NFT copyright is still a total mess, says report
Non-fungible tokens, or NFTs, are sold on the promise of “ownership,” but a new review suggests many creators and buyers still have no idea what that means. A review by blockchain investment firm Galaxy Digital finds that only one of the 25 most valuable NFT projects even attempts to give buyers direct intellectual property rights to the underlying art, and many offer confusing or nebulous licenses despite recent efforts to clear up up in the square.
The Galaxy Report analyzes the terms of major NFT projects, including the Yuga Labs project Bored Ape Yacht Club (BAYC), Gary Vaynerchuk’s VeeFriends and World of Women as well as the “metaverse” social platforms Decentraland and Sandbox. It concludes that “the vast majority of NFTs convey zero intellectual property rights to their underlying content,” and many of their operators (including Yuga Labs) “appear to have misled NFT purchasers” about the extent of their rights. Some projects have tried to prevent confusion by adopting the widely known Creative Commons license, but in the process some have effectively freed IP rights from NFT – making it “impossible” for NFT holders to defend exclusive rights to the art.
This reflects the conclusions of a review by Cornell University and the Initiative for CryptoCurrencies and Contracts, adapted by The Verge earlier this year. And both reviews call out BAYC, one of the largest and most influential NFT series, as particularly disjointed. The BAYC terms promise that buyers “own” the underlying art for their token “completely”, but they also provide a license that directly contradicts this claim. (In short, if you actually owned the art, you wouldn’t need a license to use it.) Galaxy is highly skeptical of the claim that major artists like Seth Green actually rely on NFT’s terms of use. “It’s hard to imagine that Seth Green and his production studio didn’t negotiate a separate deal with Yuga,” it reasonably concludes.
That said, Yuga Labs recently introduced a heavily revised Terms of Service for the CryptoPunks and Meebits series, detailing what a more professionalized version of NFT licensing might look like. Galaxy also calls the “noble effort” World of Women (WoW), the only project in its survey that attempts to formally transfer copyright ownership of art with its NFTs. But it says that WoW still does not clarify how the sale of NFT transfers the rights to derivative works based on that copyright.
When the IP rights remain with the NFT’s original creators, they can unilaterally change the terms in ways that some NFT buyers may hate. This happened recently with the Moonbirds project, which announced a move to the CC0 (or “no copyright reserved”) Creative Commons license after telling buyers for months that they “owned” their Moonbirds art. CC0 effectively means that anyone, not just the NFT holder, can use the art – which has reportedly sunk at least one Moonbirds owner’s pending licensing deal with a brand.
Galaxy’s report focuses on the goal of improving NFT licensing. This can be useful for NFT enthusiasts who want to license their purchases or make fan art out of them. But their current status does not indicate that they are a great way to manage intellectual property rights – at least not without a lot more work.
