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'Boss Beauties' has swarmed non-fungible tokens (NFTs) back into the spotlight as NFTs are recognised by the UK High Court as private property in the case of Lavinia Deborah Osbourne v (1) Individuals Unknown (2) Ozone Networks Inc. The issue? This does not extend to the underlying assets of the NFTs.

OpenSea (a decentralised marketplace that allows users to buy and sell digital assets such as crypto collectables and NFTs) has faced an increasing number of lawsuits in the US for negligence and breach of contract. These cases involved a phishing attack on the marketplace that led to the theft of millions of dollars in NFTs. OpenSea has also halted the sale of NFTs from its marketplace.

In this case, Lavinia Osbourne, founder of Women in Blockchain Talks, claimed that two digital artworks from Boss Beauties were stolen from her MetaMask crypto wallet (private key) located on OpenSea. The Boss Beauties NFT project was the first of its kind in that it created opportunities for women and girls and raised $4.4 million as part of Boss Beauties’ global initiative. The NFTs were traced to two separate wallets, without authorisation. The NFTs were traced with the aid of the security and intelligence firm, Mitmark. This led Lavinia to appeal to the UK High Court on 10 March 2022 for a freezing injunction on the NFT cryptoasset, which was later extended on 31 March 2022.

Find out more about NFTs with this Commercial Question: 'The evolution of ownership: NFTs, blockchain and property'.

Now setting precedence for the recognition of NFTs as private property, this case provides NFT owners with some legal protection for their NFTs. Yet, NFTs still remain unregulated. Whilst injunctions have previously been placed on cryptocurrencies, this was the first freeze of an NFT due to its non-fungible nature, highlighting NFTs’ capability of being subject to a freezing injunction and its traceability.

That said, it’s not long until more corporations follow suit and suspend the sale of NFTs – at least, until they find a way to secure NFTs. With any luck, this will begin to bring some order to the unregulated market of NFTs and encourage the recoverability of stolen NFTs, rather than accept that NFTs are stolen, forever.

What next for NFTs?

For England and Wales, NFTs are distinct from the underlying asset (eg, music, digital artwork). Crucially, we continue to await intellectual property protection for NFTs, at least separately from the underlying assets. Without a doubt, claims of this nature involving NFTs will increase, along with disputes relating to the ownership of the NFT. The high-profile case has sparked much publicity across the globe, highlighting the uncertainty of NFT marketplaces. Until there is increased regulation for NFTs and marketplaces in which they exist, the courts are likely to apply existing rules to the copyright owners and owners of the NFT.

Read Neide's previous LCN Blog post:'The laws of music: the rise of fan-crazed NFTs'.