This article is excerpted from Galaxy Digital, original author: Alex Thorn & Michael Marcantonio & Gabe Parker, compiled by Odaily translator Katie Ku.
Although NFT has generated huge amounts of money and promises that NFT will have a revolutionary impact on ownership, the reality still leaves a lot to be desired. Going against the ethos of Web3, today's NFTs convey to their token holders exactly zero ownership of the underlying artwork. On the contrary, the "Game of Thrones" between NFT issuers and token holders is like a Web2 maze consisting of opaque, misleading, complex and restrictive copyright licenses, while popular secondary markets such as OpenSea do not provide Buyer provides copyright details therein.
Over the past few weeks, the crypto community has become increasingly aware of the tension between intellectual property ownership and NFTs, with two well-known issuers drastically changing the licenses for their NFT collections. This week, Yuga Labs, by far the largest NFT issuer, released a new licensing agreement for CryptoPunks and Meebits, two of the oldest NFT series.
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Four major NFT copyright types
We examined the top NFT collections by implied market capitalization (floor value multiplied by collection size). According to our review, NFT copyright licenses are divided into four categories:
Commercial rights: You can monetize artwork for free, in any location or format, for any length of time, with no income cap.
Limited Commercial Rights: You can use the artwork to generate a certain amount of income, or in a limited format or venue, or for a specified period of time. Typically, this license is only available for sales of low-value items (ie T-shirts) (limited to $100,000).
Personal use only: you cannot use the artwork for any profit-making purposes. Owned artwork display rights are limited.
Creative Commons: This artwork is placed in the public domain.
commercial rights
commercial rights
One example is the Azuki Collection, whose license grants token holders the right to monetize collectibles. At the time of writing, Azuki ranks ninth in the NFT family by implied market capitalization.
The Azuki copyright license grants unlimited monetization rights with no revenue cap and no venue, format or duration limitations. While the Azuki series is an example of a more permissive copyright license than many other projects, Chiru Labs does not grant any intellectual property rights to token holders. This license may be changed and revoked by Chiru Labs at any time for any or no reason.
It is worth noting that although the owner of Azuki can use and create derivative works, it cannot be used for another NFT project, so Chiru Labs can also modify the original artwork at any time without reason, or create adaptations and derivative works with your own and modifications of similar or identical original works.
Compared with many other projects, the ability of NFT holders to "free commercialize" NFT is powerful. Having said that, it is highly unlikely that any serious entrepreneur will base any significant commercialization solely on the basis of a unilateral agreement that can be revoked at any time by the issuer.
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limited commercial rights
Doodles are one example of a limited commercial NFT series. At the time of writing, Doodles is the eighth most valuable NFT collection by implied market value.
Unlike the unrestricted revenue rights of the Azuki series, the Doodles copyright limits token holders to $100,000 in revenue from merch sales. In addition, the Doodles copyright license also prohibits changes to the illustrations of NFTs, and expressly prohibits the use of NFT illustrations on any merchandise deemed "illegal or unreasonable". Note that while these terms are broad in scope, in practice the publisher can renew or amend the license at any time without reason at all. Prohibition of any unreasonable commercial use is always in the hands of the Doodles publisher.
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personal use only
The Veefriends NFT collection is an example of a highly restrictive, personal-use-only copyright license. As of this writing, Veefriends is the tenth most valuable collectible series.
VFNFT (Veefriends NFT) holders are granted a "limited copyright license to access, use or store such VFNFT and its contents solely for their personal, non-commercial purposes." The license goes on to expressly state that VFNFTs are content-based limited edition digital creations that may be trademarked and/or copyrighted by VeeFriends. The final license statement: "Unless otherwise specified, your purchase of VFNFT does not give you the right to publicly display, perform, distribute, sell or otherwise reproduce VFNFT or its contents for any commercial purpose."
According to this copyright license, the VFNFT holder has no right to realize the underlying artwork in any way, shape or location, but the holder can display the artwork for personal use.
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Knowledge Sharing
All copyright licenses we have reviewed so far impose a series of restrictions on the licensee's use and enjoyment of the copyrighted material, in favor of the copyright holder. In contrast, a CC0 copyright license has no such restrictions on the licensee's use and enjoyment of the copyrighted work. By adopting a CC0 copyright license, the copyright holder effectively undertakes to waive all copyright and related rights in its copyrighted work to the fullest extent permitted by law. Therefore, the work is actually dedicated to the public domain. If, for whatever reason, the waiver is invalid, CC0 will make the work the maximum copyright license possible for any purpose.
Several star NFT projects have adopted the CC0 copyright license, with mixed results. While the CC0 model undoubtedly has advantages over the existing copyright licenses described above, there are also disadvantages.On the plus side, holders of CC0-managed NFTs have no restrictions on commercializing the art in the NFTs or using them in any way they see fit. NFT holders of NFT governance are on equal footing with the creators of NFT projects when it comes to ownership of NFT artwork.
Once a work of art enters CC0, no one owns the work of art - meaning anyone can use it for any purpose, including creating NFTs.This begs a question about the value support of NFTs managed by CC0: why would you spend a lot of money on an NFT when neither you nor the NFT project can prevent non-NFT holders from using the art associated with your NFT?
For this reason, many consider the CC0 license to be problematic for NFTs, as it enables anyone to use CC0-governed images without owning the NFT. CC0 NFT holders can commercialize their NFTs, but so can others. If CC0 NFT holders decide to commercialize their art, they will not be able to legally protect their commercialization since they do not own the copyright (and thus have no right to exclude others from using the same image). A good example is the lil nouns project, which is a direct copy of the real Nouns project. Because Nouns are issued under CC0, neither the Nouns DAO nor the holders of the Nouns NFT can pursue any type of copyright infringement claim against Lil Nouns or its NFT holders.
Given the dynamic relationship between copyright holders and purchasers, CC copyright licenses function similarly to CC0 copyright licenses. However, not all CC copyright licenses are structured the same, and there are often differences in commercial and modification rights. Currently, CC0, CC-BY, CC-BY-SA, and CC-BY-ND copyright agreements are the only CC licenses that allow commercial use. Except for CC-BY-ND, other CC copyright licenses allow the creation of derivative works.
The core issue of the NFT license agreement is the asymmetric control of the license by the copyright owner. If the copyright owner believes that the license agreement has been violated, or for any other reason, they have the right to modify and revoke the NFT license at their sole discretion. This ability to amend the license agreement at any time is a major flaw in the NFT architecture, as it means that the rights of each NFT holder (especially, to the extent available, its commercial use rights) can be limited or completely restricted by law. undo. This will greatly inhibit the widespread use and adoption of NFT artwork. Many of the license agreements we analyzed clearly state that the NFT project (the licensor) has no responsibility or obligation to notify NFT holders of any modification or amendment to the license, and it is the responsibility of each NFT holder to keep the project license updated on its website the latest terms contained in the Agreement.
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Copyright licensing of major NFT projects
Yuga Labs
Yuga Labs is a $4 billion NFT giant with an implied market cap of 63% of the top 100 NFT companies. In March 2021, Yuga acquired the intellectual property rights of several additional NFT series from Larva Labs, including CryptoPunks, one of the well-known NFT projects. Yuga Labs owns intellectual property rights to 5 of the 10 largest NFT projects by implied market cap: BAYC, CryptoPunks, MAYC, BAKC, and Meebits. On an implied market cap basis, Yuga's NFT collection is today worth more than 63% of the top 100 NFT market cap at over $4.2 billion.
There is a key inconsistency in the licensing provided by Yuga to BAYC, MAYC, and BAKC NFT holders, that is, the licensing agreement makes it difficult to properly transfer intellectual property to NFT holders. Yuga describes its license as unlimited, exclusive, worldwide, royalty-free, allowing full commercial use. We categorized various BAYC licenses as "commercial use" in the previous section. Under the ownership terms of the BAYC license, Yuga Labs stated: "When you buy an NFT, you own the potentially boring ape, the artwork for that NFT."
On the face of it, the above statement in BAYC's copyright license suggests that NFT token holders own the intellectual property that forms the basis of the NFT. But the copyright holder is the entity that owns the intellectual property of the underlying art, and Yuga's authorization does not transfer the intellectual property to the NFT holder.Copyright holders have the sole authority to grant licenses to use the intellectual property they own. By explicitly granting the license in the agreement, Yuga's copyright implies the clause that the NFT holder does not actually own the artwork.
Despite this contradiction, there have been some examples of BAYC holders using their ape NFTs for commercial purposes, most notably actor and author Seth Green. He is reportedly developing a TV show featuring his ape NFT for Cartoon Network's Adult Swim show. Given that Yuga can unilaterally change or revoke the terms of its commercial use license, Seth Green and his production studio have no separate agreement with Yuga. Producing TV shows is expensive, and no production company is going to use someone else's intellectual property. In other words, no production studio is going to use intellectual property to make a TV show that could, at any point, be required to modify it.
Cryptopunks New Official Copyright License
In March 2021, Yuga Labs acquired the intellectual property of CyptoPunks and Meebits from Larva Labs. Larva Labs lies in its highly restrictive licensing terms, which make it basically impossible for holders of NFTs to profit from their creations, given that Yuga Labs is more active in the commercialization of NFTs for use by its holders and third parties. position, the acquisition is seen as a potential positive. After purchasing the intellectual property rights, Yuga Labs can determine the artistic use of these works at its own discretion, but promises to formally renew the license. After nearly 6 months, Yuga Labs finally released a new license for the CryptoPunks and Meebits series on August 15th. The incident further puts the discussion on NFT licensing agreements in the spotlight, as Yuga Labs admitted that they have the right to unilaterally update or modify the licensing terms of these projects. These terms are often buried in the terms and conditions of the issuer's website, and never explicitly stated on secondary trading platforms such as OpenSea.
While BAYC's copyright license is unclear and potentially misleading, the new licenses from Yuga Labs, including the new CryptoPunks and Meebits licenses, are decidedly more professional and explicit in terms of ownership and licensing.Based on the discrepancies between Yuga's BAYC license and its new license, it's unclear whether Yuga Labs intends to grant the same commercial use rights to holders of BAYC NFTs and Punk NFTs. If Yuga Labs intends for these licenses to be functionally identical, they should update the BAYC license to remove misleading statements like "You own the full artistic rights to the potentially boring ape NFT".
Otherside Copyright License
Yuga’s metaverse project Otherside will interoperate with the NFT series currently under Yuga Labs (BAYC, MAYC, BAKC, Punks, Meebits). Its foundation will be different from the structure of other popular metaverses (Decentraland and Sandbox).The main difference between Otherside and Decentraland and Sandbox is that the project revolves around interoperability with Yuga's existing NFT community.While Decentraland and Sandbox focus on user-generated content, Yuga has designed Otherside to facilitate the utility of its existing (and future) collection of NFTs. Specifically,Otherside is an exclusive metaverse, not an open one, as it can only be accessed by owning the Otherdeed NFT.
Otherside consists of 200,000 parcels called "Otherdeed" and "Koda" (game characters attached to specific parcels). Otherdeeds vary in characteristics and rarity. Each piece of land and Koda will initially be a separate NFT distributed by Yuga Labs.
Reviewing the terms and conditions of the Otherside metaverse is critical to understanding the difference between metaverse projects that mandate the use of non-user-generated products, and metaverses that primarily use user-generated products. Regarding the Otherdeed NFT plots, the terms and conditions clearly state that "the buyer has the property rights to transfer the NFT, and the property rights do not include intellectual property rights." Essentially, although NFT owners can use and transfer the virtual plots they purchased, Otherdeed owns However, the owner cannot own the copyright in the artwork or other media related to the virtual parcel.Notably, Otherdeed is the first NFT released by Yuga Labs that does not grant commercial rights.In contrast, the Koda license provides a full commercial license for NFT token holders. Koda's commercial rights are defined consistent with the BAYC license. However, unlike the licensing of the BAYC NFT series, the Otherdeed agreement clearly stipulates that the purchase of other Otherdeed NFTs does not include intellectual property rights.
Moonbirds
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Source: Contents of Moonbirds.xyz on August 8, 2022
Recently, PROOF Collective announced that Moonbirds will be transitioning from a commercial use license to a Creative Commons license, placing all Moonbirds intellectual property in the public domain. PROOF can unilaterally change its license terms, and in fact did. This is further evidence that holders of the Moonbirds NFT do not actually “own the intellectual property.” While PROOF hasn't actually released any updated license agreement as of 18th August 2022, they did remove the "you own the IP" reference from the Moonbirds website on 8th August 2022 as if moving to CC0 was Moonbirds The reason why NFT holders no longer own IP, when in fact Moonbirds NFT holders never owned any IP.
The announcement of the CC0 license change was made on Twitter, in a Twitter Space on August 5, 2022, and it became clear that Moonbirds NFT holders had no idea that the license could change. One Moonbird holder said they were in the process of licensing Moonbirds artwork to a brand, but the brand pulled out of the deal due to a statement about the license switch. If Moonbirds moves to CC0, the work will enter the public domain and brands can use the work without owning any NFTs or paying any NFT holders.
PROOF Collective has the right to change the Moonbirds copyright license, assuming they actually release a new CC0 license, it will lead to several important discussions:
In fact, the holders of Moonbirds do not "own the IP". By changing the license, PROOF indirectly acknowledges that the statements on its website have been misleading.
The IP owner can unilaterally change or revoke the license for commercial use at any time without prior notice to the NFT holder.
The CC0 license is too permissive. While commercial licenses allow NFT holders to monetize their NFT creations while retaining ownership of the publisher's intellectual property and thus conveying some license to use to NFT holders, the CC0 license fully transfers the intellectual property into the public domain, This means that no one owns the intellectual property. While CC0 does relinquish ownership of intellectual property to the issuer, it does not pass the intellectual property on to the holder. In fact, while commercial use rights licensing may result in the NFT owner's exclusive rights being revoked at any time, CC0 guarantees that the NFT owner has no exclusive or commercial rights.
World of Women （WoW）
World of Women's NFT series differentiates it from the other 25 top NFT projects as it is the only one that attempts to transfer all intellectual property to NFT holders. WoW does this by offering a novel copyright transfer agreement. According to this copyright transfer agreement, WoW attempts to create a governance structure in which the copyright of each WoW NFT "runs alongside" the NFT, so that whoever owns the NFT owns the copyright. According to WoW's Copyright Assignment Agreement, "this Copyright Assignment Agreement is intended to govern the terms and conditions of the assignment of all right, title, and interest in and to the Artistic Intellectual Property." In other words, the WoW project is trying to transfer the copyright of all artwork to the owner of the WoW NFT.
One problem with the structure WoW has created is that it is not clear that this intellectual property transfer agreement can continue to dominate downstream sales to secondary buyers. Specifically, if the original minter sells their WoW NFTs to secondary buyers on OpenSea, it's not clear whether the seller would need to transfer the IP to the secondary buyer, even though WoW's IP transfer agreement requires it. There is no guarantee that the Intellectual Property Transfer Agreement will transfer from the Founder to the Secondary Acquirer unless both the Founder and the Secondary Acquirer agree to these terms. To make matters worse, the original transfer from WoW to the minter happened on WoW's website, where this IP transfer agreement also exists, but future secondary sales happen on marketplaces like OpenSea, which neither show nor any function to facilitate the execution of such transfer agreements.
Major Metaverse Copyright License
Decentraland and Sandbox have become two major projects in the Metaverse space. We've reviewed their terms and conditions to see how real-world copyrights and trademarks look in the context of the Metaverse. Ultimately, both Decentraland and The Sandbox are trying to assign IP ownership of user-generated content to their users, while clarifying user rights.
In both cases, Decentraland and The Sandbox retain all intellectual property rights in their metaverse related to the sale of the plots (only the use rights are transferred to NFT buyers). However, they all try not to take over the intellectual property rights of user-generated content, keeping it in the hands of the creators in any case. Decentraland seeks to make ownership of intellectual property transferable between creators and secondary purchasers, stating in its terms and conditions, "The sale of an NFT through the marketplace will transfer the aforementioned title, ownership and intellectual property rights to the buyer. Upon transfer To a third party, the creator will forfeit to the greatest extent any moral rights to the NFT.” Although Decentraland attempts to transfer IP to secondary buyers such as WoW, successful transfer of IP is difficult to achieve for the same reasons mentioned above.
Sandbox explicitly states: "When you upload an asset and make it available for sale on the Sandbox marketplace, you retain ownership of all intellectual property associated with that asset, but you agree to sell a certain amount of the asset as an NFT." Therefore , the buyer of the in-game item will obtain a license from the seller, and the seller still retains the copyright of the in-game item. This seems more realistic than Decentralized's attempt to have IP flow from creators to buyers without an IP transfer agreement.
Summarize
Summarize
We analyzed the top NFT projects and categorized their associated copyright licenses into several categories to assess what buyers actually own when purchasing an NFT. All licenses we found (except for one of the series) retain all intellectual property rights in the images referenced by the NFT. Even in the case of a project attempting to create a family of NFTs that transfer intellectual property from buyer to buyer, design constraints raise questions about the efficacy of such transfers of ownership.
Some publishers directly provide misleading claims, such as on websites, marketing materials, or community chat rooms, that contradict the terms set forth in the relevant licenses. In some cases, these inconsistencies may arise from ignorance of the laws governing intellectual property and digital rights. In other cases, issuers appear to be intentionally misleading buyers by failing to explicitly correct the market’s misconception that buyers hold title to their NFTs and underlying artwork.
On the other hand, some projects have explicitly disclosed the fact that NFT token holders only own the tokens and have no intellectual property rights to the underlying artwork.While there is no requirement for NFT issuers to specifically grant purchasers full intellectual property rights, the lack of intellectual property rights undercuts the goal of NFT and Web3 promoters that this technology will revolutionize digital ownership. If NFTs are to be used widely online, across the metaverse, and for commercial purposes, a more durable framework for the distribution and transfer of intellectual property must be adopted. Even in the case of CC0 derivative licenses, the issuer does not retain the intellectual property rights of the NFT's underlying content, nor does it pass on exclusive rights to non-NFT holders. Due to the lack of legal protection, entrepreneurs cannot integrate NFTs into their businesses. Achieving a true future of digital ownership requires the following actions:
NFT holders should fight for their intellectual property.Blockchain is powerful in tracking ownership, not just the license of the artwork for which the issuer retains title. If your use of NFT-related content is entirely dependent on the third-party issuer's permission, it's not even clear that a blockchain is needed. Beyond that, relying on the publisher's license puts your use of the content at risk. If the NFT issuer sells the underlying intellectual property to a third party, or is acquired outright, the new owner can unilaterally restrict, alter, or cancel your license entirely.
Flawed licensing must be fixed now for Web3 to be possible.There is also the question of how a limited commercial license (which can be revoked at will and does not transfer ownership of the digital content) reconciles with the ethos of Web3 - the proposition that the future Internet will be run by users, not big tech Group owned. However, as this report describes, such promises are not found in the terms and conditions of most NFT projects today, in large part because these terms do not confer ownership of the underlying intellectual property rights on their owners; they simply Extending the limited Web2 license within that intellectual property fails to give NFT holders any say or control over the future of the art their NFTs are connected to. As NFTs are still in their infancy, it is critical for the NFT community to start developing a framework for properly awarding intellectual property to users before mass adoption. Without addressing these IP ownership deficiencies and mass adoption of NFTs begins, NFTs will clearly form Web2 products and be marketed as Web3 products.
A decentralized metaverse requires intellectual property.If these issues are not resolved now, the so-called decentralized metaverse will not be substantially different from the virtual worlds built by Web2 giants such as Meta (Facebook). In this case, the decentralized metaverse will only be decentralized in name, using only the public chain and tokens to achieve an efficient off-chain secondary market, but does not transfer actual property rights. If the digital property of the Metaverse is not owned by the user, but authorized to the user by others at their sole discretion. The promise of empowering new technologies, then, might inform the design of social credit systems.
In the end, we believe that for the Web3 dream of NFTs to become a reality, token holders must demand ownership of their NFTs, or increase the transparency of the issuer.
