Intellectual property (IP) is a broad term that can refer to any product of human intellect. It includes copyright, patent, trademark, and trade secrets. IP rights protect the owners of intellectual property from unauthorized use by others.
In terms of NFTs, these rights belong to their creators, i.e., the individual artists or designers and the brands behind the projects.
What do you own, then, when you purchase an NFT? The NFT ownership concept is often misunderstood. That’s why, in this article, we want to shed light on this topic which includes some grey areas.
What does NFT ownership really mean?
NFT buyers don’t own the actual underlying asset but only the token that represents it. An NFT is the digital certification of this token, and since it’s registered on the blockchain, buyers can prove the purchase.
Unless stated otherwise, purchasing an NFT doesn’t grant you the copyrights of 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 resembles buying a printed edition of an artwork. In that case, what you possess is only that edition of the artwork, not the copyrights associated with it. For example, you can’t print the artwork on a coffee mug for commercial purposes.
NFT projects that transfer copyrights
In practice, some NFT brands and creatives prefer to deploy different terms of use, though. These range from conferring full rights to granting limited licenses. They are encoded in the NFT’s smart contract or written in external agreements.
Standard license agreements
These contracts are very common in NFT projects. They can grant the rights to copy, display or resell NFTs.
An example is the NFT License used by one of the most well-known NFT projects, Crypto Kitties. This license allows the NFT holders to resell the artwork and commercialize their own merchandise for a maximum annual revenue of $100,000.
Other NFT projects can use the same license terms or a variation. For example, RTFKT deploys a limited commercial use license for the CloneX NFTs. NFT holders can produce derivatives and fan art, as well as sell merchandise, whereas the NBA Topshot collection restricts any right to modify or commercialize the NFTs and only allow use and display rights.
Intellectual property and NFT marketplaces
Marketplaces approach the intellectual property issue in different ways, as well. For example, creatives who mint their work on secondary marketplaces like Rarible and OpenSea usually license NFTs directly to the purchaser. As a result, these marketplaces don’t own the NFTs and the related copyrights. Creatives selling their work on marketplaces like SuperRare are expected to allow promotional activities for NFTs, which may require granting distribution and display rights.
Note that these are only general practices. When you buy an NFT, always read the terms of service of that particular platform.
Final thoughts
Owning the token doesn’t automatically mean owning the intellectual rights of the underlying asset of the NFT. In most cases, it’s safe to assume that you only own the right for personal use. If you, for example, reproduce the work without the consent of the copyright holder, you would be infringing the law.
Also, know that royalties from secondary sales belong to the original creator of the NFT, not the current holder of it.
Moreover, a resale of an NFT removes the rights of the former owner and transfers them to the new owner. This means that even if you had some intellectual property rights through a license when you purchased the NFT in the first place, you would transfer them to the new buyer when reselling.
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