NFT’s and games: the next frontier (and the legal considerations along the way)

by | Feb 24, 2021 | Articles, Digital

They are the “latest craze”, the talk of the town. It seems that every week we discover a new use for them. There are three letters that have been appearing consistently in the news: NFT, the so-called non-fungible tokens (in Portuguese, “token não-fungível”).

An NFT functions as a digital certificate that, when affixed to a particular digital file (be it an image, a song, text, or even a social network post), makes such a file unique. It is as if the file with the NFT received a serial number, which singularizes it and creates scarcity around the item.

The information contained in an NFT is recorded in blockchain technology, which has as its main characteristic immutability. Once a block of transactions is added to the blockchain, it is no longer possible to change or delete it, hindering fraudulent actions or the acts of hackers.

As mentioned, the possibilities for applying NFTs are diverse, ranging from digital artwork to collectible cards composing iconic NBA players. In this context, there is a highly technological market segment that could not miss out on the opportunities offered by NFTs. It is the branch of the creative industry that has grown the most in recent years, with accelerated expansion during the pandemic period: the video games market.

There are numerous games that allow the player to collect items through purchases (e.g., characters, clothing, weapons, or any other object that contributes to a different gaming experience). NFTs leverage and make these in-game acquisitions even more attractive, as the token makes the traded item unique and prevents it from being unilaterally deleted or changed.

Therefore, the NFTs in a game can represent a rare or unique asset for which the public would be willing to pay large amounts. It is therefore about taking the level of monetization of games to a new level, with huge potential for massive adoption going forward.

However, with new technologies, new questions will arise. In the case of NFTs, there are some issues that intellectual property (IP) rights holders should be aware of. The first point is contractual in nature. Designers, developers, and other professionals involved in the creation of collectibles with NFTs must expressly transfer, in written form, the necessary copyright so that the result of their work circulates in the game (or even outside it) through an NFT. In Brazil, copyright contracts are interpreted restrictively, so the lack of predictability of the NFT “format” certainly creates further doubt.

Second, it is necessary to make it clear which rights are being acquired along with the token. There is a distinction between the ownership of the NFT and the ownership of the IP rights itself, these being the rights over artistic creations, such as the design of the item, among others. Buying an NFT does not mean that the player has now replaced the IP holder.

As a rule, the holder of an NFT only has the right to use the file with the token in their private/personal sphere, or to resell it. These are possibilities that are more restricted than those reserved for copyright holders, whose sphere of rights cover the reproduction of the archive and its adaptation to derivative works.

The above are just a few examples of how NFTs open new opportunities for players in the video game market, while also bringing issues that have been under addressed. Undoubtedly, it is a technology that is here to stay, and for which we must also be prepared from a legal perspective.

Article published in the Jornal Jurid portal.

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