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Third party IP licensing rights to keep in mind when minting an NFT

Third party IP licensing rights to keep in mind when minting an NFT

The NFT space is continuously becoming more interesting to a lot of companies looking to enter the space and build out new business streams for themselves. This short piece aims to highlight a couple of things that a company looking to license IP rights to create an NFT collection should consider.

  • Who owns the IP right to the underlying work?

For example, if you are a company looking to create a collection of player cards, there are essentially at least three parties to the contract: 1) the author of the original work (which in this case would be the player whose picture will be minted into an NFT), 2) the creator of the NFT (which might be the company that will also mint and sell the NFT, but it might also be a third party that designs the NFT whereby the number of parties to the contract might increase to four) and lastly 3) the buyer of the NFT. In such a setup it is useful to understand that the creator of the NFT does not become the owner of the underlying IP right to the material used to mint the NFT. Therefore owning the NFT does not mean obtaining the property of the underlying asset, but rather only getting the property of the NFT. It follows that it therefore is important to understand what type of licensing right your company has been granted by the right holder as this will dictate the type of rights your company may grant the buyer of the NFT. If the IP right holder remains the right holder of the underlying work, which often is the case, the buyer, as a result of the purchase often gets the right to display the NFT, brag about having it, transfer and sell it. Thus, in most situations a “BAYC” situation is not at hand, meaning the owner of the NFT would not be able to freely start printing t shirts.

What is noteworthy is also that once an NFT is minted it will live on. This means that in most cases, after the NFT has been dropped, it cannot be burned anymore*and thus remains on the market even if the license the company received from the right holder to the underlying right terminates. The NFT lives on. * exceptions might include burning an NFT that for example has been stolen or misused in similar unethical manners.

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