The metaverse and non-fungible tokens (NFTs) may be viewed as being utilized solely for enjoyment and frivolity, yet the technologies have applications beyond videogames and multimillion-dollar paintings. With the metaverse as the next stage in online interaction and NFTs as a forum for customizing one’s online experience, it is reasonable to see the need for unique and validated digital assets. As with many technologies gaining traction in the marketplace, there are legal and business considerations for the metaverse in the new year.
Understanding the intellectual property rights of non-fungible tokens: The creation, sale, and utilization of NFTs are dependent on intellectual property rights. The individual or organization “minting” (or creating) the NFT must possess or have the appropriate rights to the underlying asset being utilized or displayed as an NFT. Moreover, one should not assume that existing licensing or artist agreements involved in the creation of an asset immediately permit the asset to be converted to NFT form; this would rely on the terms of the deal. The absence of such rights would necessitate, at best, renegotiation or possibly abandonment of the NFT project, and, at worst, litigation.
Create a “Minter’s checklist”: When reviewing and negotiating agreements involving NFTs, it will be beneficial to have a due diligence checklist to ensure awareness and full compliance with all requirements necessary to create an NFT, including whether the creator has completed the scope of his or her employment. The NFT was built by an independent contractor under the terms of an approved contract.
When choosing where to list an NFT, carefully examine the platform’s privileges and restrictions: There are numerous NFT platforms or marketplaces to select from, and each has its own capabilities and unique terms of service with regards to selling and licensing NFTs, therefore it is essential to ensure that the service aligns with the platform’s vision and capabilities. Terms for a particular digital item.
When buying or selling NFTs, be aware of the rights and constraints you put on end users: Consider the rights and/or constraints imposed on the eventual end user, as well as what the seller is and is not offering, while negotiating the conditions of a purchase or sale of a non-fungible token. Sellers can place restrictions such as whether or not the NFT can be modified, whether or not it is subject to an ongoing royalty provision, whether or not commercialization is permitted, and where and how the digital asset can be utilized.
Consider building the conversion of works from third-party designers or artists into digital assets and inserting relevant grant language into existing or new agreements, given the predicted trajectory of NFTs. This would potentially obviate the need to resume negotiations with the originator of a particular work, which has the potential to postpone or halt specific NFT projects.
As the functionality of the metaverse and non-fungible tokens (NFTs) becomes increasingly complicated, it is anticipated that the legal challenges will evolve in this direction. With these legal factors in mind, firms will be better positioned to safeguard their intellectual property rights when engaging in metaverse activities.
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