IP, copyright & tax basics

Who owns the output of a generative algorithm?

Short answer: in most jurisdictions, you do — provided you made meaningful creative choices in the system.

US copyright

The US Copyright Office has held since the 1960s that computer programs can be copyrighted as literary works. The output of a program is a separate question.

• Computer-generated works with no human creative input (e.g. a pure RNG with no parameters set by a person) have been refused registration. The leading case is Feist Publications v. Rural Telephone Service (1991) on originality, applied through the Office's 1976 Act regulations.
• Generative works with human authorship — where a human selects the algorithm, sets parameters, makes curation decisions, and signs the output — are routinely registered. The artist registers a single representative deposit and the rest of the series is covered.
• 2023 ruling on AI-generated images: in Zarya of the Dawn (Kris Kashtanova, 2022–23), the Copyright Office held that the selection, coordination, and arrangement of Midjourney outputs was human-authored and copyrightable; the individual AI-generated images alone were not. The Office has reaffirmed this position in subsequent decisions through 2025.

Does the AI ruling apply to generative code?

Most generative-art practices write their own algorithm. The human authorship chain is direct: the artist writes the program, chooses the parameters, makes the curation calls, and signs the output. This is closer to traditional photography or printmaking than to text-to-image AI.

The Zarya framework, by analogy, supports copyright for the outputs of human-authored generative code: the artist exercises creative control through the algorithm's design, parameter ranges, and curation choices. This has not been litigated to a definitive ruling in 2026 — but it is the working assumption of major generative-art platforms (Art Blocks, fxhash) and of the artists who register their drops with the US Copyright Office.

UK and EU

The UK and EU have similar but not identical rules. Both jurisdictions recognise computer-generated works under the author's "own intellectual creation" standard. The Infopaq (EU, 2009) and VG Bild-Kunst (EU, 2021) decisions shape the current case law. The practical answer is the same: human-authored generative outputs are copyrightable.

The UK has a specific provision for "computer-generated works" (CDPA 1988, s.9(3)) that names the person who made the arrangements necessary for the work's creation as the author. This is the most explicit statutory protection anywhere; it was written with computer art in mind.

What you actually sell

An NFT is not, by itself, a copyright assignment. Selling a token conveys ownership of the token — which means the collector owns the specific recorded artwork instance and can display, transfer, or sell it. It does not, by default, convey the underlying copyright.

Two structures

The default in the generative-art market is NFT-only sale — you retain copyright, the collector gets the token. This is what Art Blocks, fxhash, and Manifold assume. If you want to grant commercial rights to the collector, you have to say so explicitly (often via a separate license attached to the metadata URI or via the contract's terms).

CC0 — Creative Commons Zero

Some generative artists release their drops under CC0, which waives copyright to the maximum extent possible. This is more common in the Tezos generative community than on Ethereum mainnet. CC0 means anyone can do anything with the work — including mint derivatives — which can compound reach but removes the artist's exclusivity.

CC0 is irreversible. Once you've released a drop under CC0, you cannot retroactively claim copyright enforcement. Make this decision deliberately and document it.

Trademark and artist names

The algorithm is yours. The artist name might not be — and trademark is a separate system from copyright.

Protect the artist name

If you've been operating under a name for years, register it as a trademark in the jurisdictions where you sell. US registration through the USPTO is roughly $250–$350 per class (you'll want at least Class 9 for digital goods and Class 35 for retail services). EU registration through EUIPO is similar. UK through IPO is roughly £200.

Don't infringe others'

A few common traps:

• Project names that overlap with existing brands. "Apparitions" is the name of Aaron Penne's Art Blocks drop; don't title your series the same thing.
• Platform names in your title. "Art Blocks Engine: my-drop" looks like an official collaboration. Don't imply partnership you don't have.
• Artist-resemblance in generative output. If your algorithm's outputs consistently resemble a living artist's signature style, you've crossed a line from inspiration into infringement.

Defensive notes

Trademark is enforced jurisdiction by jurisdiction. A US trademark doesn't protect you in the EU; an EU registration doesn't protect you in Asia. If your collector base is global (and most generative-art audiences are), plan for the major markets at minimum.

Tax basics

NFT sale revenue is taxable in most jurisdictions. The exact treatment depends on whether you're treated as a casual seller or a trade or business.

US — collectibles vs. ordinary income

The US IRS issued Rev. Rul. 2023-27 in 2023, clarifying that NFTs are taxed as collectibles for purposes of the 28% long-term capital gains rate, regardless of what the underlying asset is. This is a higher rate than the 15–20% applied to most other long-term capital gains.

Practical implications:

• Primary sale revenue (you mint and sell) is ordinary income at your marginal tax rate. Estimated taxes should be set aside at the time of sale.
• Secondary royalties are ordinary income to you, with the cost basis being zero (you didn't pay for the collector's purchase).
• If you buy an NFT and resell it at a gain, the gain is taxed at the 28% collectibles rate if held more than a year. Held less than a year, it's ordinary income.

EU and UK

EU member states treat NFT income inconsistently. Most treat primary sale as ordinary self-employment income, with VAT implications on top (whether crypto-to-crypto sales trigger VAT is itself a contested question; the EU's Linux-era DAC6 directive requires reporting of cross-border crypto transactions above thresholds).

The UK treats cryptoassets (including NFTs) under capital gains rules, with a £3 000 annual exemption as of 2024–25 (rising with inflation). HMRC has published guidance that covers most NFT situations; the working assumption is that NFTs held as investments are subject to CGT on disposal.

Recordkeeping

Whatever jurisdiction you're in, you need:

• A record of every wallet address that has received income on your behalf.
• The date and USD-equivalent value of every primary mint and secondary royalty.
• Gas costs (these are deductible in many jurisdictions as a cost of doing business).
• The cost basis for any NFTs you bought and later sold.
• The wallet address and transaction hash of every transfer (chain analytics firms can reconstruct this if your records fail).

A typical accounting workflow uses a tool like Koinly, CoinTracker, or Vezgo to pull the on-chain history, then a CPA to translate it into a tax filing. Cost ranges from $100/year for the tools to $1 000+ for CPA fees depending on complexity.

The 2023 US Copyright Office AI ruling — in detail

The most-cited legal development in this space. The Zarya of the Dawn decision (Feb 2023, reaffirmed in subsequent Office decisions through 2025) is worth understanding precisely because it shapes how you describe your work.

What the ruling said

Kris Kashtanova registered a graphic novel that incorporated Midjourney-generated images. The Copyright Office initially refused registration, then partially reversed: the text and the selection, coordination, and arrangement of images was human-authored and copyrightable, but the individual AI-generated images alone were not.

What it means for generative-art NFTs

The ruling distinguishes between AI as a tool used by a human author (which produces copyrightable work) and AI as an autonomous creator (which doesn't). Generative-art NFTs written by the artist fall into the first category:

• The algorithm is human-authored code (the artist wrote it).
• The seed selection and curation is a human creative choice.
• The outputs, as a curated selection, are an arrangement with human authorship.

This puts generative art closer to photography (where the photographer owns the copyright despite the camera being autonomous) than to text-to-image AI (where the prompt and the model's outputs sit in a more contested space).

What it does NOT cover

• Pure ML-generated outputs with no human creative input (e.g. raw model samples) are not copyrightable.
• Works where the generative system is fully autonomous and the artist contributes only training or curation at a high level remain contested.
• Works that incorporate third-party model outputs (where the third party's rights are unclear) carry the most residual risk.

Pre-drop legal checklist

Things to confirm with a lawyer (and your CPA) before the first mint opens.

Before the drop

• Art Blocks / fxhash / Manifold platform terms — which rights does the platform require you to grant them? Read these.
• Copyright registration for the algorithm and a representative output (US: $65 single-work, $85 group registration).
• Trademark search for your project name and artist name in your primary markets.
• Decide NFT-only vs. NFT-plus-license structure. If license, draft the license text and pin it to IPFS alongside the artwork metadata.
• Decide CC0 vs. all-rights-retained. Document the decision.

At deploy time

• Royalty rate locked at deploy. Don't change it later.
• Contract ownership renounced if applicable (so you can't unilaterally change terms).
• Mint price, mint window, per-wallet cap all on chain and visible in the contract.

After the drop

• Recordkeeping for every primary sale and every secondary royalty.
• Quarterly estimated taxes (US: 1040-ES; UK: payment on account).
• Public announcement of any unsold-inventory decision (burn, release at floor, roll forward).
• Year-end tax filing with all NFT income and gas costs itemised.

References & further reading

• Feist Publications v. Rural Telephone Service, 499 U.S. 340 (1991) — originality threshold for US copyright.
• US Copyright Office, Zarya of the Dawn registration decision (February 2023) and the Office's 2023–25 AI-generated works policy guidance.
• UK CDPA 1988, s.9(3) — "computer-generated works" authorship provision.
• EU CJEU, Infopaq (C-5/08, 2009) and VG Bild-Kunst (C-392/19, 2021).
• IRS Rev. Rul. 2023-27 — NFTs as collectibles.
• HMRC Cryptoassets Manual (CRYPTO10000 et seq., 2024–25 update).
• EU DAC6 directive (2018/822) — cross-border reporting obligations for crypto transactions.

Next: the practical side of a drop starts with /sell/platforms/. Pricing and edition math at /sell/pricing/.