NFT Licensing

The popularity of non-fungible tokens (NFTs) has skyrocketed over the last few years. This popularity has been in part due to a wide range of artistic works getting put up for sale as NFTs, from world-renowned artists’ paintings to everyday creations. But, with this kind of popularity comes questions of licensing, intellectual property, and copyrights.

Intellectual Property

The most effective approach to commercializing an NFT is to sell it to a third party. The actuality of buying an NFT, on the other hand, is typically not as simple as buying a tangible item. Although the owner of an NFT can prove ownership of the token, that’s pretty much all there is to it.

It should be noted that an NFT is fundamentally asset metadata that is stored on a blockchain. This implies that while an asset is often used to encode the NFT in order to create a unique depiction of that asset, an NFT is typically just a link to a digital file.

Of course, an NFT seller can transfer intellectual property rights to the buyer (provided the NFT seller has any intellectual property rights to the underlying item).

This will not automatically happen unless there are explicitly stated terms expressing the contrary, either in the smart contract or anywhere else. This means that if you do not know if you get intellectual property (IP) rights upfront, the IP will most likely remain under the control of the creator.

NFT smart contracts make it possible to send royalty payments to the original owner or sellers of an NFT. This opens up a potential alternative revenue stream for asset owners, automating the process as well. Royalty payments are usually paid as a percentage of the subsequent sales price, and they can create an endless source of revenue.

This feature of NFTs is of key significance to digital content creators in the gaming and art industries, as monetary incentives for creators can encourage developers to keep track of their assets and aid in driving the growth of their economy. Before making an NFT purchase, you should understand the implications of its IP and royalties.

Music

In 2021, music NFTs produced millions in primary and secondary sales, igniting an unprecedented wave of growth and innovation in the music industry around blockchain technology. Blockchain technology is quickly becoming a new medium for artists and producers to avoid the need for an expensive middleman. This new infrastructure empowers a new generation of artists and producers to reap the benefits of their efforts.

The following are a few of the potential benefits of the widespread adoption of NFTs in the music industry:

• Allowing the exchange of music rights and maintaining a public record of provenance that can be used to properly address conflicting fee claims makes music licensing generally easier.

• Expanding the music rights market to the general masses opens up a new type of investment opportunity. Artists can use NFTs to make it possible for their followers to directly purchase their music copyrights. There’s a reason labels and publishers are a part of an artist’s career — and the goal isn’t to fully avoid them but to open up new investment opportunities and give more power to the musicians.

Artists

Only the artist’s own creations should be minted. If the project is designed with the help of others, their permission is generally required. A lot of people can get away with minting substandard replicas of other artists’ works in most NFT marketplaces, but they do not hold nearly the same value as originals.

Because the blockchain keeps account of every single transaction, it isn’t difficult to monitor financial and copyright violations using algorithms for NFTs. If an artist discovers their artwork is being advertised as an NFT without their permission, they can sue the sellers for copyright infringement as well as alert the marketplace to the scam.

Unless the artist sells the copyrights to buyers through an arrangement, they generally retain ownership of their work’s copyrights. Alternatively, if they created the NFT artwork as part of a job contract, it could be considered work for hire. In this instance, the copyrights may be held by the deployer.

Artists can also publish their artwork as an NFT before revealing it to others to protect themselves from persons with malicious motives. But they should be mindful of the platforms where they sell their work, as well as the copyright terms and conditions.

One of our partners, LiveArt, a web3 platform for art and culture, supports all forms of art and believes that digital art is simply that, art. It is another medium that extends the reach of creators beyond the physical realm – making it possible to tell powerful and interactive stories with NFTs, generative art and digital exhibitions.

Brands

The use of NFTs as brand extensions is the newest hot topic in the licensing and marketing industry. NFTs are one-of-a-kind and digitally scarce, which appeals to brands of all shapes and sizes. The fashion industry is one area looking at adopting the NFT trend. NFTs and gaming have been used by Burberry and Louis Vuitton to advertise their brands, while Gucci is planning to develop its own NFTs.

With branded NFTs, there’s a lot of opportunity for recurring royalties. The recurring royalty element of each minted NFT is essentially encoded in the digital code or smart contract, allowing brands to determine the desired royalty rate for resale. Each time one of their NFTs is sold, brands will gain from repeated transactions, exposure, and knowing who sold it and for how much.

In addition to providing chances for recurring royalties, branded NFTs also: 

• Allow brands to have more control over how their digital assets are used.
• Create memorable digital brand experiences for fans and customers.
• Prove legitimacy with solid evidence.
• Increase brand and product awareness by giving brand owners’ digital assets more exposure.
• Create digital collectibles with a sense of exclusivity and worth.
• Create new revenue streams in both virtual and physical environments.
• Make it easy to trade digital assets.