Should I sell my Intellectual Property?
Intellectual Property — This is a category of property that includes intangible creations of the human intellect.
The best-known types are copyrights, patents, trademarks, and trade secrets.
The main purpose of intellectual property law is to encourage the creation of a wide variety of intellectual property. To this end, the law gives individuals and businesses property rights to the information and intellectual goods they create, usually for a limited period of time.
The intangible nature of intellectual property presents difficulties when compared with traditional property such as land or goods. Unlike traditional property, intellectual property is “indivisible,” since an unlimited number of people can “consume” an intellectual asset without it running out.
And on intangible property, how can it be applied?
The advent of NFT technology has greatly challenged this argument and created conflicting opinions… Let’s clarify.
NFTs
However, someone might create artwork in connection with an NFT minting — that person would own the copyright in the artwork. IP rights in NFTs can be modified by contract. As part of NFT acquisition, there can be an assignment of IP rights, but you cannot assume that the recipient receives plenary IP rights.
NFTs represent data on a blockchain, which would not constitute an original work of authorship under intellectual property law.
The author may license or possibly assign ownership of the underlying artwork as part of the NFT transaction, but in that regard, the NFT vehicle is no different from a typical license or assignment arrangement.
You can acquire a patent to protect your NFT-related invention, but you will still need to meet the prerequisites for receiving an issued patent. The invention must contain patent-eligible subject matter, be new or innovative, practical, and obscure.
Trademarks are used by NFT firms, both conventional trademarks, and NFT-specific trademarks. The NFT’s topic itself may be a trademark in and of itself.
NFTs may be subject to IP protections, including copyright, design patent, and trademark rights. As such, NFT purchasers should pay attention to what IP rights, if any, come part and parcel with the NFT. Indeed, many or most NFTs include a license that only grants the NFT buyer the license to use, copy, and display the NFT.
For instance, Jack Dorsey earned around $3 million from the sale of an NFT of his very first tweet. Because Dorsey continues to hold the copyright, the owner of the NFT did not acquire any intellectual property rights in the tweet itself and was therefore unable to, for example, print the tweet on hats and sell them without Dorsey’s consent.
However, while the majority of NFT producers place limitations on commercial use, other authors grant NFT owners broader rights. Members of the Bored Ape Yacht Club (BAYC) have the right to use their “apes” for commercial purposes, which allows them to produce and market hats, T-shirts, mugs, and other items. Like this, proprietors of CryptoKitties are permitted to sell their goods as long as their annual revenue does not surpass $100,000 under the rules of the license.
The BAYC case
The Bored Ape Yacht Club (BAYC) has quickly become the most famous and valuable NFT collection in the blockchain ecosystem. The monkey cartoon images bring a strong familiarity, allowing Yuga Labs to develop a brand instantly recognizable by fans and critics.
After a year of trading, the effect of allowing token holders to independently use the images is making new companies, from a hard seltzer startup to Heidi Klum’s art career, grow and earn, while opening the door to new marketing methods for savvy digital audiences.
Along the way, the value of the BAYC brand itself has been strengthened, if not the value of the tokens. Here are just a few of how digital collectibles have evolved into powerful IP IRL.
Bored and Dangerous
Jenkins the Valet is one group that has used its BAYC IP to create a project that is developing a narrative around a collection of Bored Apes.
The Bored and Dangerous token incorporates a significant amount of functionality and utility related to an online game with staking and burning mechanisms.
But even more interesting is its licensing agreement that will continue to pay royalties to the holders of each Bored Ape included in the Bored and Dangerous story.
White Horse Tavern
Seth Green, a well-known comedian, has been a pop icon for nearly three decades with his roles in Austin Powers, The Griffins, and Robot Chicken. Now, Green has taken a new approach with the acquisition of Bored Ape #8398, which he has named Fred Simian. The character, around whom he has developed a plot and narrative, is the centerpiece of his new television program.
Below Bored Comedy Club
The metaverse has become another area ripe for branding and the use of intellectual property. One example is the Below Bored Comedy Club, developed by Aaron Haber, a longtime comedian and holder of BAYC #2960.
The club, just launched in August, hosts a series of cabaret shows within the metaverse.
These open mic nights will consist in, special events, live streaming performances, and plans to teach cabaret.
Using the BAYC brand, Below Bored Comedy Club has already solved much of the marketing with the use of BAYC # 2960 to attract other top comedy talents who are also interested in the potential of metaverse-based comedy clubs.
The branding potential of Web3
It has become evident that the branding potential of NFTs with captivating artwork and cult popularity is paving the way for a new marketing realm in which the community drives the brand.
Although BAYC represents only a slightly part of what exists on the blockchain, with enough momentum behind a project, the ability to expand brand recognition through the intellectual property rights of a token is eye-opening and tear-inducing.
A model very similar to franchising but applicable to any industry.
We could call it a franchise 3.0.
Can brands maintain IP on their NFTs?
Purchasing an NFT does not necessarily mean that you own the right to view it, for example, or the right to use it for personal business purposes. Sellers can (and indeed often would) retain certain rights even after they transfer the deed to the digital asset.
Smart contracts embedded in an NFT could automatically perform different actions, such as paying royalties, with each subsequent sale.
In the absence of an express license, a license will be implied, but it is likely to be quite narrow. Depending on the circumstances, in the case of an NFT relating to a digital good, the license may be limited to the right only to use or display the underlying digital asset for personal use and to resell the NFT.
Brands then can rest assured, selling NFTs in the marketplace will not give its owners the ability to use them for commercial purposes.
Final observations:
NFTs present numerous opportunities and potential risks for businesses.
A clear line between what is allowed and what is not, concerning IP rights, should be established in the terms of the sale of the NFT, which will also allow a company to monetize its IP rights.
There should also be adequate oversight of the use of a company’s IP by third parties (whether NFT buyers or third parties), and measures are taken where appropriate.
There are many issues to be addressed, and ultimately it remains to be seen how the law will evolve.
