Changing Trends for IP Licensing in NFT Terms and Conditions | JD Supra

With the proliferation of non-fungible tokens (“NFTs”), particularly in the realm of art, an interesting and potentially revolutionary practice has developed where certain intellectual property (“IP”) relating to NFTs is licensed to purchasers of NFTs and their assignees. This type of IP license was made famous by the developers of the Bored Ape Yacht Club, who included a commercial use license in their terms and conditionss and, based on public statements, intended that these licenses would allow NFT holders to more fully market their Bored Apes. Granting the owner of an NFT, or for that matter, any reproduction of a work of art, a license for commercial use has so far not been common practice, as traditionally the buyer n is only authorized to use this article. This trend of granting greater intellectual property rights to owners of NFTs is aligned with the philosophy of Web3 – allowing owners to have more control over digital assets and content.

This licensing of trading rights to a particular NFT holder presents exciting opportunities for buyers to monetize their NFT purchases. It also presents new challenges as developers attempt to craft the most appropriate legal construct to serve the interests of both the overall project and individual NFT owners. Some of these challenges recently arose when major changes were made to the license terms in two popular NFT projects: Lunar birds and CryptoPunks, each demonstrating a different strategy for assigning intellectual property to NFTs. Moonbird NFTs sold for up to 350 ETH (about $570,000 based on the current ETH price as of August 22), and CryptoPunk NFTs sold for up to 8,000 ETH, or about 13 million dollars based on the current price of ETH in August. 22).

Moonbirds move to CC0

One approach to licensing, which is “Web3” only, is to place otherwise protectable intellectual property into the public domain through the use of Creative Commons “No Rights Reserved” (“CC0”) agreements. The idea behind CC0 is that when art is placed in the public domain, it allows more people to use and advance that art without fear of infringement, which in turn increases the awareness and value of original works.

The Original Moonbirds Conditions of sale has licensed the artwork in individual Moonbird NFTs to holders of such NFTs for commercial purposes. The relevant excerpt from those original terms is below:On August 4, 2022, Kevin Rose (founder of the Moonbirds project) announced on Twitter that Moonbirds would move to a CC0 public license. This shift from licensing a work of art only to individual owners – to now allowing the general public to have equal rights to the use of that work of art has upset some Moonbirds NFT holders who previously had greater intellectual property rights and suddenly found themselves with diluted commercialization rights due to the sudden change in licensing terms.