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- 1 NFTs are expanding horizons over time with wider audience demand and use cases.
- 2 Due to the nature of NFTs involving artistic and creative skills, there is a need for specific IP rights regulations to be codified for them.
- 3 While the current laws can be extended to NFTs and there are precedents to many of the cases, other means include IP Rights license monetization.
NFTs and Intellectual Property Rights regulations pose a conundrum for owners and creators on what would be the extent of their ownership once bought. Some licenses may give the investors rights for commercial use while others can only be for display. While some creators may choose to provide free access to their NFTs, others may retain the right to take a royalty on each sale. Furthermore, NFTs can also be employed to protect against counterfeiting real-life intellectual property.
Why Must IP Rights Regulations Be Codified for NFTs?
After the subsequent settlement of the market frenzy over Non-Fungible Tokens, NFT artists and companies have sought to expand their value potential beyond speculative trading in the secondary market. Projects are now realizing the utility of these popular and tokenized digital arts by incorporating them into video games, tickets, TV shows, movies, animation features, and merchandise. The metaverse gives a brilliant extensive use case for the adoption of NFTs.
Most NFT platforms use collections from artists and creators that they hire or purchase collectibles from. This falls under intellectual property. The World Intellectual Property Organization defines intellectual property (IP) as — “creations of the mind, such as inventions, literary and artistic works; designs and symbols, names; and images used in commerce.”
The law protects three types of intellectual property: copyright, patent, and trademark. Non-Fungible Tokens can be subject to all three of these protections.
Being an art form, it warrants copyright protection.
The digital tokens can also be used as trademarks by companies and by entities originating or “spinning off” from the same platform, thereby warranting trademark protection.
The process of minting, registering, and, most importantly, designing them can also be patented as an inventive technique, hence, fall under patent infringement protection.
Buying an NFT gives the owner the right to gain profit from trading, and they can use it as they like. It depends on the collection platform and the artist of the design himself, what rights they give out to the customer.
Generally, it is considered, if not specifically laid out in writing, buyers can only use, trade, and display the token.
For example, Sina Estavi, who owns the non-fungible token of Jack Dorsey’s first-ever tweet that he sold as an NFT, cannot print it out to be sold in merchandise or post it as his tweet without Dorsey’s permission.
Cases of IP Rights Infringements in NFTs
The demand for defining IP regulations for NFTs has surged in recent times due to cases such as NFTs being made from stolen art leading to lawsuits. Such an example is when Miramax, an American film studio, filed a lawsuit seeking to stop Quentin Tarantino from selling excerpts from the screenplay of ‘Pulp Fiction’. However, both parties have now settled to sell it via an NFT auction.
2K Games, a popular video game publishing studio, faced a lawsuit from Solid Oaks Sketches, a graphic design studio. Solid Oaks owned the copyright of designs of certain tattoos on famous NBA players, which were reproduced by 2K Games in their video game NBA 2K in the digital avatars of those athletes.
AM General LLC, the manufacturer of Humvee military vehicles sued Activision, the publisher of the video game Call of Duty 2017. They alleged that the video game infringed their company’s trademark by reproducing it on the vehicle’s depiction.
Both of these cases ruled in favor of the defendants, implying that the infringed work used the protected work in a very insignificant amount, hence, was non-infringing to IP protection. But there have been other cases where video games have used intellectual property to a much further extent, gaining profits from the creator’s artwork.
Hermes Birkin, the company of the famous handbag brand, sued the NFT artist Mason Rothschild for “MetaBirkin” NFTs that mimic the Hermes Birkin bag. The court ruled in favor of the company.
Yuga Labs, the creator of Bored Ape NFTs, sued artist Ryder Ripps for RR/BAYC NFTs, who claimed “not to copy but parody” their design. The court ruled it as copyright infringement in favor of Yuga Labs.
IP Rights Licensing for Non-Fungible Tokens
NFT creators can issue licenses over their NFTs dictating the buyers on what aspects of their IP rights they can utilize. Such a license is programmed in a smart blockchain contract that dictates what utilities are permitted to them.
The licensing designations may be for personal use only or for commercial use. Some licenses may also lay down alternative conditions. If the creators don’t outline the terms of the IP license, it is a personal license by default.
Yuga Labs, creators of the BAYC collection and who acquired the Meebits collection and Cryptopunks collection, in August, granted commercial rights to all the holders of their NFTs which permits them to use the characters on objects for commercial use such as their businesses and merchandise. Yuga Labs would take a small cut from their business. A restaurant is set to open in California which goes by the name “Bored & Hungry”, and uses the NFT on all its labels.
NFT platform X2Y2 gives commercial rights to the buyers with flexible royalties options.
ZINU, on the other hand, offers a royalty-free commercial license to the buyers.
NBA Top Show grants NFTs for personal use only, nothing beyond that.
CryptoKitties charges zero royalty over commercial use of the NFT till the profit of that business reaches $100,000 a year.
An organization called Creative Commons has released six different licensing structures that the NFT creators can give to the buyers. Creative Commons has released six different licensing structures that NFT creators can embed on the blockchain and execute through smart contracts.
Adarsh Singh is a true connoisseur of Defi and Blockchain technologies, who left his job at a “Big 4” multinational finance firm to pursue crypto and NFT trading full-time. He has a strong background in finance, with MBA from a prestigious B-school. He delves deep into these innovative fields, unraveling their intricacies. Uncovering hidden gems, be it coins, tokens or NFTs, is his expertise. NFTs drive deep interest for him, and his creative analysis of NFTs opens up engaging narratives. He strives to bring decentralized digital assets accessible to the masses.
