Yuna Kim, Chief Attorney at Law Firm Artro
Digital Works Not Considered Ownership Target
Buyers Should Be Cautious Due to Weak Legal Protection Measures
NFT artwork 'Everydays: The First 5,000 Days' by Beeple, sold for $69.3 million at Christie's auction in March last year
[Asia Economy Reporter Choi Dong-hyun] "Even if you purchase a non-fungible token (NFT) artwork, the ownership of the artwork does not transfer to you. The same applies to copyright."
Yuna Kim, lead attorney at the law firm Artro, cautioned that buyers currently have limited legal protection in the NFT market. Attorney Kim is currently active as a legal advisor specializing in content and cultural arts companies, including the Korea Gallery Association.
Consider a famous artist, Mr. A. Suppose Mr. A creates a painting and mints it as an NFT, then sells it to Mr. B through an NFT platform. Common sense might suggest that the 'ownership' of this NFT artwork has transferred from Mr. A to Mr. B. However, there is no clear legal basis for this in reality.
Attorney Kim explained, "Under current law, digital works like NFTs are not considered objects of ownership, so it is difficult to regard ownership as having been transferred in a typical NFT transaction," adding, "This means it is impossible to precisely specify what exactly is being traded." Current law recognizes ownership only for tangible physical objects.
What issues might arise between Mr. A and Mr. B in this situation? First, even if Mr. A sells the NFT artwork, the 'copyright' remains with him. Unlike ownership, copyright is a legal framework designed to protect the creator's rights, including intangible assets. If Mr. B exhibits the NFT artwork in online or offline spaces or prints it for promotional purposes to facilitate resale, legal problems may arise. Such acts are only permitted in a limited way to those holding copyright or ownership under copyright law. Mr. B has essentially purchased only a so-called 'digital original receipt' for the NFT artwork, not ownership, making legal protection difficult. Attorney Kim noted, "There is currently no legal judgment on whether Article 35 of the Copyright Act, which grants limited exhibition and reproduction rights to owners of artistic works, applies to NFT holders."
When multiple rights holders are involved?not just the original creator and the NFT buyer, but also copyright assignees, physical artwork collectors, and NFT artwork purchasers?the situation becomes extremely complex. In such cases, the minimum precaution is for the parties involved to draft a separate contract.
"Recently, galleries selling works by their affiliated artists as NFTs have been entering into written contracts with buyers. These contracts specify ownership and how copyright usage will be handled. This is done to minimize potential legal disputes. It would be helpful if government bodies such as the Ministry of Culture, Sports and Tourism establish and distribute guidelines for NFT transactions to reduce confusion among market participants."
The risks increase when purchasing NFTs through platforms. Buyers find it difficult to verify whether the artwork was tampered with during the NFT minting process on the platform, and there is also the possibility of hacking. While NFTs implemented with blockchain technology are theoretically almost impossible to tamper with, the original digital artwork file is not stored within the NFT itself. Only the artist's name, artwork title, and a server link where the original file exists are recorded. If that server is hacked, the receipt (NFT) remains, but the digital original disappears. Without the original, it is unlikely that the NFT will retain high value. Attorney Kim advised, "Even if the server is hacked and the NFT still exists, neither the platform nor the original NFT seller is obligated to reissue the NFT artwork," adding, "NFT buyers should be aware of these risks in advance and choose secure trading platforms as the most practical measure."
Attorney Kim emphasized that for the NFT market to thrive, social consensus on NFTs as a whole is needed alongside platform regulations. He pointed out, "Many NFT platforms have terms that exempt them from liability in disputes between users," and stressed, "It is necessary to require NFT platforms to share some responsibility for disputes and to maintain appropriate security standards." He added, "Above all, laws enacted before the advent of NFTs must be revised, and social and legal consensus surrounding NFTs must be promptly achieved."
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