One of the best things about many NFT projects is that holders can use their avatars to make money by making and selling derivative works of art, goods, and other things. But a recent investigation by Galaxy Digital says that some NFT projects may have “misled” customers about the IP rights they thought they were buying.
The paper comes to the conclusion that “the vast majority of NFTs do not give their owners any intellectual property rights.” It specifically names the Bored Ape Yacht Club and Moonbirds as two projects that Galaxy researchers think misled customers about their IP rights.
The paper says that some NFT projects are much less strict about their IP than others. Bored Apes by Yuga Labs is probably the best-known project that lets people use their Ethereum NFT photos in any way they want. This led to the creation of ape-themed clothing, marijuana packaging, music, and even fast food places.
Other projects, like Google’s Doodles, make it hard to sell things because they make it hard to change the original artwork and limit how much money can be made from derivative works, according to the research. On the other hand, the “personal use only” license for the VeeFriends project makes it very hard for users to make commercial products.
There are other projects that follow the “no rights reserved” rule of Creative Commons Zero (CC0), which means that anyone, not just NFT holders, can use the artwork to make new products. Nouns is probably the best-known example of this kind of license, and Moonbirds is going to switch to this kind of license.
Galaxy Digital’s research shows that even if an NFT project promises a lot of commercialization rights, the language used could be confusing, inconsistent, or even just fake. Alex Thorn, director of Galaxy Digital Research, told Decrypt that there is often a difference between what the public thinks they are getting and what they are actually buying with these NFTs.
An NFT, which is a blockchain token, shows who owns an object. The technology can also be used to make digital art, objects for video games, and collections of profile pictures, like the Bored Ape Yacht Club and CryptoPunks.
For example, Yuga Labs’ license for the Bored Ape Yacht Club says, “when you purchase an NFT, you own the underlying Bored Ape, the Art, completely.” Yuga Labs still has the rights to the intellectual property, but Galaxy Digital says that Yuga “implicitly acknowledges that the NFT holder does not, in fact, own the art.”
Yuga Labs bought CryptoPunks and Meebits, two well-known NFT projects, earlier this year. Last week, it announced that the IP license agreements for these two projects, which it had bought earlier this year, were much longer and more detailed. These agreements give NFT holders more information about their rights, but Yuga Labs’ Noah Davis recently said that the Bored Ape license would not be changed to meet the requirements of these agreements.
The study also criticizes Moonbirds for saying recently that they want to switch to a CC0 license. This year, tech entrepreneur Kevin Rose’s company Web3 Proof started the project. On the Moonbirds website, it said that when you buy a Moonbirds NFT, “You own the IP.” Even though this was said, Proof said that Moonbirds will be in the public domain.
The study says that Proof can change the terms of its license on its own, and it did. This is more proof that the people who own Moonbirds NFTs don’t really “own the IP.”
Thorn compared it to the Bored Ape Yacht Club as “a more extreme case of marketing materials and the stated licensing being at odds with each other.” Many Moonbirds owners have been upset by the decision, and one has even said that the CC0 statement caused a “six-figure licensing contract” with a company to fall through because of it.
Proof was asked what they thought about the Galaxy Digital story by Decrypt, but they didn’t answer right away.
According to the survey, only World of Women, which is one of the 25 most valuable projects on the market, “even tries” to give IP rights back to their owners. It says that World of Women has the most thoughtful license agreement and tries to fix the problems of the others on the list. However, it also has problems, especially with how rights are transferred after a game is bought on the secondary market.
Thorn says that basically, none of the non-financial transactions are really transferring IP rights.” He said that it was a huge problem for the future of the metaverse and that it “dramatically undercuts the projected ideal of Web3, which is that users will own intellectual property rights on this future version of the internet.
What gives? Thorn says that it’s mostly because the NFT industry is still young and campaigns for commercialization rights only started to gain traction last year. He said that some of these license agreements are “amateurish” and that many businesses just copy each other. But as the NFT market grows, the license requirements get more specific.
Thorn says that the Bored Ape Yacht Club is a great example, because as they grew and became more well-known in their metaverse, these agreements became more formal.
Galaxy Digital’s analysis shows that NFT owners need to fight for clarity on IP rights and that project designers need to find ways to make Web3 ownership real instead of just giving out a license. If that doesn’t happen, “the NFT landscape will become clear: Web2 products will be sold as Web3 products,” the article says.
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