The interaction of NFTs in the metaverse – publications

by James · December 17, 2022

Metaverse and non-fungible tokens (NFTs) may come with a perception of being used solely for entertainment and frivolity, but the technologies are more than video games and multi-million dollar works of art. By viewing the metaverse as the next step in online interaction and NFTs as the place to customize one’s online experience, it is possible to understand the demand for unique and authenticated digital assets. As with any technology gaining commercial momentum, there are legal and business issues to consider in the metaverse going into the new year.

Understanding intellectual property rights for NFTs: Development, sale and use of NFTs are intertwined with intellectual property rights. The person or company that “coins” (or creates) the NFT must either own or have appropriate rights in the underlying asset used or displayed as an NFT. Also, one should not assume that existing licensing or artist agreements involved in the creation of an asset automatically allow that asset to be converted as an NFT – that will depend on the terms of the agreement. Lack of such rights will at best require renegotiation or potentially the scrapping of an NFT project and at worst a court case.
Make a “Minter’s Checklist”: When reviewing and negotiating agreements involving NFTs, it will be valuable to have a due diligence checklist to hand to ensure awareness and full compliance with all the requirements required to create NFTs, including whether the creator has created the works within the scope of his employment or NFT was established by an independent contractor bound by an appropriate contractual agreement.
Carefully review the platform’s rights and restrictions when choosing a place to list an NFT: There are several NFT platforms or marketplaces to choose from, and each has its own features and specific terms of service that deal with things like selling and licensing NFTs, so it’s important to ensure that a platform’s capabilities and terms of service aligns with the vision for a particular digital resource.
Be aware of rights and restrictions you place on end users when buying or selling NFTs: When creating the terms for an NFT purchase or sale, you need to think about what rights and/or restrictions should be added to the final end user and what the seller is and is not giving up. Sellers can set restrictions such as whether an NFT can be changed, is subject to an ongoing royalty stream, allows commercialization, and where and how the digital asset can be used.
Look at the future: Given the expected trajectory of NFTs, consider building the conversion of work from third-party designers or artists into a digital asset and inserting the appropriate grant language into existing or new agreements. This would potentially eliminate reopening negotiations with the creator of a particular work, which could delay or prohibit certain NFT plans.

As the functionality of the metaverse and NFTs become more complex, you can expect legal issues to follow suit. By keeping some of these key legal considerations in mind, businesses will be better equipped to protect their intellectual property rights as they engage in the metaverse.

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