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First, all NFTs provide a license to use. Use licenses can be divided into four broad categories. These are Commercial Rights, Commercial Rights Restricted, Personal Use Only, and Creative Commons Zero. Let’s understand each license and how different NFT collections approach them.
NFTs make ownership details very clear. When a digital asset is purchased, the owner’s details are coded into a token and permanently stored on the blockchain. Therefore, NFTs provide unequivocal ownership of digital assets. However, it gets a little vague when it comes to licenses to use its digital assets and intellectual property (IP).
Galaxy Digital’s report found that among the top 25 most valuable NFT projects, only one collection seeks to offer buyers the IP rights to the underlying art. The rest will only confuse the purchaser and we reserve the right to change the license to use the NFT collection at any time. Messed up? Please tag when describing NFT usage and intellectual property aspects.
First, all NFTs provide a license to use. Use licenses can be divided into four broad categories. These are Commercial Rights, Commercial Rights Restricted, Personal Use Only, and Creative Commons Zero. Let’s understand each license and how different NFT collections approach them.
commercial rights
Offering commercial rights, NFTs are free to monetize their artwork. There is no cap on how much you can earn with NFTs. Assets can be used in any location or format for any duration. Azuki by Chiru Labs is his 9th largest collection of NFTs by market value and has a license that grants token holders unlimited monetization rights.
Other NFT collections that fall into this category are Bored Apes Yacht Club (BAYC), Bored Ape Kennel Club, and Mutant Ape Yacht Club.
restricted commercial rights
As the name suggests, these NFTs offer licenses to monetize artwork, but only up to certain limits. These limits are usually related to earnings amounts, format and venue restrictions, and time slot caps. For example, the Doodle NFT collection limits revenue earned through merchandise sales to $100,000.
Personal use only
This type of license does not allow the artwork to be monetized in any way and indicates limited display rights. For example, NBA Top Shot’s terms of service clearly state that owners may only use, copy, and display the art for personal and non-commercial purposes.
Veefriends is another personal use only NFT collection. Its terms of use state, “Unless otherwise stated, the purchase of VFNFT does not grant the right to publicly display, perform, distribute, sell, or otherwise reproduce VFNFT or its content for commercial purposes. No.”
creative commons zero
Creative Commons Zero (CC0) is a license in which the copyright owner effectively waives all copyright and related rights in the artwork. Such NFTs can be used virtually free by the public domain. Anyone can commercially use, modify, or monetize these artworks without the permission or attribution of the original user. Examples of CC0 NFTs include Chain Runners, Mfers, and CrypToadz.
License to Use is Different from Intellectual Property Rights
Two of the four licenses above provide monetization rights, but none offer intellectual property rights. Chiru Labs does not provide intellectual property ownership to token holders. The same goes for Doodles, Bored Ape Yacht Club (BAYC), and other of his NFT collections. In fact, according to Galaxy Report, the only collection among her top 25 NFT projects offering intellectual property rights is The World of Women (WoW) NFT Collection.
The rest of the publishers retain their IP rights and can change their use licenses at any time. This happened in the case of Moonbirds, the eighth largest NFT collection (based on implied market value), which moved from full commercial rights to a Creative Commons license.
As a result, the brand could use all Moonbirds without the owner’s consent or permission. One of his Moonbirds owners lost his “six-figure” licensing deal after the brand he worked with pulled out of the deal. What’s surprising here is that Moonbirds had misleading text on his website, such as “You own his IP”, before moving to CC0.
WoW’s copyright transfer agreement, on the other hand, governs “all right, title and interest in intellectual property rights in the art.”
Simply put, the project transfers all copyrights to the owner of the work. However, the contract does not address downstream sales to secondary purchasers. Therefore, it is not clear if IP rights will automatically transfer to the new owner if she buys her WoW from the project’s publisher and sells it on her NFT marketplace.
Conclusion
Each NFT project has a different license to use, and few collections offer IP rights to NFT owners. Additionally, some projects have misleading statements on their websites and terms of ownership. Therefore, it is very important to understand the terms of the contract before committing any funds to the project.
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