What legal restrictions are there on creating NFT&#39;s?
<p>Creating, or minting, non-fungible tokens (NFTs), involves calculating the hash of a digital file and creating a token containing that hash on a blockchain such that only someone knowing the private key of a wallet can create transactions transferring that token.  These can, but are not required to, also form a contract of copyright ownership.  Technically anyone with access to the file can create an NFT.  An example of non-copyright NFT is the <a href="https://www.themoscowtimes.com/2021/09/09/russias-hermitage-to-sell-digital-art-as-nft-tokens-a75009" rel="noreferrer">Hermitage Museum offering NFTs of their works</a>, for example Leonardo da Vinci's &quot;Madonna Litta,&quot;</p>
<p>There have been legal questions regarding the right of someone to mint an NFT.  <a href="https://www.hollywoodreporter.com/movies/movie-news/quentin-tarantino-sued-pulp-fiction-nft-1235048725/" rel="noreferrer">Quentin Tarantino has been sued</a> about creating NFTs of Pulp Fiction, and <a href="https://www.theguardian.com/world/2022/jan/24/surgeon-faces-legal-action-for-trying-to-sell-bataclan-victim-x-ray-as-nft" rel="noreferrer">a doctor is in trouble</a> for creating one of an x-ray of a victim of terrorism.</p>
<p>What laws restrict the creation of NFTs?  The two most obvious are:</p>
<ul>
<li>Copyright law.  Copyright restricts the right to create derivative works, but is an NFT an derivative?  Hashes are generated from the original work, but other inputs would give the same hash.  However it is currently impossible to do so intentionally, called finding a hash collision.  It is similar to the creation of a hash involved with distributing files via the bittorrent network, and I think this has never been found to create a derivative work despite significant effort put into criminalising this activity.</li>
<li>Data protection law.  In particular reference to the doctor's NFT of the patient, it seems that the sharing of the image in clearly a data protection issue, but this is separate from creating the NFT.  For data protection law to restrict NFTs it would have to allow the public sharing on an image, but not the minting of an NFT.</li>
</ul>

<p>Copyright indeed applies to derivative works as well. However, that does not invalidate the other restriction on copyright, namely the type of things it covers. Something like a filesize is a purely descriptive property, and numbers can't be copyrighted. Hashes fall in the same category. It doesn't matter that the number applies to a creative work.</p>
<p>Similarly, data protection law just protects specific kinds of data. Here I do see a potential problem, though. Even the mere existence of some data might be protected. Making an NFT out of a patient's data reveals that the person is or was a patient. In this case, it will matter what the local jurisdiction has to say. It won't be specific to blockchains, though. When information may not be made public, the ban applies to all means of communication.</p>

<h2>NFTs are new so we don't have much (any) case law</h2>
<p>For what it's worth, my personal opinion is that they are clearly derivative works of the underlying artistic or literary work even though they are created automatically through an algorithm. The Lord of the Rings in Word format is the same literary work as The Lord of the Rings in pdf format even though a computer program can go from one to the other automatically and even though a has of one file would produce a different number from the hash of the other. Beyond that, the <em>value</em> of the NFT is inherently linked to the underlying artistic or literary work - an NFT of The Lord of the Rings will be more valuable than an NFT of this answer <em>because</em> it is an NFT of the Lord of the Rings.</p>
<p>That said, AFAIK, no court has yet delivered an opinion on the matter.</p>
<p>Naturally, patient confidentiality and data protection laws will apply to NFTs of natural, living persons just as they do to all other personal data.</p>

copyright blockchain