Some Skepticism About NFT Copyright

I am participating today in the Copyright Office’s NFT Roundtable. Here is the text of my (brief) opening remarks:

Good morning, and thank you. I’m a professor at Cornell Law School and Cornell Tech. I would like to make one point, at a high level of abstraction. It may seem obvious, but I think it is urgent not to lose sight of.

One promise of blockchain is that it is a perfect paper trail. But all paper trails can fail. Sometimes this is because of technical failures in a record-keeping system itself, which is the problem that blockchain attempts to address. But more often it is because the information that parties attempt to record never corresponded to reality in the first place.

Some transactions that look valid on paper are not, because of forgery, fraud, duress, or mistake. And some otherwise valid transactions are imperfectly documented: perhaps the contract was signed in the wrong place. If a transactional form is used enough times, everything that can go wrong with it eventually will.

The legal system deals with these cases all the time. When the facts on the ground and the records in the books get out of sync, a court or agency will step in to bring them back into alignment. Sometimes in such cases the paper trail prevails. But often it does not, and the legal system will ignore the records, or correct them to match reality.

The application to NFTs should be apparent. The transfer of an NFT by entering a smart-contract transaction on a blockchain is a kind of paper trail, and all paper trails can fail. Some intended NFT transfers will not go through, and some NFT owners will lose control of their NFTs without giving legally valid consent.

This means that if the state of copyright ownership or licensing is tied to ownership of an NFT, one of two propositions must be true. Either the legal system must have some mechanism for correcting the blockchain when its records are in error, or else in some cases copyright owners will lose legal control of their works through preventable forgery, fraud, duress, or mistake.

It is sometimes said that the advantage of a blockchain is that on-chain records are immutable and authoritative. That is precisely why I am skeptical of blockchains in the copyright space. To quote Douglas Adams, “The major difference between a thing that might go wrong and a thing that cannot possibly go wrong is that when a thing that cannot possibly go wrong goes wrong it usually turns out to be impossible to get at and repair.”