Understanding NFT Ownership
Venture capital firm Andreessen Horowitz — known as a16z — has released a series of non-fungible tokens (NFTs) licenses titled ‘Can’t Be Evil’ for project uses by creators. Amid confusion over what intellectual property (IP) rights NFT holders have, the venture firm has partnered with Punk 6529 to diminish ambiguity by offering free licenses to let different NFT projects commercialize IP.
The Confusion
NFTs are used in a myriad of different ways such as gaming, assets, music and media, tickets and most notably, artwork. Digital artwork captured widespread public attention when an artist named Beeple, real name Mike Winkelmann, sold an NFT to his artwork titled “Everydays: The First 5000 Days,” through international auction house, Christie’s, for $69 million.
NFT art exploded onto the scene shortly thereafter. Notable projects — like the Bored Apes Yacht Club — became massively popular, developing merchandise, NFT series, and even beers! Billion dollar exchanges, such as OpenSea, have developed for the sole purpose of supporting NFT circulation. Most of these popular NFT projects grant holders the right to develop derivative products from the NFT’s they hold. However, there have been questions over whether such IPs licenses are legally durable, arguing that major NFT projects have misled buyers about their IP rights.
A survey of NFT licenses conducted by Galaxy found that the “vast majority of NFTs convey zero intellectual property ownership.” According to the survey:
“Most people talk about purchasing NFTs as “buying jpegs,” the image files you see online in avatars and marketplaces like OpenSea. But the reality is that the issuers of the NFT collections retain full ownership of those images. We reviewed the licenses for all of the top NFT collections, and in all cases, except one, the issuers offer only a usage license to the NFT purchaser, with varying levels of commercial rights ranging from permissive to highly restrictive.”
The report claims that most NFT projects were not forthcoming about their ownership, claiming that you ‘own the art’ if you hold the NFT for it. This has exacerbated pervasive misconceptions that NFTs equate to digital ownership, although property rights remain out of sight. NFT owners believe they can display their art, as they would with a physical collectable, but this isn’t always necessarily the case.
NFTs allow the owner of a collection to distribute their product, and proof of ownership, completely online. The creator can do this because, in the US and UK, once you create a piece of art — or anything for that matter — you own its copyright. Under copyright law, the creator’s rights include communication of that art to the public, adaptation, and reproduction. When someone buys an NFT from a creator, it is a certificate of ownership, but doesn’t necessary mean you own the copyright. This is similar to buy a physical piece of art, such as a novel or a painting. Just because you own the original work does not give you the right to reproduce it at your own will.
Digital content by its very nature complicates reproduction rights. Anything digital is so easy to share and reproduce that buyers of NFTs may not know that they are infringing on copyrights by doing so. Some creators have stipulated that that their NFTs may be used for commercial purposes in a limited capacity, such as CryptoKitties, which allows owners to make up to $100,000 in revenues each year. Others, such as the Kings of Leon NFT music, was explicitly made for consumption purposes only.
Creative Commons & a16z’s Solution
As people in the NFT ecosystem sought ways to simplify copyright complications, and legally empower their owners, they turned to Creative Commons — CC0 copyright license — as a legal tool seen as a solution to these problems.
CC0 means “no rights reserved” on intellectual property. It’s a form of copyright that allows creators to waive legal interest in their work, moving it into the public domain. For NFTs, this allows NFT owners to build upon and duplicate their NFT for any purpose. Projects under this license don’t even limit NFT owners to their own NFT — you can use any NFT in the collection for whatever purpose the owner is seeking.
Recently, several high profile NFT projects have turned CC0. Dubbed “CC0 Summer,” and headlined by Moonbirds’ shift to creative commons, the move was meant to “[empower] anyone with the ability to creatively remix work for commercial purposes. [CC0] is a promise by the creator of a work that the work itself can become a credibly neutral platform — without restraint or the fear of restriction or creative limitations,” according to Proof’s founder Kevin Rose.
A16z invested a substantial portion in Proof’s $50-million raise, showing complete alignment with Proof’s goal of fully utilizing CC0 as a means to empower creators and owners alike. The VC firms “Can’t Be Evil” licenses support this goal by empowering NFT owners to skip the legal literacy requirements to reproduce or mutate the NFTs they own.
The “Can’t Be Evil” licenses were developed for and inspired by the Web3 movement. A16z worked with some of the top IP lawyers in the web3 space to develop six types of broadly applicable NFT licenses, made available for free.
According to their blog post, in creating these free licenses, the VC firm had three goals in mind:
1. To help NFT creators protect (or release) their intellectual property (IP) rights;
2. To grant NFT holders a baseline of rights that are irrevocable, enforceable, and easy to understand; and
3. To help creators, holders, and their communities unleash the creative and economic potential of their projects with a clear understanding of the IP framework in which they can work.
Andreessen Horowitz, building off the ethos of the blockchain as a trustless network, developed these licenses with that purpose in mind. As it stands, every party has a common understanding (allegedly) of the rights associated with NFT ownership. Andreessen created these licenses to codify the IP rights in the smart contracting language, “so that every party has a common understanding of the rights associated with NFT ownership.” This enforces the blockchain — and NFT — ecosystem as trustless, providing users with a minimum baseline standard.
With this move, the VC firm hopes to begin a dialogue with NFT owners and creators alike on the importance of IP rights in NFTs, especially given its growth in recent years. “We hope this set [of licenses] is a starting point for fostering a trustless NFT licensing ecosystem and encouraging greater standardization as the space grows,” they said.
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