Legal issues surrounding NFTs have been a topic of discussion for some time in the web3 space. Because the technology is so new, a lot of traders are navigating through uncharted legal territory. Yet, as blockchains become more popular, regulations and local laws are slowly starting to filter into web3 in order to protect users. 

One of the primary legal gray areas surrounding NFTs are intellectual property rights (“IP”). IP laws are a set of rules that have been developed and practiced by lawyers to protect content and work created by an individual or team. They exist so that their created content cannot be stolen or profited from by outside parties. 

NFTs, being such a new invention, have unique complications regarding certain intellectual properties which have led to legal action. However, this doesn't mean that NFTs are for illegal activity inherently. It indicates that NFTs are evolving vigorously and have reached a phase  requiring more legal attention. 

Copying non-web3 IPs

Some of the most obvious copyright issues come from NFT projects which use artwork that is too closely associated with popular movies and television shows. 

Project Godjira 

Project Godjira is a well-known NFT project achieving significant success over the past year. Their original NFT collection, called Genesis, eventually led to their Gen 2 project which has become their flagship token. 

One thing that traders will immediately notice is its close resemblance to the popular Japanese monster Godzilla created by Toho Co. While the company has not explicitly told the team to discontinue their project, a recent letter quickly circulated around Twitter and Discord claiming that Toho Co. was requesting the team to cease the project. 

While the letter turned out to be fake, Opensea still took the initiative to delist Project Godjira Gen 2 from its marketplace despite any true legal action being taken against the NFT.  

PxN

Phantom Network was set to become one of the next big NFT projects available. The hype that led up to its public mint claimed that it could overtake Azuki as the top anime project. However, this never happened as their art reveal produced some odd results for people holding legendary tokens. 

A quick search of tokens #8331, #3721, #7652, #1426, & #3062 will bring up poorly drawn artwork that looks childish. At first glance, this can only be seen as a joke, but the reasoning behind this was to avoid any DMCA issues because their original legendary artwork was too closely associated with well-known anime characters. 

Tarantino NFT

Legendary director Quentin Tarantino has also found himself in legal hot water following his attempt at using NFTs to sell content from his popular films including Reservoir Dogs and Pulp Fiction. Although he retains certain rights to portions of his films, the fact that he is attempting to profit off of IPs that belong to the movie studios that he worked for is creating a situation which is making his NFT project difficult to grow. 

Projects with artwork similar to popular IPs

While not explicitly stealing artwork from established IPs, these projects do possess tokens that draw heavy inspiration from other works. While they are at no immediate risk of copyright infringement, traders should be aware that certain projects can still be called into question by marketplaces. 

Shinsei Galverse

The Shinsei Galverse is a project that spawned from the popular anime trend started by Azuki. Their artwork draws heavily from the Sailormoon manga and anime which has caused the trading volume to spike multiple times. The Project can be seen with a floor price that hovers between .15 and .5 Eth. 

Pixelmon

Pixelmon was a hyped up project which promised to take full advantage of the metaverse by creating a universe and game that were highly similar to the Pokemon franchise. While the project failed to impress many traders, its resemblance to the famed Japanese anime is obvious. 

Regulars

Regulars is an NFT project that takes inspiration from famed Colombian artist Fernando Botero. Their tokens rely heavily on his artwork by depicting various characters using his recognizable artwork which features fat bodies and small faces. 

Copying other NFTs

Another common issue surrounding IP rights are the NFTs which directly copy other, more successful NFT projects. Derivative projects, known as derivs, generally take the artwork from other projects, flip their orientation and attach similar titles to the collection name in an effort to trick buyers or openly encourage traders to make a quick buck by trading their NFTs on small pumps. 

These projects are generally frowned upon by marketplaces and delisted within a few days. However, as more networks become popular, we are starting to see more projects being copied and hosted on other blockchains to take advantage of marketplaces that are slower to delist a project. 

Delisting Risks

Overall, many NFT projects take inspiration from other artwork in an effort to produce a familiar style on their tokens which can encourage traders to buy and sell their tokens. While this doesn’t always come from bad intentions, traders still take on a risk by associating with these projects. 

While projects like Regulars and Project Godjira won’t disappear anytime soon, traders should be fully ready to expect DMCAs to be a possibility. In other cases, like PxN, copyright issues are stagnating the project and prompting the floor price to drop to unexpected levels under 1 Eth. 

In the end, originality always wins. Projects which have developed their own unique artwork tend to perform better than those directly copied from others. Goblintown.wtf, Bored Apes Yacht Club, and Doodles are perfect examples of projects which have seen their value increase over time because they were able to capture a unique style.