- - What Does NFT Mean?
NFTs are bought virtually in high quantities thanks to
the blockchain technology that is becoming more popular each passing day, which
makes them highly popular and on huge demand. It brings along such questions as
what the legal extent of this brand new technological concept is, and whether
it can be positioned under the Turkish law, or not.
NFTs are getting bigger demand each passing day, and creators
of NFTs can easily reach the buyers and sell their works at extraordinary high
prices, which makes such works positioned at an extremely critical point under
the intellectual property law and personal data protection law.
- - What does NFT (Non-Fungible Token) stand for?
NFT stands for “Non-Fungible Token” which is a digital
technology. Non-fungible token is a data unit stored on a digital book called
as block chain, which confirms that any digital asset is unique, and therefore,
may not be interchanged.
Having a quite different method of operation than the
commonly-used coins and tokens, NFT is a unique and unchangeable asset with its
authenticity and intellectual property essential. NFT stands for a recoverable digital asset having a digital value.
Such non-fungible tokens may consist of not only many
kinds of artworks such as music or paintings, but also a photograph or a video
or even a tweet or a behavior which has become a viral hit.
Each NFT has a unique and original identifier and meta
data.
While cryptocurrencies and NFTs can preserve its
nature without losing their qualifications and still continue to exist as a
cryptocurrency for both parties of a transaction, NFTs cannot be replaced with
any other NFT or match up with any other NFT as they are unique, which well
explains why NFTs are considered as an “artwork”.
Besides, NFTs benefit from the blockchain technology. Details
of NFTs are recorded under a digital book, known as the block chain, helping to
authenticate any digital work.
- - How is NFT positioned under Turkish Law?
-
We are far away
from saying that NFTs are regulated under the Turkish Law. However; some
provisions banning to use cryptocurrency assets directly or indirectly in any
payments to be made in Turkey were incorporated under the Regulation on Banning
Use of Cryptocurrencies in Payments, as promulgated by the Central Bank of the
Republic of Turkey on April 16, 2021. Therefore, trading of NFTs by means of
cryptocurrencies will lead to arising of many legal issues with respect to
their position and existence in legal transactions.
- - NFT Technology and Personal Data Protection Law
Aside from whether NFT Technology is an artwork, or
not; artistic activities are excluded from the applicable Personal Data
Protection Law nr.6698 as per the article 28 thereunder.
However; NFTs have a blockchain base having a
permanent and invariable nature, which makes it impossible to delete or change
any personal data, kept on such base, and leading to arising of some problems
with respect to protection of personal data.
Persons should be provided with information properly
and grant their explicit consent for processing of personal data, but it will
not be possible to dispose or delete any such data due to the blockchain base and
nature of NFTs upon expiry of the period of use of such data.
In cases where
NFTs, which keep personal data of persons who have not been provided with
information or who have not granted their explicit consent as per the Law nr.
6698, or which cannot dispose of any personal data the period of use of which
has expired, are not deleted, it needs to be clarified how the process will be
run in terms of the Personal Data Protection Law, and who will be the data
controller due to the decentralized nature of blockchain.
- - Intellectual Property
Protection of copyrights
is essentially included under the Law on Intellectual and Artistic Works
(“FSEK”) numbered 5846. As per the provisions set out under the FSEK; “any and
all kinds of intellectual and artistic works” “which have the characteristics
of the owners thereof”, “and which can be deemed as scientific, musical, fine
arts or cinema works” are deemed as works.
Accordingly; the
works created as NFT are for sure considered as works under both the Turkish
law and the international regulations, and they are expected to have a legal
protection. However; it is disputed how the NFTs, which do not have a legal
position under the Turkish Law yet, can benefit from such legal protection.
- - NFT Sales and Associated
Intellectual Property Rights
The rights of the
owners of works are set out in detail under the FSEK. Accordingly; owners of
works have the moral rights to reproduce, process, distribute, represent, and
to publicize via sign – voice – image transmission means. As per the article 52
of the Law on Intellectual and Artistic Works numbered 5846; it is required to
transfer such intangible rights to reproduce or process any artistic work
separately in writing.
Sales of any NFT
will not purport that any and all intellectual property rights of the work,
which has been turned into an NFT, have been automatically transferred to the
buyer, and the possession of NFT will be transferred only in sales of NFTs, and
the intellectual property rights of the work shall be kept being held by the
owner thereof.
Intellectual
property rights may be transferred entirely or partially upon incorporating
such provisions under the smart contracts constituting the basis of the sales
of NFTs.
Although sales
of NFTs are realized through smart contracts, it is still a critical question
whether such contracts are able to comply with such terms and conditions of
transfer, as set out under the Law on Intellectual and Artistic Works numbered 5846.
- - Infringement of Rights on
NFTs, and Settlement of Disputes
It may be
resorted to some ways to settle any disputes to arise from exercise of the
rights on NFTs. Accordingly; an action for prevention of infringement, action
for prohibition of infringement, action for pecuniary or non-pecuniary damages,
action for determination of ownership or infringement, or action for return of
unjust gains may be filed in case of any potential dispute.
However; as the
blockchain system on which the NFTs are kept is not within the borders of any
state and/or under the control and/or supervision of any state, some issues
might arise even in such key issues as the applicable law or the competent
jurisdiction, etc.
Besides, NFTs
have not been regulated under any law yet, which might also lead to arising of
many problems in interpretation of the rules of law to apply thereto.
- - Taxation of NFTs
Copyright
earnings is defined as the earnings gained from intellectual and artistic works.
In other words, copyright earnings refer to the earnings gained from
exploitation of the copyrights in several ways such as use or sales thereof.
However; it is
set out by the lawmaker that any and all earnings, gained from self-employment
activities, shall be taxed customarily, subject to some exceptions.
Nevertheless;
taxation of NFTs due to trading of cryptocurrencies, not allowed under the Law,
is not possible currently. However; it is envisaged that various statutory
regulations will be enacted in the near future with respect to this
ever-growing informal economy.
