NFTs and Intellectual Property

Intellectual property (IP) is a broad term that can refer to any product of the human intellect. This includes copyrights, patents, trademarks and trade secrets. IP rights protect intellectual property owners from unauthorized use by others.

In terms of NFTs, these rights belong to their creators, ie, individual artists or designers and the brands behind the projects.

what do you have then, when you buy an NFT? The concept of NFT ownership is often misunderstood. That’s why, in this article, we’d like to shed some light on this issue, which has some gray areas.

What does NFT ownership actually mean?

NFT buyers do not own the actual underlying asset but only the token that represents it. An NFT is the digital certification of this token, and since it is registered on the blockchain, buyers can prove the purchase.

Unless otherwise stated, purchasing an NFT does not give you copyright in the underlying work, such as reproducing and distributing copies, creating derivatives based on the original work, or performing the work in public. The original creator retains ownership of the IP rights.

The situation is similar to buying a printed version of a work of art. In that case, all you have is that version of the artwork, not the copyright associated with it. For example, you cannot print artwork on a coffee mug for commercial purposes.

NFT projects that transfer copyright

In practice, however, some NFT brands and creatives prefer to establish different terms of use. These range from granting full rights to limited licenses. These are encoded in NFT’s smart contracts or written in external contracts.

Standard License Agreement

These contracts are very common in NFT projects. They may grant rights to copy, display or resell the NFT.

An example is the NFT license used by one of the most well-known NFT projects, Crypto Kitties. This license allows NFT holders to resell artwork and commercialize their own merchandise for a maximum annual revenue of $100,000.

Other NFT projects may use the same license terms or a variation. For example, RTFKT establishes a limited commercial use license for CloneX NFT. NFT holders may create derivatives and fan art, as well as sell merchandise, whereas the NBA Topshot Collection restricts any rights to modify or commercialize the NFT and allows only usage and display rights.

Intellectual Property and NFT Marketplace

Marketplaces approach the intellectual property issue in a variety of ways. For example, creatives who place their work on secondary marketplaces such as Rarable and OpenC typically license NFTs directly to buyers. Consequently, these marketplaces do not own NFTs and related copyrights Creatives selling their work on marketplaces like SuperRare are expected to allow promotional activity for NFTs, which may require granting distribution and display rights.

Note that these are just general practices. When you buy an NFT, always read the terms of service of that particular platform.

Last thought

Owning a token does not automatically mean owning the intellectual rights to the assets underlying the NFT. In most cases, it is safe to assume that you only own personal use rights If you, for example, reproduce the work without the consent of the copyright holder, you will be breaking the law.

Also, be aware that royalties from secondary sales belong to the original creator of the NFT, not its current holder.

Furthermore, the resale of an NFT removes the former owner’s rights and transfers them to the new owner. This means that even if you have some intellectual property rights through license when you buy the NFT in the first place, you transfer them to the new buyer when you resell.

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