Protecting Your NFT Assets ' Why NFT Licensing 'Can't Be Evil'

• Published date: 04 November 2022
• Subject Matter: Intellectual Property, Litigation, Mediation & Arbitration, Technology, Copyright, Arbitration & Dispute Resolution, Fin Tech
• Law Firm: Withers LLP
• Author: Richard Stebbing, Richard Penfold and Harvey Knight

Despite the burgeoning popularity of Non Fungible Tokens ('NFTs') and the NFT sellers' market over the last 24 months, there is a lag in market understanding (at least amongst purchasers) as to what they can do in relation to the digital art, music and other media rights ('NFT Content') they may have purchased (or not) and the relevant licensing considerations in relation to the IP rights that may attach to their NFT purchase.

This lack of market understanding is further compounded by the NFT licence often being kept off-chain (eg in a marketplace platform's standard terms) which can make such terms difficult to access and/or subject to change to less favourable terms at a later date.

In some instances, NFT project creators and/or sellers are not providing any licence terms in connection to an NFT purchase at all. This inherently creates ambiguity in the market with NFTs being a new technology and class of product that are not a natural fit for traditional licensing modes and expectations.

On 31 August 2022 the Silicon Valley VC firm Andreessen Horowitz (known as a16z) published a series of NFT licences which are intended to be part of the solution to these general market issues. These licences are known as the 'Can't Be Evil' or 'CBE' licences - a reference to the maxim that the decentralised nature of web3 means that users do not need to trust each other as web3 is effectively a 'trustless' environment. In this spirit, the CBE licences are openly available to be attached to projects and they are drafted to be reasonably short-form and transparent.

What are the CBE licences?

There are 5 CBE licences aimed at the commercialisation of NFTs.

1. Exclusive Commercial Rights (CBE-ECR licence)

The NFT holder/creator grants the licensee full, exclusive commercial rights to the NFT Content, including the right to creative derivate works for commercial use, with the NFT holder/creator not retaining any rights to create their own derivate works for commercial use.

This form of licensing will be most appropriate for NFT creators commissioned to create bespoke pieces, or other 1/1 projects, where much of the project value is derived from the generous basket of rights that the licensee is paying to receive.

2. Non-Exclusive Commercial Rights (CBE-NECR licence)

Similar to the CBE-ECR licence, but with the NFT holder/creator granting commercial rights to the NFT Content on a non-exclusive basis, whilst also retaining rights to create their own derivate works for...