What do you buy when you buy an NFT?

Bored Ape #0

Photo: Bored Ape Yacht Club

Presented by 

Hello and welcome to Protocol | Fintech! This Tuesday: what you can and can’t do with your NFTs, Unit’s Itai Damti on embedded fintech, and Binance’s newest regulatory hurdle.

Who owns that NFT?

One of the lasting questions about non-fungible tokens, or NFTs‚ is what you get with your NFT. Do you get intellectual property rights or just the right to say “I own this”?

Some NFT collectors think that IP rights do attach to NFTs unless the creator or seller says otherwise, says Dorian Banks, CEO of Looking Glass Labs, an NFT design company. “In the NFT space, it really is felt that it’s yours to do what you want — unless licensing or something specifically says you can’t do it.”

The idea is that users add value to an NFT by buying it, re-mixing it as they would with a sample in a music track, and creating more public interest in the project.

NFT IP standards aren’t settled. But it’s clear that norms and expectations among NFT users are different than in the traditional art or creative world.

  • Larva Labs, the creator of one of the early NFTs, CryptoPunks, doesn’t attach IP rights to its NFTs. It apparently uses something called the NFT License, which allows using the NFTs for “personal, non-commercial use.” That doesn’t include, say, selling a million T-shirts with “your” CryptoPunk on it.
  • Larva Labs itself has signed with United Talent Agency to sell rights for CryptoPunks and two other NFT collections for film, TV, video games and other licensing. Larva Labs co-founder Matt Hall has said the deal will help increase the value of CryptoPunks overall, but there doesn’t appear to be a direct monetary connection. CryptoPunks buyers might see their punks on TV and not get paid for it, in other words. Dapper Labs, which has a licensing deal with the NBA, retains the rights when consumers buy its Top Shot basketball NFTs.
  • This makes sense: In the real world, if you buy art from someone, by default, that generally doesn’t give you the right to the underlying intellectual property. It may seem unintuitive when you’re making a digital purchase that is all about a license, but IP rights shouldn’t be automatically expected, one crypto investor said.

That rubs some collectors the wrong way. Many believe owners should be able to do what they want with NFTs, including profiting from them.

  • Some NFT minters, such as the makers of the popular Bored Ape Yacht Club, say NFT owners own them “completely.” One owner created a music video with an ape. Virtual band KINGSHIP, made up of four Bored Apes, signed with Universal Music Group. There’s also a beer launched by an owner. And artist Dan Rollman created a comic with his Bored Apes. “Rather than wait for the project creators to add value to my NFT, I set out to build value around it myself,” he said in a Twitter DM.
  • Still, Bored Ape creator Yuga Labs doesn’t allow use of Bored Ape’s “name, logos or branding” — which Arizona Tea had used inappropriately, Yuga said. In other words, you can exploit your ape, but not Bored Ape. Yuga Labs has signed with legendary manager Guy Oseary to expand into film, television and other formats.
  • There are many NFT projects that use Creative Commons CC0 licensing that gives owners virtually all rights to use the NFTs.
  • We should note: The smart contracts governing NFTs can be written in a number of ways, from facilitating one-off sales that hand over all rights to splitting ongoing revenues from a creative work between the original creator and a series of owners.
  • The bottom line: There’s no consensus on what IP rights are proper for NFTs.

Companies need to navigate these differing expectations. Nike, which has patented shoes on the blockchain, on Monday announced it was buying NFT and fashion startup RTFKT (pronounced “artifact”). The online backlash came swiftly.

  • On Twitter, NFT connoisseurs complained that RTFKT’s recent NFT drop didn’t explain the IP rights until after the NFTs were sold. The rules for most of the NFTs allowed up to $1 million in commercial use, but certain rare NFTs in the drop do not come with any IP rights.
  • The complaints seemed to be more about the lack of transparency than the rules themselves. “In the NFT community if you’re not transparent you’re in trouble,” Banks said. “The whole community is about transparency. It’s about people taking control, not corporations taking control.”

The NFT rights question comes amid a swirling debate over compensating creators. These issues aren’t just being talked about in crypto circles, but also regarding other creator services like Patreon, OnlyFans and Substack. It’s a debate about whether creators should retain rights forever, or whether NFT owners should reap the rewards of participating in and promoting those NFTs for the creators. With NFTs seeping into more of the broader creator world, expect to see these issues heat up.

Leave a Reply