homecryptocurrency NewsNFTs rarely offer intellectual property rights to underlying art, says report

NFTs rarely offer intellectual property rights to underlying art, says report

To begin with, all NFTs offer usage licences, which can be split into four broad categories. These are commercial rights, limited commercial rights, personal use only, and creative commons zero. Let's understand each licence and how the various NFT collections approach them-

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By CNBCTV18.com Aug 24, 2022 3:02:51 PM IST (Published)

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NFTs rarely offer intellectual property rights to underlying art, says report
NFTs make ownership details extremely clear. When a digital asset is purchased, details of the owner are coded into the token and stored permanently on the blockchain. Therefore, NFTs provide undisputed ownership of digital assets. However, when it comes to usage licences and intellectual property (IP) rights of the said digital asset, things get a bit blurry.

A report by Galaxy Digital found that among the top 25 most valuable NFT projects, only one collection tries to provide buyers with IP rights to the underlying art. The rest just confuse buyers and retain the right to change the usage licence for their NFT collections at any time. Confused? Tag along as we explain the usage and intellectual property aspects of an NFT.
To begin with, all NFTs offer usage licences, which can be split into four broad categories. These are commercial rights, limited commercial rights, personal use only, and creative commons zero. Let's understand each licence and how the various NFT collections approach them.
Commercial Rights
NFTs that offer commercial rights allow you to monetise the artwork freely. There is no cap on revenue you can earn on the NFT. You may use the asset in any venue or format for any amount of time. Azuki by Chiru Labs, the 9th largest NFT collection by market value, has a licence that grants token holders unlimited monetisation rights.
Other NFT collections that fall into this category are the Bored Apes Yacht Club (BAYC), Bored Ape Kennel Club, Mutant Ape Yacht Club, etc.
Limited Commercial Rights
As the name suggests, these NFTs offer licences to monetise the artwork, but only up to certain limits. These limits usually pertain to revenue amounts, format and venue restrictions and timeframe capping. For instance, the Doodle NFT collection limits revenues that can be earned through merchandise sales to $100,000.
Personal Use Only
This kind of licence indicates that you are not allowed to monetise the artwork in any way and have limited display rights too. For instance, the terms and conditions of NBA Top Shot explicitly mentioned that owners could only use, copy, and display the art for personal or non-commercial use or onward sale.
Veefriends is another Personal Use Only NFT collection. Its terms and conditions state that "unless otherwise specified, your purchase of a VFNFT does not give you the right to publicly display, perform, distribute, sell or otherwise reproduce the VFNFT or its content for any commercial purpose."
Creative Commons Zero
Creative Commons Zero (CC0) is a licence wherein the copyright holder effectively waives off all its copyright and related rights for an artwork. Such NFTs are then effectively free for use by the public domain. Anyone can use these artworks commercially, alter them and monetise them without permission from or attribution to the original users. Some examples of CC0 NFTs include Chain Runners, Mfers, CrypToadz, etc.
Usage licenses are different from IP rights
While two of the four licences mentioned above provide monetisation rights, none of them offer IP rights. Chiru Labs provides zero intellectual property ownership to token holders. The same goes for Doodles, the Bored Ape Yacht Club (BAYC), and other NFT collections. In fact, as per the Galaxy Report, the only collection among the top 25 NFT projects that offer IP rights is The World of Women (WoW) NFT collection.
The rest of the issuers retain IP rights and can change usage licenses anytime. This happened in the case of the 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, brands could use all Moonbirds without the owner's consent or permission. One Moonbirds holder lost a "six-figure" licensing agreement after the brand he was working with pulled out of the deal. What's surprising here is that, before the move to CC0, the Moonbirds website carried misleading texts, such as "you own the IP."
On the other hand, WoW's copyright assignment agreement governs "all rights, title and interest in and to the intellectual property rights on the Art."
Simply put, the project transfers all the copyright to the artwork's owner. However, the agreement does not touch upon downstream sales to secondary purchasers. Therefore, if you purchased a WoW from the project issuers and sold it on an NFT marketplace, there is no clarity on whether the IP rights would automatically be transferred to the new owners.
Conclusion
Each NFT project has different usage licences and very few collections offer IP rights to the NFT holder. Moreover, some projects also carry confusing statements on their websites and terms of ownership. Therefore, it is extremely important to understand the agreement conditions before committing monies to a project.

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