Future of Intellectual Property within the Web3 Industry

Quick Takes:

• Regulations are still required for the decentralized Web3 to achieve a Metaverse future and fully materialize its commercial potential.
• CC0 license allows NFT projects to earn ongoing royalties from secondary sales. It turns competition into cooperation and helps form a virtuous cycle for co-creation.
• Different projects should specify their needs and adopt suitable IP licenses accordingly.

Intellectual property, or IP as it is popularly called, is automatic rights given to the creator over the property of their intellect. It is granted by copyright law and has been widely applied in many scenarios in today’s society. However, as the internet evolves from Web2 to Web3, where ownership takes on novel expressions, the conventional ideas of IP and related norms appear outdated.

On August 23, Mary Ma, the Chief Strategy Officer at MixMarvel, spoke about Metaverse regulation at the Singapore Digital Economy Forum. In her speech, she shared a few thoughts on the future of IP in the Web3 industry. Mary Ma suggested that collective ownership would be a feasible solution for the current IP dilemma and may leverage more business value of collectivity for Metaverse.

Why Do We Still Need IP Regulations in the Web3 Era?

The decentralized nature of Web3 seems to be at odds with the full measure of regulation. But for the Metaverse, the immersive virtual world based on Web3 technology where more people get to spend time engaging in all kinds of daily activities from an applicational point of view, real-world controls are necessary if it intends to be a viable place to live and do business in. In other words, as Mary Ma argued, when the Metaverse develops into a convergence of technology, content, and the human experience, “its scientific, creative, and social attributes naturally lead to the emergence of regulations, as shown in Web2 and societal history”.

Transparency, accountability, and collectivity are the three aspects where Metaverse regulation should concentrate its efforts. While the first two are more upon the technical subjects, collectivity concerns more with IP, ownership, and personal conduct, aiming to provide a rights-waiving tool that enables anyone to profit from NFTs and create derivative works without worrying about facing legal repercussions. And since collectivity is the key to achieving Metaverse and its business value (as it prompts co-creation), it is bound to, in turn, create the need for and bring more attention to Metaverse IP regulations in the future.

Currently, there are two broad buckets for IP regulation to choose from. One is the Creative Commons Zero license (or the CC0 license), which lets artists put their work into the public domain so that anyone can iterate on it and make money from it. Another is a solution between “all rights reserved” and “no rights reserved,” bestowing commercial or limited commercial rights to NFT holders.

The CC0 license

Traditionally, protections of works of art are automatically granted by copyright law and enforced by centralized institutions, regardless of whether the creator wanted it or not. To challenge and change the status, the U.S. nonprofit organization, Creative Commons, published the standard licensing CC0 in 2009, which allows creators to declare that their works belong in the public domain. With creators of CC0-labeled works relinquishing their ownership of these works in the legal sense, everyone is free to adapt and use them for commercial purposes.

NFT creators are increasingly choosing this “no rights reserved” CC0 license for their projects in recent days. Contrary to what most people think, “no rights reserved” does not mean that the original work will become worthless due to unrestricted duplication or that the creators will not be able to make money from their own work anymore. As a matter of fact, it is quite the opposite.

As royalties are not enforceable at the smart contract level, CC0 NFTs mainly earn ongoing royalties from secondary sales. Therefore, for creators who have given up their ownership of the projects, monetizing their works is, indeed, no longer a simple, direct process. Instead, it is the centralized third-party organizations (like OpenSea) who streamline the royalties procedures that ideally may help popularize the project, increase derivatives, and thus add value to the original CC0 asset by boosting the demand.

As Robbie Broome recently explained, “By giving up my IP to CC0 rather than ‘protecting’ it, it avoids bad rehashes down the line. If, for example, UrbanOutfitters wanted to put my design on a tee, instead of hiring someone on their team to design something that looks like it, they can just use the actual work.” In this sense, adopting a CC0 license can also effectively turn competition into cooperation.

From an industry standpoint, the CC0 license’s removal of limits on copying, spreading, and secondary creation, the self-propagation effect, will allow project owners to enjoy the rapid accumulation of a great deal of attention without exerting too much effort to promote their work. It also “liberates an IP from its intrinsic value and optimizes its functional and social value through community co-creation,” Mary Ma added, “[which further] enables community members to generate infinitely scalable contents…As a result, more capital and talents may join the co-creation and eventually form a virtuous cycle [for the industry].”

Restricted IP Licenses

However, as promising as CC0 is, it is not suitable for every project. A creator cannot expect the public domain to magically accept and transform a project into a phenomenal hit by simply adopting the CC0 license, nor rely on the public domain to make anything wildly popular overnight. Similar to open-source software, CC0 is most effective for NFT projects that have the potential to establish a rich, expanded ecosystem. When a project fails to meet this prerequisite, restricted IP licenses provide a better solution.

Projects such as BAYC, Meebits, and Azuki have all taken this more eclectic approach of granting restricted licenses. For example, BAYC allows holders to use their NFTs to create and sell derivative products but requires that they not use the BAYC brand logo or name; Meebits requires that holders receive no more than $100K per year in commercial benefits, etc. The advantage of this model is that, while the copyright of the NFT work remains with the project owner, the project owner grants the power to the holder free of charge under certain conditions. Hence, the scarcity of the project is ensured.

Different goals call for different tactics. For low-barrier NFTs, co-creation should be open to everyone so that the IP, culture, or spirit of the NFT can spread easier and the project can grow in unexpected ways. And creators should try to secure a collector base by building a highly consensual community to support royalties and promote the popularization and proliferation of the NFT. As for high-barrier NFTs such as BAYC and CryptoPunks, limitations are still necessary to ensure the scarcity of the NFT. Various restricted licenses can be granted based on the degree of contribution of consumers, such as spending amount, activity in communities, sales of previous co-creations, etc. “Polarized approaches toward collective ownership should be adopted based on the IP positioning of NFTs,” Mary Ma suggested, “while CC0 suits mass NFTs best, restricted licenses may suit high-end NFTs better.”

While the current intellectual property frameworks surrounding Web3 creatives are still from the Web2 world, the future requires new regulatory mechanisms to actualize the Metaverse vision. Mary Ma firmly believes that collective ownership is both a full revolution and a rational answer to address this issue. By building a solid technological foundation such as Rangers Protocol, the promising future of Metaverse, and Web3, IP renewal will soon be within grasp.

About MixMarvel

MixMarvel is the world’s leading blockchain content-incubation platform and creators community. By in-depth exploring the open world and integrating world-renowned IP with high-quality content, MixMarvel connects investors and mass users through asset distribution, content publication, DeFi tools, infrastructure, community co-creation, and other diversified scenarios in a new ecosystem of dapps. Its ecosystem comprises a broad portfolio of FT/NFT assets, including the MIX, RPG, and HEROES tokens; blockchain content, including the GameFi application DeHero; and infrastructures, including Rangers Protocol and MixMarvel SDK. For more information, visit https://linktr.ee/MIXMARVEL.