The Can’t be Evil License: Bringing Order to the “Wild West” NFT Realm | Ingram Yuzek Gainen Carroll & Bertolotti, LLP
In a previous post, we wrote about the importance of reviewing the terms of sale of an NFT to determine what rights, if any, are included in the sale to commercially exploit the asset associated with the NFT, and the confusion that arises in interpreting such terms through the lens of copyright law. In an effort to clear up this confusion and bring NFT licensing into line with the mechanism of US copyright law, Silicon Valley venture capital firm Andreessen Horowitz, or “a16z,” in consultation with IP lawyers and other NFT operators, has released a set of six free and public US copyright-specific NFT licenses termed the “Can’t Be Evil” license (“CBE License” or “License”), a spin on Google’s “Don’t Be Evil” corporate code.
The CBE license is modeled after the Creative Commons license, which provides a standardized public domain copyright license that enables the free distribution of a copyrighted work with varying degrees of permission granted by the copyright owner.
The diagram above summarizes the six types of CBE licenses. The most permissive license is CBE-Public, which is essentially a public attribution of the asset associated with NFT, subject to the terms of Creative Commons CC0 1.0 Universal. The remaining five licenses go from restrictive to permissive in ascending order, with licenses allowing personal use (with one version where the license will be terminated if used for hate speech, and another version without this restriction); licenses allowing non-exclusive commercial use (again one version with and another version without the hate speech restriction); and finally the exclusive license where the copyright owner does not retain the licensed right.
The actual terms of the six licenses and the legal primer can be found here. The primer provides that “The License may be tailored by creators of NFT projects to suit their specified needs.” Some provisions may require assessment before the license is put into use to see if they need such tailoring. For example, with respect to the exclusive and non-exclusive commercial licenses, the buyer is expressly granted the right to create a derivative work, but must also agree to a covenant not to sue the NFT creator (for the exclusive license, only up to the time before the license grant), other subsequent purchasers or other licensees, even if their derivative works are very similar or possibly identical to the purchaser’s derivative works. While this will provide comfort to purchasers and subsequent purchasers of NFT in one respect, the scope of the agreement appears to require careful examination, particularly with respect to the rights of an exclusive licensee, as it is unclear what other licensees will exist outside of it exclusive of the license, and the agreement may interfere with one’s ability to assert a valid claim of copyright infringement.
The CBE license is non-transferable, but if the NFT is legally sold, all rights associated with the NFT will terminate, and the NFT and its underlying rights will be transferred to the subsequent purchaser. Another feature of the CBE license is the ability to sublicense. However, like the termination of the license described above, the sublicense is subject to automatic termination when the NFT is sold. As for the ability to use the derivative works already created, the terms of the CBE license seem a bit ambiguous, but it is noted in a16z’s article that “[a]new derivatives. . . created may continue to be used if they do not include copyrighted material from the original artwork.” So it appears that the intent is that a seller or sublicensee should be prepared to stop using the derivative work in a sale unless the derivative work does not contains copyrighted elements of the original, which may be difficult to determine.
The termination of the sublicense in the previous paragraph appears to have been inserted with the interests of a subsequent purchaser in mind, because a new purchaser may not wish to invest in an NFT with prior claims attached. Although this invites some uncertainty in the duration of the sub-license, which may make NFT less attractive to sub-licensees, it will also not be ideal for the seller if the fact that NFT is encumbered makes it difficult for NFT to sell. In this way, the sublicensing provision appears to strike a balance between competing interests. It notes that “once transparent and chained sublicensing regimes are widely adopted, more open and permissive sublicensing without automatic terminations will be possible.”
The CBE license also attempts to address the not infrequent problem of stolen NFTs by providing that license rights must be transferred “legally” in order for them to be attached. This would mean that even if the blockchain says that someone owns the NFT, unless the sale is considered legitimate, licensed rights will not be held by that person. While this language appears to provide some assurance to the legitimate NFT owner in exercising their rights, it is still likely to involve an off-chain investigation of competing claims to ownership (especially if it involves a subsequent purchaser of the stolen NFT -en), which requires the help of lawyers and possibly the involvement of a plaintiff. The primer also notes that “The Creator may choose instead to ensure that the ownership of the NFT (and the licensed rights associated with such ownership) will simply be based on the records of the relevant blockchain, in order for the Creator to avoid becoming part of a dispute over the right to exercise the rights under the license by various persons claiming ownership of the NFT”, but that “this option may still not be enough to avoid liability or involvement for the Creator in a stolen NFT scenario.” Thus, there still does not seem to be a simple solution to deal with the problem of a stolen NFT.
Finally, all disputes between the Buyer and the NFT Creator “arising out of, relating to, or in connection with these Terms, including with respect to their construction, applicability, breach, termination, validity or enforceability” are subject to a 90-day good believe dispute resolution, and if that fails, to exclusive arbitration. This means that a claim between the creator and the buyer is not subject to judicial review, and cannot be appealed if either party dislikes the outcome of the arbitration, making it more difficult to develop case law regarding the CBE license.
Being the first iteration of these licenses, the CBE license may undergo further tweaks and developments as they are adopted, and some web3 projects have already begun to adopt it. But overall, the CBE license appears to be a useful guide and represents a commendable effort to provide a template to bring some order to the increasingly chaotic NFT ecosystem.
