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NFTs and Intellectual Property (IP) Rights Explained

Jul 05,2024

KEY TAKEAWAYS:

— NFTs allow all types of digital content to be tokenized and digitally owned, and sometimes you may even receive extra permissions, such as intellectual property rights.

— If your NFT is an image, owning it doesn’t always mean you can use the image as you’d like.

— Intellectual property rights can vary, from allowing only the owner to use the image commercially, to allowing anyone on the planet the same rights.

The true value of blockchain technology for these non-fungible assets is that they offer true ownership. Tokens on the blockchain are immutable and tamper-proof, their terms of transfer are also transparent. Your NFTs rely on the underlying infrastructure of the blockchains that host them. They aren’t stored in wallets, but on the blockchain, in a blockchain address, only you can access using your private key.

 

The decentralization of blockchain networks alongside the power of smart contracts opened up the possibility of launching decentralized marketplaces, metaverses, and gaming platforms. Industries previously gatekept by middlemen are now open to all. Typically, the distribution of art is controlled by galleries, and the distribution of games by publishing companies. But now, blockchain allows creators to make, distribute, and monetize their work without these middlemen.

 

Since the inception of NFTs, their use cases have grown exponentially. They can represent anything from fashion, music, videos, art, avatars, and gaming assets, plus, they are also programmable, meaning creator royalties can be directly written into their code. Simply, this changed the game for digital creators: NFTs sparked a whole creator economy.

 

One of the most interesting use cases influenced by this new creator economy is NFTs as a medium of sharing intellectual property rights. But what does that mean exactly? Let’s dive in.

 

Understanding Intellectual Property Rights (IP)

In basic form, intellectual property rights are designed to protect creators. These rights acknowledge that art in all forms is the intellectual property of its creator, and give them control over how that property is used. Which makes sense – if you built yourself a house, you wouldn’t let someone else rent it out, right?!

 

So how does this work in practice? Say you’re making a film and want to use a particular piece of music, or maybe you want to create a campaign using some art you found online – in both cases, you’d need permission from the original artist first. Likely, you’ll also have to pay them for the privilege. The work is their property, and that transaction is their only chance to monetize that creation.

 

But what has all of that to do with NFTs exactly?

 

NFTs and Intellectual Property (IP) Rights: What’s It All About?

It’s important to note that with NFTs, what you own is the token itself, not the intellectual property it represents.

 

For example, say you buy a piece of digital art as an NFT. In this case, you own the token, much like you could own a print of a physical piece of artwork. However, you would not own the original image: those rights would remain with the digital artist. That means you couldn’t start a company using the artwork as your logo or use it as your band’s album cover. You would still need permission from the artist.

 

However, that’s not always the case. One of the most interesting things about NFTs is you can attach all sorts of data to them and program their smart contracts with executable conditions. This means you can include terms of use, granting holders of the NFTs extra rights or permissions.

 

Specifically, some NFT collections award holders specific Intellectual property (IP) rights. In these cases, you might have permission to use your NFT’s image in your business. Or perhaps your NFT represents a piece of music instead. In this case, you could use the track in a monetized YouTube video or create your remix to sell.

 

In short, NFTs as a medium for intellectual property rights is an interesting case. To understand further, let’s dive into some of the NFT collections using intellectual property rights in a novel way.

 

The First Big NFT Collection To Offer Commercial IP Rights

The Bored Ape Yacht Club (BAYC), created by web3 giant Yuga Labs, was one of the first NFT collections to offer commercial IP rights to its holders. To explain the bored ape Yacht Club is a collection of 10k NFT profile pictures. The images are procedurally generative, meaning each Bored Ape has a unique combination of traits.

 

Since each Bored Ape is unique, they are perfect as branding for a business, or as the base of a digital avatar. With commercial rights, Bored Ape owners are free to use their Apes to monetize their own projects.

 

One great example is a craft beer licensed under Bored Ape #3500. By using their NFT as the brand, the brewer behind the beer leveraged the global reputation of BAYC, as well as their ties with its community, allowing them to benefit personally by maximizing the reach of their small project.

 

However, there are some limits. Even when projects grant NFT holders commercial IP rights for their images, it only extends to the individual NFTs – not the over-arching brand.

 

For example, as a Bored Ape NFT holder, you can launch an ice cream brand featuring your ape’s image, but you can’t call it Bored Ape ice cream. Fellow NFT collectibles project Deadfellaz has a similar approach: you can use your own NFT, but you can’t use the Deadfellaz name or logo in your own projects.

 

Essentially, commercial use of the brand name itself remains under the remit of the creators. This allows them editorial control.

 

The No Rights Reserved (CC0) NFT Model

A CC0 (creative commons zero – no rights reserved) describes any artwork where the creator forgoes their intellectual property rights. This means absolutely anybody can use them, for any type of project, without asking permission.

 

Thus, NFT projects adopting the CC0 stance allow anyone (from token holders to members of the public) to use the project’s intellectual property without limitations. This includes not only the artwork but even the over-arching brand itself. Anyone can use the NFT image or likeness.

 

Some of the most popular collections using the CC0 model include Moonbirds, Cryptoadz, and Nouns.

 

Why use CC0 for NFTs?

The logic is pretty simple – the more individuals have free reign to produce derivative projects and display their creations publicly, the more exposure the project gets. Meanwhile, the value of that visibility is harnessed by the project’s native NFT collection. While the CrypToadz artwork is free for all to use, the floor price remains (at the time of writing) roughly 3 ETH.

 

This highlights something interesting about NFT value: token holders are not paying for the art, they’re paying to be part of the story.

 

Which Intellectual Property (IP) License Do I Want For My NFTs?

You might be wondering at this point how to understand your own NFT collection better, and what rights you have yourself. To conclude, commercial rights for any NFT are determined by the creators themselves. Normally, you can find them on the project’s Terms of Service (TS).

 

The NFT space is a patchwork of different commercial rights levels. Each of these methods of approaching intellectual property is valid, depending on what the project is.

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