NFTs and intellectual property: What is the future of digital asset monetization?

NFTs and intellectual property is not a clear or simple topic. According to the law, this is a grey area, especially when we consider the fact NFTs are fairly new, and digital asset monetization is likewise, a new concept.

Part of the problem, as Deloitte rightly points out, is “at present, we lack a shared definition of the term crypto-asset.” One of the challenges, when it comes to NFTs and intellectual property, is defining what does and does not qualify as an asset. As a result, this means clearly understanding who owns the IP rights to the physical or digital asset someone purchases with an NFT.

Someone could purchase something using an NFT. Whatever the “thing” is, whether that’s a piece of digital art, a video, the first ever Tweet by the Co-founder of Twitter, or some of the original source code of the world wide web (WWW).

Sir Tim Berners-Lee, founder of the modern Internet, recently sold some of the original source code he wrote for the web using an NFT as the transaction medium. But does this mean the people buying these NFTs own the intellectual property, and are they allowed to do anything with — such as monetize — what they’ve bought?

The answer to that is more complicated than we might imagine. Ownership does not necessarily confer the rights to the intellectual property behind a purchase.

In the same way that owning a house that comes with the lease (e.g. a leasehold property); which is separate to the ownership of the property. A lease is a separate expense, and paying this does not confer ownership of the lease on the owners of the property.

Let’s look at this more closely, and what it means for those who buy, sell, and want to monetize NFTs.

NFTs and intellectual property (IP): What does the law say?

Non-fungible tokens (NFTs) are unique, they can’t be swapped or exchanged for something else, in the same way that a Bitcoin (BTC) can be bought or sold for U.S. Dollars (USD$), or any other currency or cryptocurrency, or token, of equal value.

NFTs are verified using ‘distributed ledger technology’, such as a blockchain. Ownership rights are transferred in this way, once a new owner pays the relevant amount for the digital asset.

Ownership verification is recorded in this public ledger, and if that owner wants to sell it to someone else, the transaction is recorded in the same way. Usually, an NFT is the digital and unchangeable validation that someone owns the asset an NFT is connected to, such as a piece of digital art, video, or segment of code.

It’s worth asking: Does the owner of an NFT have the rights to the IP of the original (physical or digital) asset?

No, or at least, not necessarily.

Take the example of a series of videos the NBA sold of slam-dunk by the celebrity US basketball player LeBron James. These videos were sold as limited edition (rare) digital collectors cards of NBA highlight clips, which were available on an NBA ‘Top Shot’ marketplace. All of them have been sold as NFTs.

However, the underlying IP is still the property of the NBA, and therefore they have every right to sell them again and again, in new formats, to a much wider audience, and for whatever price the NBA wants. Owning an NFT of a limited edition highlight basketball shot does not confer ownership of the IP behind the asset.

Acquiring one of these rare NFTs does not give new owners the right to change the video in any way. Nor can you monetize this new asset, not without the express permission of the NBA. Plus, the terms attached mean you can’t place this video within your ‘Top Shot’ marketplace app next to “images, videos, or other forms of media that depict hatred, intolerance, violence, cruelty, or anything else that could reasonably be found to constitute hate speech or otherwise infringe upon the rights of others.”

Any breach of these license terms could see your account suspended, and the video removed, according to Lexology. As you can see, NFTs and IP are a more complicated topic than most people would initially imagine.

How can an NFT owner acquire IP rights?

Depending on what the underlying asset is, a potential NFT owner might want to acquire the NFT ownership rights, specifically, the IP. Imagine if you want to buy blockchain intellectual property, or patent NFTs?

In which case, this needs to be a question asked straight away. Ask whether you are going to acquire the IP as part of the asset, or what terms (or extra costs) might be attached or involved to purchasing an NFT that includes the IP.

Unless you make sure of this straight away, you might find you’ve bought everything except the intellectual property. Which means you won’t be able to monetize the digital or physical asset in question. Therefore, always ask, and pay more as needed, if the owner is willing and happy to sell the IP wrapped into the purchase.

All of this needs to be accurately and clearly documented in the smart contract at the time of the purchase, so that when the asset is transferred, the IP comes with it. This will be recorded in the public blockchain, conferring, verifying, and validating ownership and IP rights.

How can NFT owners monetize digital assets?

Providing the owners of IP, such as content creators, schools, and universities, pharmaceutical giants, artists, sports stars, inventors, and entrepreneurs, want to include the IP when selling digital and physical assets using NFTs, then the possibilities are endless.

Acts of creation and invention could be monetized in numerous different ways. Entrepreneurs in every field — such as vaccines, education, renewable energy and numerous others — could monetize their creations and inventions faster than ever. Getting them to market in creative new ways, handing over IP to those who can build on what they’ve created, either for a one-off payment, or license payments that could last for years.

A new NFT protocol is launching soon, which will make it easier for creators and owners to benefit from assets and IP, such as inventions and patents: DEIP. DEIP is an intellectual capital protocol that will empower the discovery, evaluation, license and exchange of digital assets. It’s designed to enable intangible asset tokenization (F-NFTs), and will include governance (DAO) and liquidity for F-NFT owners.

Now those wanting to monetize the IP behind NFTs can achieve this thanks to DEIP . New owners can leverage every advantage of ownership, including the IP, to generate new income streams for themselves, while ensuring the original creators profit from original ideas.

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