In March 2021, a digital collage by the American artist Mike Winkelmann, known as Beeple, sold through Christie's auction house for US$69.3 million. The work, Everydays: The First 5000 Days, was the first purely digital NFT-based work offered by a major auction house, and the sale was widely reported as proof that non-fungible tokens had arrived as a way to own digital art.
Since then, musicians, sports leagues, game studios and brands have all minted NFTs, and Australian business owners have asked whether a non-fungible token (NFT) is a new way to hold intellectual property (IP). The short answer is no. An NFT is a digital token that records ownership of itself. It is not a new form of IP right, and it does not displace the ordinary Australian law that governs copyright, trade marks and consumer protection. What IP actually changes hands when an NFT is bought or sold depends on that law, not on the blockchain.
This article explains how an NFT works, what a buyer actually receives, where Australian law bites on the sale, and when you should get advice before minting or buying one.
Who is involved in an NFT sale
Four groups interact in any NFT transaction, and each has a different stake in the IP question:
- Creators and sellers: the artist, musician or business that mints the NFT. They hold the copyright in the underlying work unless they assign it in a signed writing.
- Buyers and collectors: they acquire the token itself. What else they receive depends on the terms of the sale and the platform's terms of service.
- Marketplace platforms: they run the smart contracts and set the terms of service that often define the licence a buyer gets.
- Regulators: the ACCC polices misleading conduct in NFT sales, ASIC considers when digital assets are financial products, and IP Australia sets trade mark practice for virtual goods.
What an NFT actually is
Non-fungible means unique. One NFT cannot be swapped for another in the way that one dollar or one bitcoin can. Each token is a unique digital identifier recorded on a blockchain, most often the Ethereum blockchain. A blockchain is a public, tamper-resistant ledger: transactions are grouped into blocks, each block is cryptographically linked to the one before it, and the whole history is shared across the network. That design makes the record difficult to alter and open for anyone to inspect.
The important point for IP purposes is what the token is not. An NFT functions like a digital certificate of authenticity or a title deed. It proves that whoever holds the token holds that particular token, and it records the chain of previous owners. It is not the artwork itself, and it is not a grant of rights in the artwork. The image, video or audio file associated with the token usually lives elsewhere on the internet, and the token simply points to it. Owning an NFT is closer to owning a signed certificate for a print than to owning the copyright in the image.
Most NFTs are bought and sold through smart contracts, which are pieces of code that execute automatically when conditions are met, such as payment being received. The smart contract can embed licence terms, resale royalty arrangements and restrictions on use. Because the code executes automatically, the network enforces the terms, which can be convenient. But the code only records what the parties have agreed. It cannot create rights that the parties never had, and it cannot override the Copyright Act 1968 (Cth).
What a buyer actually receives
Australian copyright law starts from a simple position: protection is automatic, and there is no registration system as there is for trade marks and patents. Under s 32 of the Copyright Act 1968 (Cth), copyright subsists in original literary, dramatic, musical and artistic works as soon as they are created. The author is generally the first owner, subject to exceptions such as works made by employees in the course of employment.
Copyright is personal property, and it can be transferred, but s 196 of the Copyright Act 1968 (Cth) requires an assignment to be in writing signed by or on behalf of the assignor. A click-through marketplace sale does not meet that test by itself. So when a buyer pays for an NFT, what they actually receive is the token, the recorded provenance, and whatever licence the sale terms and platform terms of service grant. They do not receive the copyright unless the terms say so in a way that satisfies the writing requirement.
In practice, most NFT sales grant only a limited licence. Marketplaces such as NBA Top Shot, which sells NFTs linked to basketball highlights, grant the buyer a licence to use, copy and display the work for personal, non-commercial purposes. A buyer who treats the purchase as full ownership and starts selling merchandise featuring the artwork, or reposting it in a way that communicates it to the public, can find themselves on the wrong side of the copyright owner's exclusive rights. The copyright owner, usually the creator, keeps the exclusive rights to reproduce and communicate the work, and the token does nothing to change that.
Moral rights add a further layer. Under Part IX of the Copyright Act 1968 (Cth), authors have rights of attribution and integrity that are personal to them and cannot be assigned. An NFT buyer may need to respect those rights even where the commercial copyright has been dealt with, and should check how the sale terms handle them.
The result is that the US$69.3 million Beeple sale bought the token and the status that goes with it. The copyright in the underlying work remained with the creator unless the sale terms separately assigned it. That is the same position as buying a physical painting: the buyer owns the object, while the artist keeps the copyright unless they agree otherwise.
Where Australian law bites on an NFT sale
Because an NFT is bought and sold in trade or commerce, ordinary consumer law applies to the transaction. The Australian Consumer Law (ACL), which is Schedule 2 of the Competition and Consumer Act 2010 (Cth), prohibits misleading or deceptive conduct, and its definition of goods includes computer software. This is where the gap between what a token records and what a buyer expects can become expensive.
Misleading conduct in NFT marketing
Under s 18 of the ACL, a person must not, in trade or commerce, engage in conduct that is misleading or deceptive or likely to mislead or deceive. Claims that an NFT is "the one true original", that it "includes full IP" or that it is a "limited edition" need to be accurate. A seller who implies that the buyer is receiving ownership of the artwork, or exclusive rights in it, when the buyer is only receiving a token and a display licence, faces enforcement action from the ACCC and remedies for the buyer including damages and orders setting the transaction aside. The same exposure applies to a seller who mints multiple copies of a work after marketing it as unique.
Whether the ACL's consumer guarantees apply to an NFT purchase is not yet settled, and a token may fall within the ACL's definitions of goods or services depending on how the sale is structured. Buyers and sellers should not assume either way, and the characterisation is exactly the kind of question that turns on the terms of the sale.
Trade marks for virtual goods
An NFT does not give its holder trade mark rights. A brand that wants to stop others from selling virtual goods, digital collectables or NFT-linked merchandise under its name needs a registered trade mark that covers those goods and services. IP Australia's guidance on emerging technologies, which took effect in August 2023, explains the practice. Virtual goods are classified in Class 9 and must be described specifically enough to be acceptable, while goods or services involving NFTs and blockchain are classified according to the underlying goods or services they relate to.
The growth in this area is not hypothetical. NFT-related trade mark filings in Australia went from one in 2019 to more than 2,000 in 2022. A business entering the space should check whether its existing registrations cover virtual goods, because a registration for physical clothing does not automatically cover downloadable virtual clothing.
When an NFT becomes a financial product
Most art and collectable NFTs sit outside the financial services regime, but not all do. ASIC's Information Sheet 225 explains that a digital asset can be a financial product under the Corporations Act 2001 (Cth) depending on the rights and benefits attached to it. An NFT that promises returns, gives rights to profits, or is issued as part of a fundraising arrangement can cross into territory where an Australian financial services licence is required. The assessment turns on the specific structure, and ASIC warns that consumers are only protected by financial services law to the extent that the asset falls within it. A business issuing NFTs with investment-like features should treat the licensing question as a live one.
Unauthorised minting of someone else's work
Because minting an NFT is easy and cheap, the market has seen sellers tokenise works they do not own. In one prominent example, DC Comics sent warning letters to freelance artists after an artist made US$1.85 million selling NFTs linked to artworks featuring DC's comic characters, where the copyright belonged to DC. Selling an NFT of someone else's work can infringe the copyright owner's exclusive rights, and the token does not cure that. It can also expose the seller to consumer law claims if the provenance was misrepresented.
The public ledger and what it reveals
The blockchain's transparency cuts both ways. A token's entire transaction history is permanently visible to anyone, including the wallet addresses of every past owner. A buyer can trace the seller's wallet and see the seller's other transactions, and a seller can see where the token ends up. Because the ledger is designed to be tamper-resistant, there is no practical way to unpublish that history after the fact.
This matters for businesses in two ways. First, wallet addresses are pseudonymous rather than anonymous, and once a wallet is linked to a person's identity, their whole transaction history becomes publicly associated with them. A business that collects, publishes or attaches personal information to a token needs to consider Australian privacy law and the fact that the record cannot later be corrected or deleted. Second, a business should decide at the minting stage what metadata and content it attaches to a token, because that content is public and permanent.
When you need legal advice
The points where NFT sales go wrong are the points where the token and the law diverge, and each of them is manageable with advice at the right time:
- Before minting: a lawyer can review the smart contract terms and the marketplace's terms of service to make sure the licence granted to buyers matches what the marketing claims, and that the assignment of copyright, if intended, is documented in a signed writing that satisfies s 196 of the Copyright Act 1968 (Cth).
- Before buying: a lawyer can check what the sale actually transfers, whether the seller owned the underlying work, and whether consumer law protections are available.
- For a brand: a trade mark attorney or lawyer can review the portfolio against IP Australia's classification guidance and file for virtual goods before someone else does.
- For a business issuing investment-like tokens: advice on whether the asset is a financial product, and whether an Australian financial services licence is required, should come before the sale, not after a regulator comes calling.
The terms, not the token, decide what you hold
The single idea worth holding onto is that the NFT records the transaction, while the law protects the work. A token gives the holder a verifiable receipt and a permanent record of provenance. Every IP right that matters, the copyright, the licence to use the work, the trade mark protection for a brand, is whatever the written terms say and whatever the Copyright Act 1968 (Cth) and the ACL allow. The gap between those two things is where disputes start, and it is far cheaper to close that gap at the drafting stage than to litigate it later. A confidential consultation about your sale terms or your planned NFT issue is a small cost compared with the exposure that a misleading claim, an unsigned assignment or an unlicensed work can create.