NFTs: You have heard about them, your grandma has heard about them, but do you really know what you get when you buy one?
At this point, it is common knowledge that the immutability of blockchains has given creators and collectors credible proof of digital ownership, validity and scarcity for the first time ever. But what happens outside the blockchain?
Meanix is a 21-year-old self-described “all-out NFTs fanatic, halfway between blockchain and music.” He welcomes reader feedback on Twitter.
In the real physical world, ownership is often synonymous with copyright, and that is what gives companies like Yuga Labs absolute control over their brands.
Copyright has been a very hot subject in the PFP (profile picture) NFT communities because PFPs are supposed to become part of one’s digital identity. Knowing exactly to what extent you can use your digital identity is a big deal.
Thankfully, holders of Yuga’s Bored Ape Yacht Club (BAYC) non-fungible tokens were given permission to develop derivative products from their apes. Imagine spending $200,000 on an NFT that you can’t even create merchandise with. But ape owners still face limitations.
Depending on the particular NFT collection, there may be restrictions on the usage of intellectual property (IP) on the holder’s side, and so many have started looking into NFTs that give buyers the ability to leverage and commercialize their NFTs’ artwork. And that has led to an explosion of projects that give extensive or complete freedom for holders.
This debate has shifted specifically toward “CC0,” known as “no copyright reserved,” and commercial rights, or as punk6529 considers them, the main contenders for the copyright standard license for PFP projects. The Pepsi and Coca-Cola of PFP NFT copyright models have involuntarily created two camps that have continuous fiery disputes on which is better. With all the misconceptions going on, I’m here to shine a light on the matter.
While I won’t be taking any side, I want to help you make the best decision for yourself. So let’s dig in.
J1mmy.eth vs DCinvestor.eth
There are two ways of thinking about copyright in NFTs. One is about retaining the rights over your art as a creator for more control and exclusivity to revenue generation outside the blockchain. This is known as copyright.
The other way is the permissionless approach where the art, the intellectual property, belongs to no one, but ownership still exists on the blockchain, thanks to Creative Commons licenses. I was aware of the emergent discussions on the copyright models for NFT collections, especially the PFP ones. But when I saw a rare heated public exchange between j1mmy.eth and DCinvestor.eth – two high-profile NFT influencers – I realized that the rivalry between the two sides went deeper than I thought.
DCinvestor.eth is on the CC0 team – CC0 stands for Creative Commons Zero. j1mmy.eth is bullish on commercial rights for NFTs. Their disagreement has led to a dispute filled with ego and sharp remarks (start here and scroll up).
In DCinvestor’s view, there is potential in CC0 projects, but j1mmy calls CC0 mighty foolish, though he didn't use precisely those words. DCinvestor.eth is arguing that open-source software runs much of the internet and that, much like with Bitcoin and Ethereum, environments where everyone can contribute could become the most valuable. While he is “advocating for community participation and building in CC0 communities and brands,” j1mmy.eth is confident that CC0 NFTs “will not be a popular concept with mainstream,” that they are a bad investment compared with NFTs with commercial rights and that people should “ignore the CC0 projects if they are trying to win.”
Both of them made bold statements, and with their track records and credibility, there are good reasons to take them both seriously. But who’s right?
First, some context.
Copyright was created to encourage creators to create new works by enabling them to claim some of the economic value of those works. While distribution and consumption of works are getting cheaper and cheaper, creation remains costly. Copyright was the compromise that ordered or even destroyed free culture in order to save it. If there are no creators to create, there is no more culture to preserve. And without a guarantee that creators can make a living in this world by creating, this scenario would become inevitable.
That is how the “All rights reserved” implied license came to life, with all finalized creative works fitting into this category automatically, without requiring registration, unless stated otherwise by the creator.
Starting with the basics, the most important information on intellectual property rights is that these rights give the owners of copyright the power to set boundaries to their copyrighted material, discourage plagiarism and defend what for some is the only source of income by punishing anyone who threatens their livelihood by exploiting the IP without permission. Not only independent artists but projects and brands such as BAYC can benefit from the retention of some rights because protecting their brand is important for longevity.
However, in order to see the bigger picture of what copyright means for NFT collectors and creators specifically, before going any further into this article, you should check out this invaluable piece written by Amy Madison Luo for CoinDesk. According to Luo, “creators and collectors are going to inadvertently give up rights if they are not familiar with basic IP law.”
(Disclaimer: While most countries abide by the “Berne Convention for the Protection of Literary and Artistic Works,” copyright law can vary in each jurisdiction. The interpretation of intellectual property rights from this article is generally valid, but the reader should look into the lawfulness of their actions before applying anything stated in this article.)
What follows should supplement all Luo has written, helping you make more educated decisions. We’re going in deep.
What are commercial rights?
The term “commercial rights” has been used far and wide in PFP communities, but the truth is there is no accurate one-size-fits-all description of it. Some projects, like BAYC, state in their terms and conditions that the owners of NFTs have full unlimited commercial rights over their apes, which means that they can commercialize and sell items with their apes however they want. Others, like CryptoKitties, have taken a slightly different approach by giving the owners of NFTs only limited permission to commercialize their NFTs for the creation of merchandise with earnings capped at $100,000 per year and with restrictions on “using the art to market or sell third-party products” and “modifying the art.”
Both BAYC and CryptoKitties can brag about giving commercial rights to the holders, but it is evident that one of them is limiting that right to an extent.
Each project’s terms and conditions dictate what “commercial use” means for the holders, and that can vary. Depending on the project, there may be limitations on how a buyer may commercialize their NFT, including limits on revenue and on rights to create any derivative works and on exclusivity and royalties.
Generally, commercial rights give individuals access to exploit certain intellectual property for direct or indirect income generation through a transfer of copyright. But be aware that a written assignment is required for a transfer of copyright. So, unless clearly specified in the terms and conditions, you own only the token, not the actual artwork itself.
The ideal scenario for commercial rights for NFTs, and the one that I suppose J1mmy is supporting in his tweet, is the one where you, the NFT holder, get the ownership over the NFT and the underlying artwork and the exclusive unlimited commercial rights attached to it.
So, besides the ownership of the NFT and the money you can make from selling it, you are the only one with permission to use your PFP for merchandise, advertisements, movies or anything that involves the exploitation of the PFP and generates revenue. This opens the avenue to income opportunities outside of the blockchain from derivative works, and you have complete control over it for as long as the smart contract authenticates your ownership over the NFT,
Some projects, however, such as Forgotten Runes Wizard’s Cult, provide purchasers of their NFTs with a non-exclusive license to the underlying art, instead of a transfer of commercial rights, which means that the creators are also allowed to exploit the intellectual property rights governing the art.
What about Creative Commons and CC0?
Creative Commons (CC) was initiated for the purpose of shifting from the “All rights reserved” standard for copyright to a variety of options for creators on opening up their works for other people to use.
For a better understanding, in the picture below you can observe the various types of Creative Commons licenses:
As it can be clearly seen in the picture, the CC licenses lie between complete openness (CC0/public domain) and some restriction of commercial usage and modification/alteration (CC BY-NC-ND). It is worth noting that, no matter what CC license you choose from the list, once you attribute a piece of art to it, anyone can distribute it freely forever.
In the view of Creative Commons representatives, “there’s nothing contradictory about a creator offering their work to the public under a CC license as well as minting it as a limited edition NFT.” They argue that these NFTs that include CC-licensed work are still an entry on a catalogue raisonne, which gives them rareness and authenticity even though a CC license makes it legally possible to create infinite copies of a work. There are, however, some implications that come with the usage of Creative Commons licenses for NFT assets that most people seem to miss.
Most buyers believe that CC0 is the license that gives them the most power over their NFTs because the creators are renouncing their claim to exclusive rights over that artwork. But the fact that the creator no longer has any say over the usage of their work, excluding moral rights, doesn’t imply that the buyer has complete control over it.
First, if you buy an NFT from a PFP collection using any CC license, you don’t get the exclusive legal right of right-click saving it to use it as your social handles or display it wherever you want as your avatar. So, I’m sorry to disappoint you, but you have as many rights over your CC-licensed avatar as the other guy. But I promise I won’t “right click, save as” your PFP and use it as my profile picture on Twitter.
Furthermore, buying NFT artwork released under CC0 doesn’t mean that you own the rights to the CC0 artwork. It simply means you have paid for it on the blockchain. But that should be enough because it also means that if you own a CC0 NFT, you own everything. Sure, you don’t own the IP, but nobody does. It can’t be bought. It can’t be sold. All that remains is the original token on the blockchain. And that’s yours.
Let’s forget about copyright for a second. For the most part, what you are paying with the PFP projects is the community anyway. As long as you’re holding the NFT, you enjoy exclusive access to the community and its perks and utility granted by the ownership of the cryptographic token. These things aren’t available in the public domain.
Nonetheless, with public domain media, you can profit commercially from it, but so can the rest of the world. As a result, you won’t have the same opportunities for creating revenue with your NFT’s artwork. But that’s also the beauty of it. Anyone has the creative and commercial freedom to build out the brand.
There is also the risk that someone could mint these PFPs or make derivatives for resale and create their own community around them. We can see the marketplaces being flooded with lookalikes or complete copies of popular PFP projects, but under CC0, it is no longer considered plagiarism, so one of these communities that came after yours could eventually surpass yours and even have better benefits or utility. And there’s nothing you can do about it. But “pwnership” suggests that maybe you don’t really need to do anything about it.
Pwnership says copyright stinks
Now, “pwnership” could be the ultimate argument for the supposed irrelevance of copyright for status goods such as art and NFTs. Because people collect them for the social status ownership conveys, “is a status good really so bad if everyone gets to consume everything, except the status?” That’s the question law professor and NFT creator Brian L. Frye addresses in his essay “After Copyright: Pwning NFTs in a Clout Economy.”
Frye coined the term “pwnership” in the essay and argued that the NFT market is living proof that art doesn’t require copyright and that clout trumps control. He wrote:
The NFT market recognizes the owner of a “legitimate” NFT of a work as the “owner” of the work, even though NFTs typically don’t convey copyright ownership of the work.
Pwnership consists of “clout,” rather than control.
NFT owners don’t need copyright, because pwnership depends on the endorsement of the author, rather than control of the use of the work.
In fact, NFT owners encourage others to use the work, because popularity increases the value of ownership.
For example, I could mint a new NFT with any CC0 Noun, but because everyone knows the “original” collection, the one endorsed by the creator(s), mine will have no relevance and probably little if any value. But the opposite could happen, too. A creator could launch a collection with incredible art tomorrow, but fail to get any attention and sales. Someone else can “steal” the art, copy the idea, rebrand it and profit from the original work without being required to compensate the “original” creator. Copyright gives you the power to legally sue someone using your IP without permission. CC0 doesn’t.
Coming back to “pwnership,” Frye claims that copyright created artificial scarcity because markets for anything other than public goods require scarcity. But he adds that the art market never needed copyright to define scarcity in the first place because the “original” piece was always considered authentic, and so only the original is valuable.
The art market values ownership and the clout that accompanies it, and so “scarce” or valuable art was always defined by the associated clout. “Art is not scarce [because] vast quantities are available for next to nothing,” Frye contended.
NFTs have created a market in ownership. In Frye’s words, “The art market was always essentially an NFT market,” because nothing else matters besides the scarcity of clout of ownership. NFTs don’t normally offer you the right to control the use of a work of authorship, but the right to be the owner of the token and the clout associated with ownership.
Subsequently, value is tied to ownership; once the work is sold, the clout is gone. Ironically, “right-click savers” generate more clout when they boost awareness of an NFT project in their attempt to troll. By talking about the work, they only prove its value and increase that value. People can use the work however they like, without affecting the ownership.
As mentioned earlier, for PFP collections, the main value stays in the benefits and utility of the cryptographic token, and those benefits are given by the creator’s endorsement. And this seems to be the foundation of “pwnership.”
What is the fan favorite?
I was curious to know what Web 3 enthusiasts think the best copyright model for NFTs is and the poll I created on Twitter on the matter shows overwhelming support for CC0. It does make a lot of sense that people in this market would be most attracted to the “no rights reserved” narrative because CC0 is in alignment with the spirit of Web 3.
Ultimately, Web 3 is about transparency and openness, and CC0 contributes to that by allowing anyone to use the artwork of any NFT under this license for commercial use or otherwise.
We are all dreaming of an open universe where characters from our favorite NFT projects can coexist and thrive. (Some may call it the “metaverse”; the terminology is not relevant for now.) But, frankly, non-CC0 collections make this dream improbable to achieve. Copyright stands for restriction and control and makes the goal expensive and inaccessible.
To build out a universe with characters from copyrighted collections, you either have to own the token or license the IP from the owner. With CC0 collections all you have to do is build it.
And that’s kind of what Web 3 is supposed to be, right? A free for all. A decentralized universe where everyone can contribute and you don’t have to ask giant centralized entities for permission anymore.
I might have been a little harsh on both copyright and CC0, but the reality is that there’s no right or wrong when choosing a copyright license for your NFT project. It all comes down to what you are trying to build as a creator. Yet, BAYC proves that greater intellectual property freedom can inspire a community of holders to build on top of the brand. Although BAYC is not CC0-licensed, there’s no denying that the community’s contribution to the brand has significantly improved the collection’s value.
There’s no standard for commercial rights licenses, but they do have the advantage of giving you exclusive rights over the commercialization of the NFT’s artwork outside the blockchain.
Read the terms and conditions before buying any NFTs to understand exactly what you’re getting.
To end with something provocative, here's another quote from Frye’s essay:
This article is a piece of art too, I humbly submit. But don’t worry, you’re free to read it and share it.
Meet me at the finish line,