The legal framework of NFTs in Mexico


2. March 2022

By Marco Euroza.  Senior Consultant Legal Department.

Non-fungible tokens (NFTs) comprise electronic records stored on a blockchain database. These records are a form of ownership certificate over digital files like images, video, or audio and grant authenticity over other digital copies. NFTs are usually registered and traded through cryptocurrencies.

Since NFTs are associated with digital files, these are typically protected as a form of copyright. Further, the applicable legal framework will depend on the country where the right is enforced. The ownership of the NFT does not necessarily convey the rights the token represents; the NFT is proof of ownership separated from the rights. In Mexico, the Federal Copyright Law protects artistic works that can be disclosed or reproduced in any form or medium. The law protects the works from the moment these are affixed in any material support. The acknowledgment of copyright does not require any registration, document, or formality.

Under the aforementioned Law, the rights of any author for any artistic work comprise moral and economic rights. Moral rights allow the author to decide if his work may be disclosed or remain unpublished and in the case of being disclosed, the way it will be disclosed, either as an anonymous or pseudonymous work. In addition, moral rights allow the author to demand recognition of his authorship over the work he created, modify it, oppose any distortion or attack on it that undermines or damages his reputation, or withdraw his work from the trade. Moral rights are inalienable and imprescriptible.

Economic rights allow the author of a work to exploit it or authorize others to do so. These can be transferred through written contracts, agreements, or licenses in an onerous and temporary manner, establishing the number of royalties. Economic rights will be in force during the life of the author and from his death for 100 more years, when the work belongs to several co-authors, the hundred years will be counted from the death of the last co-author.

If the copyright is infringed, the author or anyone who owns the rights may claim the payment of damages through civil, criminal, or administrative actions. As long as the rights of the artwork are transferred along with the NFT, its owners could start an infringement procedure before the corresponding authorities.

NFTs are not new but remain misunderstood given that the technology behind them remains largely unregulated. Understanding this form of trading artistic work and separating them from the rights of the underlying artistic work serves to avoid any possible scam or abuse when using them.

 

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