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NFTs and Intellectual Property (IP) Rights: Explained

Read 6 min
NFT computer screen on a black background
— 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 IP rights are concerning NFTs, plus, how they affect the way that you use your NFT and what CC0 (creative commons zero) means.

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.

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 Intellectual Property (IP) Rights: What’s It All About?

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. To explain, there are two elements to every NFT – the tokenized asset itself, and the image it uses. You might own the token itself, but do you actually own the image? Well, for many NFT projects, the answer to that question is no. Put simply, the legal owner of the visual content is determined the creator, and that doesn’t change unless they decide to license the art to you with the NFT. However,that’s exactly what some projects do. In short, NFT collections award holders specific Intellectual property (IP) rights. This means some holders can actually use their NFT images for commercial use.

If you’re confused, don’t worry! Let’s explore the different intellectual property rights levels in the NFT space, and how they may affect your experience.

NFT IP Rights Often Remain With The 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.

Yuga Labs, the creators of Bored Ape Yacht Club (BAYC), subsequently acquired the Cryptopunks license. Then, part of that transition was applying a less prohibitive commercial rights agreement to the whole collection.

Some NFT Collections Offer Commercial IP Rights To Holders

Bored Ape Yacht Club (BAYC) – 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.

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 craft beer 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!

However, there are some limits.

Importantly, there’s a clear distinction between the rights to the unique artwork and broader project’s branding.

To explain, even when projects grant NFT holders the commercial IP rights for their images, it only extends to the individual NFTs – and not the over-arching Bored Ape Yacht Club brand. So for example, as a Bored Ape NFT holder, you could launch an ice cream brand featuring your ape’s image. But there’s just one rule: You can’t call it Bored Ape ice cream.

Commercial use of the brand name itself remains under the remit of the creators. This allows them editorial control over where the central story of Bored Apes goes. However, it also allows users the chance to build their own narratives for their characters.

The BAYC team took a big step by allowing their NFTs to be used commercially by individual owners. However, 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) NFT Model

A CC0 (creative commons zero – no rights reserved) describes any artwork where the creator forgoes their intellectual property rights. The works of Shakespeare would be a good comparison. To illustrate, all of his works are in the public domain. This means absolutely anybody can use them, for any type of project, without asking permission. 

NFT projects adopting the CC0 stance are similar. They allow anyone – token holders and 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. This does not protect the integrity of the intellectual property (IP). Instead, anyone can use the NFT image or likeness. One such project to use NFT IP in this way is CrypToadz

How the CrypToadz NFT Community Uses CC0 IP Rights

CrypToadz is a collection of 6,969 unique pixelated toads by the enigmatic, anonymous Web3 artist Gremplin. The CrypToadz team bucked the trend of allowing users commercial IP rights. Just like the works of Shakespeare, the project’s art would remain in the public domain instead. 

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 exposure the project gets. Meanwhile, the value of that visibility is harnessed by the project’s native NFT collection. While the CrypToadz artwork is open-source, the floor price 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.

Which Intellectual Property (IP) License Do I Want For My NFTs?

You might be wondering at this point how to understand your own NFT collection better, and what rights you have yourself. To conlude, commercial rights for any NFT are determined by the creator themselves. Normally, you can find them on the project’s Terms of Service (TS).

The NFT space is a patchwork of different commercial rights levels. Each of these methods of approaching intellectual property is valid, depending on what the project is.

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

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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