make commercial uses of the associated artworks, including in derivative works. This innovative approach fosters decentralized collaboration: whoever buys the NFT with a commercial license can become a collaborator and cocreator with the NFT producers. Third, just as we are witnessing a movement to reshape the financial system to be more decentralized (DeFi) through blockchain technology, we are witnessing a profound movement to reshape the copyright system, through private ordering, to be more decentralized and responsive to individual artists, creators, and the public. NFTs represent a new form of decentralized intellectual property (De-IP). We believe this transformation has the vast potential to “promote the Progress of Science and useful Arts” by incentivizing a much broader pool of artists to create—not just works of authorship, but also new businesses for cultural production in the 21st century.