Study: NFTs convey zero IP ownership
August 24, 2022
According to digital asset and blockchain specialist Galaxy Digital, non-fungible tokens (NFTs) convey exactly zero ownership rights for the underlying artwork to their token holders.
In a detailed report, A Survey of NFT Licenses: Facts & Fictions, the company explains the difference between terms of service, usage licences, and intellectual property (copyright) ownership. It examines major NFT collections by implied network value, categorises the most common licensing agreements, and highlight iconic examples.
According to Galaxy Digital, most people talk about purchasing NFTs as ‘buying jpegs’, the image files you see online in avatars and marketplaces such as OpenSea. But the reality is that the issuers of the NFT collections retain full ownership of those images. “We reviewed the licences for all of the top NFT collections, and in all cases, except one, the issuers offer only a usage licence to the NFT purchaser, with varying levels of commercial rights ranging from permissive to highly restrictive,” it notes. “In many cases, issuers are less than forthcoming about this point, either encouraging directly or by omission through their marketing content a widely held misconception that ‘you own the art’,” it advises.
“Because of the lack of user ownership, and exacerbated by pervasive misconceptions, the promise that NFTs can usher in a new era in digital ownership and property rights remains far off. Without rectifying this, the vision of Web3 will remain elusive,” says Galaxy Digital.
Key takeaways:
- The vast majority of NFTs convey zero intellectual property ownership of their underlying content (artwork, media, etc.)
- Many issuers, including the largest Yuga Labs, appear to have misled NFT purchasers as to the intellectual property rights for the content they sell.
- Only one NFT collection in the top 25 by market capitalisation even attempts to confer intellectual property rights to the purchasers of their NFTs (World of Women).
- The Creative Commons licence, while seen as a solution to the restrictive licences used by most projects, renders NFT ownership obsolete from a legal perspective as it moves the intellectual property fully into the public domain, making it impossible for NFT holders to defend their ownership rights in court.
- Without improvements in the on-chain representation and transfer of intellectual property rights from NFT issuers to NFT token holders, the expansive vision of Web3 will remain unrealised.