Judge confirms that ownership of Quantum NFT lies with Creator

A US federal court judge has dismissed claims by Canadian firm Free Holdings Inc. that work by NFT artist Kevin McCoy was their property.

The judge said the plaintiff’s claims sought to exploit shady legal areas surrounding NFT ownership.

Quantum ownership transfer not provable, rule judgement

According to Free Holdings, McCoy had no claim to the artwork he created because he failed to renew the ownership rights to the piece. This failure to act allowed Free Holdings to purchase the registration and claim ownership.

Auction house Sotheby’s sold the artwork, called “Quantum,” for about $1.5 million in 2021.

Free Holdings previously claimed that McCoy set a “record” of Quantum on the Namecoin blockchain in 2014. Namecoin is a blockchain that is split from Bitcoin.

A Namecoin user can use a record as a domain name. It may contain certain metadata that establishes an artist’s ownership of a digital item.

Free Holdings alleged that McCoy relinquished ownership of the record by failing to “update” his “record” around January 2015.

The judge dismissed the case. He ruled that Free Holdings had failed to prove ownership and was looking to cash in on unclear laws.

In other NFT ownership developments, PlayStation manufacturer Sony has filed a patent to allow the movement of in-game NFT content between consoles and games.

Players can transfer assets acquired on PlayStation’s platform to Xbox, eliminating the need to re-earn them when migrating to a new platform.

NFT ownership requires clear rules, say experts

An NFT, or non-fungible token, is an immutable record of ownership of a digital or physical object on a blockchain. In the case of a digital asset, the NFT does not contain the item whose ownership it registers, but the internet address where the file is located.

During the McCoy ruling, intellectual property attorney Nelson Rosario said, “It’s a window into challenges that could come for the NFT industry. An artist must understand how to make the rules of ownership clear so that a federal judge can recognize them in the event of a dispute.”

Rosario’s statements echo earlier findings from Cornell University that a creator does not automatically have control over an NFT artwork. Creators must enforce their copyright rather than expecting laws to automatically protect their work. These rights are what link the art to the asset.

“Unless an NFT explicitly grants owners copyright interests as opposed to mere access to the artwork, owners should not assume that they have any rights to use the artwork or stop others from using it,” the researchers argue.

The Ethereum ERC-721 standard is used to create NFTs on Ethereum. While ownership rights remain with the original creator indefinitely unless certain conditions are met, NFT marketplaces allow creators to claim a royalty fee for future sales.

Doodles, a popular NFT project, requires holders to obtain a commercial license if revenues from the project exceed $100,000.

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