A guide to Non-Fungible Tokens (NFTs), 2023 - Flipbook - Page 12
Legal Issues.
The discussions in this section of the note are informed by the recent
Law Commission’s Digital Assets Consultation Paper published on 28
July 2022 for feedback until 4 November 2022.
Within this consultation paper, the Law Commission deals more widely with the
applicability of personal property rights under English law to a range of digital
assets, concluding that so called “crypto-tokens” should attract such rights
as a result of being able to satisfy the proposed criteria for a third category
of personal property, “data objects”, (the other two categories being things in
possession or tangible things and things in action or legal rights).
The consultation paper does not make any specific law reform proposals in
respect of NFTs but proceeds on the basis that NFTs are crypto-tokens and are
therefore capable of attracting personal property rights as data objects.
The Law Commission proposes that the flexibility of English law is well placed
to determine the limits of these rights and, while it offers descriptions of the
potential to link NFTs to other legal rights, it does not comment on the legal
effectiveness of such links.
The below discussion of legal issues in relation to NFTs is intended to identify
and discuss potential legal interactions of NFTs when they are linked or
connected to underlying rights or assets, but clearly the law is far from settled
in this area.
Control & Ownership
Issues arise both in relation to the NFT itself and the asset underlying
it.
Ownership issues: underlying asset
As noted above, the “minter” of an NFT is not necessarily the “creator” of the
underlying asset. Where NFTs are bought and sold the parties should have an
understanding of who owns the underlying asset and intellectual property (IP)
rights in the underlying asset.
11
