Make NFT as IP RWA

Preface： The innovations of Web3 are testing the limits of traditional legal frameworks. Currently, many NFT projects completely omit licenses, or write non-standard licenses that may create more ambiguity rather than effectively resolving issues. This has led to a confusing situation surrounding NFT licenses, generating a multitude of copyright loopholes and corresponding legal issues. It’s time to establish a new licensing system specifically designed for non-fungible tokens or NFTs.

To help address these issues, METAIP is advocating the construction of an open NFT licensing system. This system aims to standardize NFT licensing, making it a commonplace institutional process. It will provide a clear and universal licensing system to protect the rights and interests of NFT creators and holders, allowing NFTs and IP RWAs to become the best carriers of intellectual property rights.

METAIP is not building this system from scratch; instead, it is standing on the shoulders of industry leaders. METAIP has taken the initiative to incorporate the licensing solutions of two major industry leaders, with further adaptability enhancements (supplemental points follow):

1. Referencing the latest CryptoPunks Terms released by Yuga Labs on August 16, 2022, METAIP has launched the “METAIP COMMUNITY” License terms based on this agreement. These license aim to maximize the rights of the holder community, granting NFT owners unlimited commercial licensing rights. This allows NFTs to be used for any commercial purpose. The “MetaIP Community”Licenses terms have added two important provisions: a. the “irrevocable licensing” clause, and b. the reverse licensing clause supplemented with the “creator retains commercial rights” provision. These provisions aim to better protect the shared interests of both NFT owners and creators, opening up endless creativity and potential for NFT community projects.

2. METAIP has also adopted the “Can’t Be Evil” license series, which was launched by a16z on August 31, 2022. This free, public licensing series aims to help address the prevalent intellectual property issues in the current NFT market. In the context of the NFT market experiencing bull-bear cycles, the establishment of standard protocols is worth everyone’s attention, as this directly affects the dissemination of NFT projects and their underlying IP in reality. All licenses issued by METAIP provide multilingual international versions (with the English version as the default basic terms, and creators can specify otherwise). The METAIP open licensing system will gradually incorporate more types of NFT licenses, including those applicable to music, video, and other media types.

The licenses mentioned above are specifically designed for NFTs and are inspired by the work of Creative Commons. These licenses are free to use for the community and serve three goals:

• Helping NFT creators protect (or release) their Intellectual Property (IP) rights;

• Granting NFT holders an irrevocable, enforceable, and easy-to-understand baseline of rights;

• Assisting creators, holders, and their communities in unleashing the creative and economic potential of their projects, while clearly defining the underlying intellectual property framework through licensing.

Recognizing that most early stage projects do not have access to legal resources, based on the joint work and contributions of industry leaders and some of the most important intellectual property lawyers in the Web3 space, we have integrated、developed and made available seven broadly applicable NFT licenses for everyone’s use.

Current State of NFT Licensing

Many people buy NFTs to own avatars, artworks, or any other creative pieces — but the reality is that they often can’t be sure of what they’re actually getting. When you buy an NFT, you typically purchase a tokenID (akin to an identity card for the NFT, stored on the blockchain), as well as metadata that ‘points to’ or references the underlying content file of the NFT (usually stored off-chain on IPFS, though there are a few fully on-chain NFT pieces). In fact, the vast majority of NFT projects give holders zero ownership of the intellectual property rights to the underlying content (the artwork, media, etc. referenced by the NFT), which effectively leads to confusion and infringement on the rights of NFT buyers.

U.S. copyright law does not automatically grant the buyer of an artwork (including both traditional and digital works) the rights to reproduce, adapt, or even publicly display the artwork. Without copyright permission or transfer from the NFT creator, the buyer cannot exercise any rights under copyright (such as reproduction, adaptation, and public display) except through copyright exemptions like ‘fair use,’ which are narrow and uncertain.

Licenses allow creators to grant additional rights to holders, but so far, their application across different projects has been inconsistent. Many projects launch without any licenses, or use custom licenses that create more ambiguity than they resolve. Licenses (and other documents that legally allow buyers to use their NFTs in certain ways) are often kept off-chain, where they can be altered without the holder’s knowledge.

Indeed, as copyright is notoriously difficult to transfer, these issues become even more complex. Even savvy buyers cannot inspect an infinite chain of rights, nor know what rights previous buyers may have given up.

Ideally, standardized NFT-specific licenses should be tracked and enforced on the blockchain to provide users with more certainty. A better licensing framework has the potential to make high-quality licenses more accessible, eliminate ambiguities around ownership, and save creators some of the burden (and cost) of creating their own licensing regimes.

METAIP NFT Licenses

The essence of METAIP is ‘Make NFT as IP RWA’ — transforming NFTs into real-world asset (RWA) carriers of Intellectual Property (IP). We propose this Web3 initiative principle, originating from a new computational paradigm: the blockchain is a computer that makes firm commitments, beyond human control. In other words, blockchain realizes a new ‘trustless’ version of the internet, where users do not need to trust each other or rely on centralized services and companies for transactions.

METAIP licenses, through ‘Make NFT as IP RWA,’ transparently write the rights of NFT creators, buyers, and sellers into on-chain licenses, extending Web3 principles to NFTs, so all parties have a shared understanding of rights associated with NFT ownership. Currently, many NFT holders must trust vague and uncertain commitments made by creators and previous owners for their NFTs, while projects using METAIP licenses can make the NFT ecosystem more trustless, providing holders with a clear, standard minimum baseline of real-world rights, thus reconciling real-world ownership with on-chain ownership.

With this in mind, we’ve developed and integrated the first batch of seven standard licenses based on the work of industry giants such as a16z and Yuga Labs：

• CC0 (“PUBLIC”) — All copyrights are waived under the terms of CC0 1.0 Universal developed by Creative Commons.

• Exclusive Commercial Rights with No Creator Retention (“EXCLUSIVE”) — Full exclusive commercial rights granted, with no hate speech termination. Creator does not retain any exploitation rights.

• Non-Exclusive Commercial Rights (“COMMERCIAL”) — Full non-exclusive commercial rights granted, with no hate speech termination. Creator retains exploitation rights.

• Non-Exclusive Commercial Rights with Creator Retention & Hate Speech Termination (“COMMERCIAL-NO-HATE”) — Full non-exclusive commercial rights granted, with hate speech termination. Creator retains exploitation rights.

• Personal License (“PERSONAL”) — Personal rights granted, without hate speech termination.

• Personal License with Hate Speech Termination (“PERSONAL-NO-HATE”) — Personal rights granted, with hate speech termination.

• Holder Community License with No Hate Speech terms(“METAIP-COMMUNITY-NO-HATE”) — Holder community rights Maximization granted, with creator retention & no hate speech terms

The two most critical typical licenses are likely CC0 PUBLIC and METAIP-COMMUNITY-NO-HATE. These represent two different ways of thinking about the copyright of NFTs. One is as a way for creators and holders to retain rights to the art, gaining more control and exclusivity over revenue generation outside of the blockchain. This is the so-called copyright. The other way is the unlicensed method, where art and intellectual property belong to no one, but due to Creative Commons licenses, ownership still exists on the blockchain.

METAIP believes that the two are not contradictory. CC0 PUBLIC represents partnership rights. Owning a published NFT artwork does not mean you own the rights to the CC0 artwork. It merely means you have proven on the blockchain that you’ve paid for this NFT. You don’t own the IP, but neither does anyone else. The IP of CC0 is not purchasable; it cannot be sold. The only thing that can be traded is the original NFT on the blockchain, but that should be enough. As long as you hold the NFT, you can enjoy the benefits and utilities granted by NFT ownership, which are not open in the public domain. Therefore, this also means that if you own a CC0 NFT, you own everything about the project.

METAIP-COMMUNITY-NO-HATE represents the maximum commercial rights of the holder community, which includes both NFT creators and NFT owners. The holder has the intellectual property rights and the maximized commercial rights, enabling them to utilize the NFT artwork and commercialize it. Under this license, the NFT itself becomes an IP RWA asset, not just a unique picture in the mathematical sense.

Clearly Understandable

METAIP licenses clearly outline the rights of the buyer to their NFT artwork, including whether these rights are exclusive (only the buyer can choose how to use their NFT artwork, the creator gives up all licensing rights); whether they include commercial rights (the right to allow the buyer to use their NFT for commercial purposes); and whether they allow the buyer to modify, adapt and create derivatives of the artwork they purchase (such as changing the appearance of the artwork or using it in different environments).

Broadly Applicable

Just as in traditional creative and open-source licenses, there are many open-source license models to choose from. We know that not all creators want to adopt the same form of license for their NFTs. We designed the ‘METAIP’ licenses with seven options for as many creators as possible, each option granting a different set of permissions:

№1–6 CBE Licenses from a16z：

№7 is “METAIP-COMMUNITY-NO-HATE” License，Its authorization scope is similar to CBE-COMMERCIAL, but includes more detailed and thorough holder commercial rights license terms and adds the “licensing permission is irrevocable” and “creator retains commercialization rights” terms.

We also recognize that, despite these choices, these licenses do not fit every project, and the licensing needs of projects will change as rapid innovation tirelessly pushes the market in new directions. METAIP treats these current trustless NFT licenses as the starting point of the NFT license ecosystem and continues to drive these applications to grow towards greater standardization.

All seven licenses can be found on MetaIP’s GitHub repository, and our legal guidance provides many additional considerations for potential modifications. For this reason, we have also placed the licenses themselves under the CC0 protocol (thereby dedicating the copyright to the public domain) so that the community can use, fork, iterate, and improve the licenses with the greatest degree of freedom.

Irrevocable by Creator

The licenses make the rights they provide irrevocable, aiming to prevent creators from switching to more restrictive licenses in the future (with some necessary exceptions), which could potentially mislead buyers. For example, an option that creators can choose requires termination of the license if the buyer violates the license or uses the NFT artwork in hate speech.

Respectful of modifications and adaptations

The licenses take a tolerant approach to modifications and adaptations to encourage the community to create secondary creations of NFT projects and prevent conflicts within the community. For example, when a series has tens of thousands of buyers, some of them may wish to use their NFTs in similar ways, whether it’s making soda water with branded images, baseball caps, or using it for any other commercial activities, etc. Where applicable, the licenses aim to protect the rights of all owners of the entire series to modify and adjust their NFTs for such efforts without increasing the risk of potential disputes within the community.

Supportive of transparent sublicensing

Similarly, once someone sells their NFT, the license stipulates that the seller’s license (and any re-licenses the seller may have granted) will be terminated, meaning that the full ‘METAIP’ licensing rights will pass to the new owner without any property burdens. This is crucial for protecting potential buyers from unwittingly purchasing NFTs with existing split licensing rights that might limit the buyer’s rights.

While this to some extent limits the holder’s ability to grant perpetual re-licenses, it does so only within the scope of the holder selling their NFT. Any derivatives they have already created can continue to be used if they do not include copyright-protected material from the original artwork. Ultimately, once transparent and on-chain re-licensing systems are widely adopted, it will be possible to have more open and relaxed re-licensing without automatic termination, as NFT buyers will be able to see these on-chain re-licenses and incorporate them into their decision-making process when purchasing NFTs.

Respectful of third-party content

When an artist creates new artwork using another artist’s work, they may introduce some additional legal risk to buyers, especially if collaboration terms are not clearly defined. Creators can supplement ‘METAIP’ licenses with additional rules and terms to reduce risk for buyers while enabling better collaboration for creators.

MetaIP licenses make it clear that the creator (not the buyer) bears the responsibility when they use third-party materials without permission (for example, if an artist adds to a limited avatar collection without the collection creator’s permission). As a result, using these licenses is equivalent to creators making a firm commitment that they have not included plagiarized elements in their NFTs.

Clarity of license ownership in the event of loss

MetaIP licenses aim to address some of the uncertainties that arise when lost or stolen NFTs fall into the wrong hands, including that even though they no longer hold the stolen NFT, actual ownership does not transfer to the thief. ‘METAIP’ licenses ensure that licensing rights do not pass to anyone who obtains the NFT unlawfully, minimizing the loss to the NFT holder in the event of a theft.

On-chain

Take as an example Section 101 of the “Copyright Ordinance” Chapter 528 of Hong Kong Law: Granting an exclusive license to a licensee to exercise copyright must be in writing and signed by the copyright owner. NFT is just a blockchain technology tool. It can be used and implemented responsibly to achieve the ultimate goal of providing legally binding rights, licenses, and ownership of intellectual property. For this purpose, reliance should not be placed solely on smart contracts, as they are just digitally encoded for fair execution and do not confer any direct legal rights or liabilities. Instead, it is necessary to embed legally binding documents in the metadata of NFTs to ensure that NFT holders have obtained the licenses for the intellectual property they intend to present.

We deploy licenses to Arweave (ensuring they are stored in a public, permanent, and immutable way), and then integrate each license into a smart contract that any new NFT project can inherit. Thus, projects can easily add an immutable reference to their preferred ‘METAIP’ license directly to their on-chain smart contracts.

The METAIP smart contract makes the getLicenseURI() and getLicenseName() functions publicly available in the Cant Be Evil.sol contract file. When the NFT project incorporates the METAIP smart contract and calls it, it allows anyone to view the license applicable to this NFT.

By referencing licenses on-chain and in metadata, marketplaces might extract the type of license for a given NFT and display it on the NFT’s listing. This can help buyers understand the rights associated with the NFT they are interested in purchasing and enhance the legal enforceability of licenses.

By making licenses easy to integrate (in a free manner), we hope to increase the accessibility and adoption of high-quality licenses, and inspire further standardization throughout the Web3 industry. Greater adoption of this certification can bring incredible benefits to creators, consumers, and the entire NFT ecosystem.

Final Thoughts

There’s no right or wrong when choosing a copyright license for NFT projects. It all depends on the content ecosystem the creator wants to build. However, projects like BAYC have demonstrated that greater intellectual property freedom can inspire the holder community to continue developing on the basis of the brand. While BAYC did not adopt the CC0 license, the appropriate licensing agreement ignited the community’s contribution to the brand and significantly increased the value of the series. Commercial rights licenses have no standard currently, but they do have the advantage of giving you proprietary rights to commercialize NFT artwork beyond the blockchain.

NFT Intellectual Property Real-World Assets Tokenizition (NFT IP RWA) have significant implications for connecting crypto NFTs with the real world and forming a unified value consensus. It will open up a heavyweight new track for the digital economy. One can imagine a scenario where, in the future, platforms will automatically recognize the licensing rights associated with a project. When the creators of new NFT projects incorporate artwork from existing projects into them, sales of the new NFT might automatically pay royalties to the original creator and current NFT holders. These benefits can stimulate creators and bring us more NFT works with complete licensing rights, thereby helping to build a more just, more efficient, and ultimately more creative NFT ecosystem.

Reference：

• *METAIP NFT Licenses：**https://github.com/YieldDAO-Foundation/metaip-contracts *

• A16Z “Can’t be Evil” NFT Licenses* ：https://a16zcrypto.com/posts/article/introducing-nft-licenses/ *

• CryptoPunks NFT Terms* ：https://a16zcrypto.com/posts/article/introducing-nft-licenses/*