So You Own an NFT. Now What?
Several weeks ago, we posted an article titled “Copyright Considerations in the Realm of NFTs and the Metaverse”, which explored, well, copyright considerations in the realm of NFTs and the metaverse. Since then we have had several discussions with NFT creators and collectors alike who shared one common question: how do I know what rights, if any, were obtained with my NFT?
Revisiting Basic Principles
In our previous article on this topic, we described copyright as a “bundle of rights”, which includes things like the right to reproduce or copy a work, the right to modify a work, the right to public performance, and the right to make derivatives. Under most circumstances, this “bundle” is automatically afforded to the creator of an original work. There are some circumstances that may complicate this. For example, if the work was created in tandem with another person, each person would be considered a co-author in the work absent any agreement to the contrary. It is also possible that one’s rights in the work were automatically assigned, or waived, in favor of an employer or contracting party, in accordance with the terms of an employment or contractor agreement.
What is also important to note is that each part of the “bundle” does not necessarily follow with ownership of the subject of copyright. To this end, liability can be found where a modification is made to a copyrighted work without the author’s permission, or where new works are created that incorporate substantial elements of copyrighted works. Art collectors or NFT creators are not impervious to the application of these considerations.
Considered in the context of NFTs, knowing who has what rights has profound consequences on what the ultimate owner of the NFT can, or can’t, do – and these rights can affect the ultimate value, or resale value, of an NFT. These rights can also include the ability to benefit from other corollary perks, like the right to earn royalties as a result of the use, or subsequent sale, of such assets.
Rights, to Varying Degrees
Some NFT creators choose to provide full rights to the ultimate holders of NFTs. This appears to be the case with NFTs associated with the Bored Ape Yacht Club collection from Yuga Labs, a notoriously popular collection known for its high demand and record-setting prices. You have likely encountered the Bored Ape “brand” before: In recent news, an NFT in this collection sold for 347 ETH (USD $1.4M). In May, a bundle from the collection sold at a Sotheby’s auction for UDS $24M. Very recently, Yuga Labs and Adidas partnered on the release of a new collection titled Into the Metaverse.
If you managed to get your hands on one of the original Bored Ape NFTs, you were granted rights allowing for the display, commercialization, and even the right to create derivative works. These rights were conveyed and articulated in the Terms and Conditions attaching to their NFTs, which features language such as:
“You Own the NFT. Each Bored Ape is an NFT on the Ethereum blockchain. When you purchase an NFT, you own the underlying Bored Ape, the Art, completely. Ownership of the NFT is mediated entirely by the Smart Contract and the Ethereum Network: at no point may we seize, freeze, or otherwise modify the ownership of any Bored Ape.” […]
“Subject to your continued compliance with these Terms, Yuga Labs LLC grants you an unlimited, worldwide license to use, copy, and display the purchased Art for the purpose of creating derivative works based upon the Art (“Commercial Use”). Examples of such Commercial Use would e.g. be the use of the Art to produce and sell merchandise products (T-Shirts etc.) displaying copies of the Art.”
As you can imagine, these rights are quite powerful. Given the brand reputation and notoriety of the Bored Ape NFTs, the right to create merchandise or other derivative works could result in real profits to the owner of the particular NFT.
The conveyance of such rights, as is done by Yuga Labs with respect to the Bored Ape NFTs, is certainly not the universal case, as any other NFT collections do not provide owners of the NFTs with such generous terms.
An example of such a collection that bestows very limited rights to their respective owners is the CryptoPunks collection by Larva Labs. As we discussed in our previous blog post on this topic, these NFTs have been selling for record-breaking amounts, and are arguably some of the popular NFTs in this burgeoning space. That being said, however, the owner of a CryptoPunk NFT is very limited in what they can actually do with that NFT. In fact, it appears as though the only rights extended to the owner of a CryptoPunk are incredibly limited, such as the right to display the NFT as an avatar. Derivative works cannot be created, nor can the NFTs be used in any marketing or commercial endeavours.
While it is impossible to predict the valuation of NFTs in the future, understanding what rights are attributed to certain collections will certainly play a large role in assessing the worth of an NFT.
For creators, it is of paramount importance to consider the long-term strategy associated with the release of an NFT collection. Do the creators wish to maintain complete creative and commercial control over the direction of the NFTs and their likeness? Are there plans to be the exclusive distributor of related merchandise or even the creation of a comic book or television series? Then it might be necessary to withhold certain rights, to ensure this ability in the future. It would be prudent to retain experts to refine a long-term strategy accounting for intellectual property rights, and to draft the appropriate terms and conditions.
For NFT owners and collectors, similar considerations must be had, as the rights afforded alongside NFTs may play an important role in future valuations.
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If you have any questions about this article or wish to learn more, please contact Massimo Orsini or Allan Oziel. Oziel Law communications and legal articles are intended for informational purposes only and do not constitute legal advice or an opinion on any issue. To obtain additional details or advice about a specific matter, please contact our lawyers.
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 See, for example, Davydiuk v. Internet Archive Canada, 2016 FC 1313, which treats infringement vis-à-vis substantial reproduction. See also case law treating the compromised moral rights of an author pursuant to unauthorized modifications to their work: Snow v. Eaton Centre Ltd. (1982), 70 CPR (2d) 105, and (1996), and Prise de parole Inc. v. Guérin, éditeur Ltée., 104 FTR 104, 66 CPR (3d) 257.
 Eduardo Prospero for NewsBTC “A Bored Ape NFT Sold For 0.75ETH By Mistake. Another Sold For 347ETH”, online: < https://www.newsbtc.com/news/ethereum/a-bored-ape-nft-sold-for-0-75eth-by-mistake-another-sold-for-347eth-but-wait/> Last Accessed December 19, 2021.
 Sotheby’s, “Yuga Labs 101 Bored Ape Yacht Club”, online: <https://www.sothebys.com/en/buy/auction/2021/ape-in/101-bored-ape-yacht-club>, Last Accessed: December 19, 2021.
 Brendan Dunne for Complex Magazine, “Adidas, With Bored Ape Yacht Club and Gmoney, Steps Into the Metaverse”, online: <https://www.complex.com/sneakers/bored-ape-yacht-club-adidas-nft-hoodie-tracksuit>, Last Accessed December 19, 2021.
 Bored Ape Yacht Club, Terms and Conditions, online: <https://boredapeyachtclub.com/#/terms>, last accessed January 3, 2022.