What rights come with your NFT
As non-fungible tokens (NFTs) become increasingly mainstream, investors are finding that not all collections are created equal.
This specifically refers to the rights and privileges that come with the associated NFTs. For example, while there are some collections that may give owners full rights to commercialize their holdings, many others limit what a person can and cannot do with their holdings. This is not a new concept, as anyone who watches a Sunday football game is likely familiar with the message stating that depictions of the game may not be transmitted without the express written consent of the National Football League and the network broadcasting the event.
While many may have no intention right now of opening up a t-shirt shop with pictures of boring or mutant monkeys, these conditions are still important because they can directly affect the demand and value of certain collections.
To delve deeper into these important questions, Forbes spoke with an expert on the subject, Stuart Levi, Partner, Blockchains and Digital Assets; Intellectual property rights and technology at Skadden, Arps, Slate, Meagher & Flom LLP and affiliated companies.
Forbes: What types of laws are most applicable to NFTs from a commercialization point of view? Also, can you explain the difference between trademarks and copyright?
Stuart Levy: The two most applicable laws are copyright and trademark. Copyright law is designed to protect original works of authorship. We usually associate it with creative works such as books, still images, video and music. The Trademark Act protects words, logos or short phrases that indicate a source of origin.
Forbes: How do these apply to NFTs?
Levi: Trademark issues have always been relevant in the Web3 space because, as with any industry, you have brands that want to protect the rights to their names and logos. Copyright law did not receive as much attention before NFTs came along. That’s because the digital works associated with NFTs are almost always copyrighted works of authorship.
Forbes: What rights do you get when you buy an NFT?
In general, unless there is a formal grant of rights, you do not get any rights in the digital work related to NFT. To date, three models have emerged. One model is that when you buy an NFT you get no intellectual property rights in the underlying work, other than the right to use it for your own personal, non-commercial use. The NBA TopShot (see chart) is a good example of that. And it’s consistent with the way digital collectibles and artworks have traditionally been sold. Another model has emerged over the past year or so, particularly with NFTs for profile pictures, based on the idea that not granting commercial rights is contrary to the ethos of Web3 and contrary to the concept of decentralization, where the community is in it together. These projects provide commercial rights to the artwork you own. Some examples are Bored Apes and Doodles. They give you commercial rights to the artwork of the NFT you bought, which means you have the right to make and sell products like T-shirts, mugs and posters using the artwork you have. However, commercial rights come in many different forms. Some projects may limit the scope of your commercial rights. So maybe I can create and sell physical goods, but I can’t, for example, turn it into a streaming service or create video content. Some projects limit the amount of money you can make from your commercialization efforts. So they kept it to let’s say $100,000 per year (Meebits and Doodles have such a limit). The third model is to put the artwork in the public domain, meaning it is free for anyone to use. (NounsDAO is an example).
Forbes: Are these rights and privileges transferred during resale?
Levi: The only way the rights are conveyed is if you have an agreement that conveys these rights. Silence in the world of intellectual property means that no rights were conveyed. In a primary sale, you very often have to click an “I accept” button. But very often these terms do not apply with NFTs, which means that in terms of secondary sales, I can buy an NFT, but the rights associated with that NFT were not presented to me and I never agreed to them. So that leaves you in a bit of an unknown space as to what your rights are.
Forbes: What advice (note this is not legal advice) do you have for buyers looking to buy NFTs?
Levi: The reality today is that each project offers different commercial rights, with some offering none. Most NFT projects and marketplaces have terms and conditions that contain a number of different restrictions, limitations and assumptions about risk, and a buyer should read these carefully; they are there for a reason.
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