Beware Off-the-Shelf IP License Agreements for NFTs

Much has been written about the bourgeoning popularity of NFTs (non-fungible tokens) and the opportunities they present to brands and creators. NFTs can offer an interesting new way to leverage a brand’s intellectual property portfolio and can open creators and artists up to a whole new pool of collectors. Out of these new opportunities an important legal issue concerning the intellectual property underlying the asset associated with the NFT has also arisen: what rights should be granted to the NFT purchaser in such IP, if any at all? To answer this question, we must first distinguish between the ownership of the NFT – the unique token on the blockchain – and the asset linked to, or associated with, that NFT and the intellectual property related to such asset.

Some NFT issuers, such as Bored Ape Yacht Club and World of Women, have opted to grant to purchasers a fulsome bundle of rights in the IP underlying the asset associated with the NFT, in many cases including the rights to commercialize such IP. Others have chosen not to grant the purchaser any rights in or to such underlying IP (analogizing the purchase of an NFT to the purchase of a traditional physical good). But the majority of NFT sellers seems to desire a hybrid approach, granting the NFT purchaser a limited license to the underlying IP while retaining certain rights that allow the creators to monetize their works. NFT issuers and their counsel may be tempted, if opting for this middle ground approach, to use an off-the-shelf IP license agreement in connection with the sale of their NFTs, as these traditional IP licenses typically set forth very specific, limited use cases for the licensee. However, when typical IP license language is used in the NFT context, it can often miss the mark. Having drafted numerous licenses involving NFTs, we have identified several standard IP license provisions that need substantial retooling in order to fit the NFT model.