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What Rights Come With Your NFT

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As non-fungible tokens (NFTs) increasingly become mainstream, investors are finding out that not every collection is created equally.

Specifically, this refers to the rights and privileges that accompany the associated NFTs. For instance, while there are some collections that might give the owners full rights to commercialize their assets, many others restrict what a person can and cannot do with their holdings. This is not a novel concept, as anybody who watches a football game on Sundays is probably familiar with the boilerplate message that says depictions of the game cannot be transmitted without the expressed written consent of the National Football League and the network broadcasting the event.

While many may not have any intentions right now of opening up a t-shirt store with pictures of your Bored or Mutant Apes, these conditions still matter because they can directly impact the demand, and value, of certain collections.

To dive deeper into these important issues, Forbes spoke with an expert on the subject, Stuart Levi, Partner, Blockchains and Digital Assets; Intellectual Property and Technology at Skadden, Arps, Slate, Meagher & Flom LLP and Affiliates.

Forbes: What are the types of law most applicable to NFTs from a commercialization point of view? Can you also explain the difference between trademarks and copyrights?

Stuart Levi: The two most applicable laws are copyright and trademark. Copyright law is designed to protect original works of authorship. We normally associate that with creative works such as books, still images, video, and music. Trademark law protects words, logos or short phrases that designate a source of origin.

Forbes: How do these apply to NFTs?

Levi: Trademark issues have always applied in the Web3 space because, as with any industry, you have brands looking to protect the rights in their names and logos. Copyright law did not get as much attention until NFTs came along. That is because the digital works associated with NFTs are almost always copyrightable works of authorship.

Forbes: What rights do you get when you purchase an NFT?

In general, unless there is a formal grant of rights, you don’t get any rights in the digital work associated with the NFT. To date, three models have emerged. One model is that when you buy an NFT you don't get any intellectual property rights in the underlying work, other than the right to use it for your own personal, noncommercial use. NBA TopShot (see chart) is a good example of that. And that is consistent with the way digital collectibles and artworks have traditionally been sold. A second model has emerged over the past year or so, particularly with profile picture NFTs, based on the idea that not granting commercial rights is contrary to the ethos of Web3 and contrary to the concept of decentralization, where the community is in it together. Those projects grant commercial rights to the artwork you own. Some examples are Bored Apes and Doodles. Those grant you commercial rights in the artwork of the NFT you purchased, meaning that you have the right to make and sell products like T-shirts, mugs and posters using the artwork that you have. However, commercial rights come in a lot of different forms. Some projects might limit the scope of your commercial rights. So maybe I can make and sell physical merchandise, but I can’t, for example, turn it into a streaming service or create video content. Some projects limit how much money you can earn from your commercialization efforts. So they kept that to let's say $100,000 per year (Meebits and Doodles have such a limit). The third model is to put the artwork in the public domain, meaning it is free for anyone to use. (NounsDAO is an example).

Forbes: Do these rights and privileges transfer during resales?

Levi: The only way that rights are conveyed is if you have an agreement that conveys those rights. Silence in the world of intellectual property means that no rights were conveyed. In a primary sale, you very often have to click on an “I agree” button. But, very often those terms don't travel with the NFT, meaning that with respect to secondary sales I can purchase an NFT but the rights associated with that NFT were not presented to me and I never agreed to them. So it leaves you in a little bit of an unknown space as to what rights you have.

Forbes: What advice (note this is not legal advice) do you have to purchasers looking to buy NFTs?

Levi: The reality today is that every project offers different commercial rights, with some not offering any. Most NFT projects and marketplaces have terms and conditions that contain a variety of different limitations, restrictions and assumptions of risk, and a purchaser should read those carefully; they're there for a reason.

Forbes is a bona fide news publication, not an investment advisor, registered broker-dealer, or exchange, and nothing in this publication should be construed as investment advice, research, or investment advisory services. Forbes’ site is not tailored to a specific reader’s or prospective reader’s current or future investment portfolio, investment objectives, or other needs. The content provided in this publication is for informational purposes only. No part of this publication should be construed as a solicitation, offer, opinion, endorsement, or recommendation by Forbes to buy or sell any security, investment, cryptocurrency, or digital good or property in the metaverse. You should consult your legal and tax advisors before making any financial decisions.

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