NFT Commercial Rights Explained

Medium May 5, 2022 · 6 min read

Key Takeaways:
— NFTs allow all types of digital content to be tokenized and digitally owned, but ownership rights exist on a spectrum.

Owning an NFT does not necessarily mean you can use the image however you like.

— Commercial rights – the right to make money using your NFT artwork – have traditionally been reserved to creators themselves, ensuring only they can make money from their work unless otherwise agreed.

— But blockchain technology changed the playing field. By creating communities around art collections, where everyone is a shareholder in that work, the network effect of large communities can be harnessed both by the artist and those buying the art.

— And as a result, the approach to commercial rights in the NFT space is changing. Here we explain.

In this article, we explain what NFT commercial rights are, how they affect the way that you use your NFT and what CC0 (creative commons zero) means in the context of NFTs – and their future.

Hello again Frens!

Fashion, music, videos, art, avatars, gaming assets – NFTs changed our concepts of ownership by allowing all types of content to be tokenized and digitally owned by anyone via the blockchain. But did you know that simply owning a token doesn’t mean you have absolute freedom over how you use it?

Commercial rights have the final word in what you can do with your treasured non-fungibles – and you might be surprised to know that they have nothing to do with blockchain. Let’s take a deep dive into good old-fashioned commercial rights, and how they interact with the slick and shiny digital world of NFTs.

LFG.

What are commercial rights – and why do we need them?

In basic form, commercial rights (or copyrights) were designed to protect creators. These rights acknowledge that art in all forms is the intellectual property of its creator, and give them control in how that property is used. Which makes sense – if you built yourself a house, you wouldn’t let someone else rent it out, right?!

So how does this work in practice? Say you’re making a film and want to use a particular piece of music, or maybe you want to create a campaign using some art you found online – in both cases, you’d need to get permission from the original artist first, and likely pay them for the privilege. The work is their property, and that transaction is their only chance to benefit from your use of that property.

The key takeaway here is that, even if you can consume art and music online, you can’t use it freely. That decision rests with the creator.

NFTs and Their Art: a Tale of Two Assets

NFTs changed the playing field when it comes to digital ownership, allowing anything to be tokenized and owned via the blockchain.

But your ownership is not absolute, because there are two elements to every NFT – the tokenized asset itself, and the image it uses. And while owning the private keys for an NFT means you own the token – and a stake in the underlying project – your freedom over how you use the visual content is still determined by the creator, not the blockchain, the smart contract or you.

If you’re confused, don’t worry – let’s take a closer look at different commercial rights levels in the NFT space, so you can understand how this big question affects your use of your own NFTs, and what it says about the space as a whole.

Commercial Rights Reserved to Creators

As one of the first and most renowned NFT collections, CryptoPunks paved the way for an entire industry based on community and digital art to emerge. Yet the project itself adopted very conservative licensing for its collection, heavily restricting the community’s usage options for their Punk.

This meant that despite paying to own their NFT, holders of CryptoPunks were limited to using the image for display purposes only. So using your CryptoPunk as a PFP was fine – but using your NFT to create your own project, company, film or brand was out of the question, no matter how much it cost you.

As you may be aware, Yuga Labs, the creators of BAYC, subsequently acquired the Crypto Punks license and part of that transition was applying a less prohibitive commercial rights agreement to the whole collection.

Commercial Rights Reserved to Token Holders

Bored Ape Yacht Club – one of the other big players in the crypto ecosystem – is known for its liberal approach to when it comes to how community members use their NFTs.

From the get-go, the project conferred full commercial rights for all holders of its NFTs. This means that, unlike the original CryptoPunks model, Apes can be used commercially by whoever owns the underlying token.

What’s in it for community members?

For individual NFT owners, this has some obvious benefits, enabling them to use their NFTs for derivative projects, and benefit personally from the existing BAYC public profile and strong network.

One great example is a recent craft beer launch, licensed under Bored Ape #3500. By using their NFT as the brand, the brewer behind the beer leveraged the global reputation of BAYC, as well as their ties with its community, allowing them to benefit personally by maximizing the reach of their small project.

Cheers to that!

What’s in it for the project as a whole?

And what about the wider community – how does it benefit from derivative projects like this? 

With NFTs making community members shareholders in a project, incentives for both the community and its individuals are aligned, and this means a win for you is a win for everyone.

So small, derivative projects serve to raise the visibility of the entire community, and consequently impact the value of the community assets by association. And while there are a lot of different reasons why BAYC became such a huge commercial success, these network effects were no doubt a factor.

Rights to the token are not rights to the brand

It’s important at this point to make a clear distinction between two elements of intellectual property: rights to NFT art, and rights to the broader project branding.

Interestingly, even where projects adopt the fairly liberal commercial approach of Bored Apes, rights for token holders only extend to the individual NFTs – not the over-arching Bored Ape Yacht Club brand. Commercial use of the brand name itself remains under the remit of the creators, giving them editorial control over where the central story of Bored Apes goes.

So for example, if you held a Bored Ape NFT and wanted to launch an ice cream brand with the image, you could – but you can’t call it Bored Ape ice cream.

The BAYC team took a big step by allowing their NFTs to be used commercially by individual owners, but interestingly, even this is not the limit of commercial freedom. A further model exists in the NFT space that permits absolutely anyone to use NFT artwork for commercial gain. Let’s check it out.

The No Rights Reserved (CC0) Model

A CC0 (creative commons zero – no rights reserved) describes any artwork where no intellectual property rights have been retained by the creator. The works of Shakespeare are a great example; all of it is in the public domain, and can be used by absolutely anybody, for any type of project, without asking permission. 

NFT projects adopting the CC0 stance allow anyone – not just token holders, but the public at large – to use the project’s intellectual property without limitations. This includes not only the artwork, but even the over-arching brand itself. Let’s take a look at one project taking this approach.

CrypToadz – Closed Community, Open source art

When the enigmatic, anonymous Web3 artist Gremplin and his team released the CrypToadz project, a collection of 6,969 unique pixelated toad character NFTs, they bucked the trend by ensuring that – just like the works of Shakespeare – the project’s art would be public domain. 

You might wonder how this move benefits the community itself – after all, if anyone can use the CrypToadz design without restriction, why buy into the project?

The logic is pretty simple – the more individuals have free reign to produce derivative projects and display their creations publicly, the more the underlying project’s visibility is amplified; meanwhile, the value of that visibility is harnessed by the project’s native NFT collection. Despite the artwork for CrypToadz being completely open-source, the floor price for the project remains (at the time of writing) roughly 3 ETH.

This highlights something interesting about NFT value: token holders are not paying for the art, they’re paying to be part of the story.

Where can I find the commercial rights details for my NFT?

You might be wondering at this point how to understand your own NFT collection better, and what rights you have yourself. As you now know, commercial rights for any NFT are determined by the creator themselves and they can normally be found on the project’s Terms of Service (TS), on its webpage. So go forth and get to know your NFTs a bit better!

NFT Commercial Rights: An Unfinished Story

The NFT space is a patchwork of different commercial rights levels that, as you now know, are not related to your blockchain-based token ownership.

There is no right or wrong approach to how a project handles commercial rights, but understanding who dictates these rights, where to find them, and how they are evolving over time will help you to better understand the space, and how you can benefit from it. Happy exploring Fren!

Knowledge is power.

In Web3, digital ownership is the name of the game – but it’s a tricky old concept to grasp. Don’t worry, School of Block has you covered.

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