A guide to Non-Fungible Tokens (NFTs), 2023 - Flipbook - Page 34
“Sale” has the meaning given in section 2 of the Sale of Goods Act 1979
(regulation 2), the provisions of which include that:
•
•
A contract of sale of goods is a contract by which the seller transfers
or agrees to transfer the property in goods to the buyer for a money
consideration, called the price.
A contract of sale may be absolute or conditional.
Therefore, a physical work meeting these requirements which is being sold for
use as an NFT could potentially trigger the Resale Rights Regulations.
Regarding the sale of NFTs dealing with a digital artwork, it is as yet unclear
whether such a sale would fall within this definition. Regulation 4(2) arguably
suggests that a digital copy of the artwork sold via an NFT could be regarded
as a work for the purpose of the Regulations so long as it is one of a limited
number. However, it is not clear whether a resale of NFTs linked to such digital
artwork would meet the requirements in regulation 12, including that “the buyer
or the seller, or (where the sale takes place through an agent) the agent of the
buyer or the seller, is acting in the course of a business of dealing in works of
art” (regulation 12).
It is arguable that NFTs themselves, as a token on the blockchain, will be
deemed to be blockchain instruments separate from any work of art, given
they are largely a means of representation. Therefore, the right would not be
applicable where, in reality, the only property transferred is the NFT without any
associated rights in an underlying artwork.
However, in any case where a copyright assignment in a work of digital art is
included within the rights conferred by an NFT, or the smart contract also deals
with physical possession of a digital work of art, the line may be blurred and
it is not yet clear whether such a transfer would amount to a resale under the
regime.
Regardless of the applicability of this specific regime, it is still possible for digital
artists to specifically provide for the payment of resale royalties in relation to
an NFT either:
•
Within the smart contract: it is possible for smart contracts to be coded
to automatically perform the payment of royalties in any future sales.
However, the durability of this is unclear. It is possible that this code could
be avoided by buyers, with use of side agreements.
