How to Create an NFT Copyright License Agreement- Free Template

My name is Enrico Schaefer. I'm an attorney that specializes in technology law and blockchain, and today we're going to be talking about NFTs, non-fungible tokens. One of the big problems with the NFT marketplaces where NFTs are both sold sold and purchased is that the platform provides for a sale of the token, which goes on to the Ethereum blockchain, but it doesn't provide any licensing language for the digital asset that is being attached to the NFT. So if you're selling a digital rendition of a piece of artwork, you're going to mint an NFT. Which is a smart contract, which is going to then attach to that particular piece of digital art. And the token's going to go onto the blockchain and the buyer is going to get that token proving that they are the owner of that NFT. The NFT is going to link out to what is being licensed. And what is being licensed is the actual digital work. It's the piece of artwork, it's the image, it's the video, it's the audio file, et cetera. So since these platforms are not providing any license language for the actual asset that is attached to the NFT, we thought we'd contribute here to the community by providing free copyright license and to continue to develop various forms of copyright licenses that people can link to when they're selling an NFT and kind of an open source project, kind of like a Creative Commons project. So let's take a look a little bit about what's going on here, right? So what are you selling? If you, if you go ahead and mint an NFT, you're selling the NFT itself. The person who gets the NFT is purchasing that NFT. They become the owner. They can transfer it later on potentially, and then that person becomes the new owner, and so on and so on. So it identifies all the transfers and events that are related to the digital asset. And the NFT typically links out through a URL embedded in the smart contract that goes into the Ethereum blockchain to a website or a database or a, a group of servers or peer-to-peer servers that are going to offer up that digital asset and identify what is being associated with the NFT. So So that's the NFT part. What about the underlying digital asset? What are you licensing? You're licensing that digital asset. You're going to grant rights and you're going to limit rights. So let's take a look at a project that I created in one of the more, probably the highest volume marketplace, which is OpenSea, very similar to Rarible. And so I have minted this particular photograph of me as an NFT. But really what I'm showing you here is how to get this free copyright license to attach to the NFT and how to modify, how to embed that license into the sale so that the purchasers know what it is they're actually getting in terms of that bundle of rights. So let's scroll down. You go ahead and mint your NFT, and you're going to have a section that's called Details. This is where you can put information concerning the license that you are attaching to this digital asset. And so you'll see here, we've indicated click on the link and you will be able to access free open source copyright license for using with your NFT listing. Now we're going to click on this link in a minute. I'm going to show you where that goes. But let's continue. The types of licenses for digital assets linked to NFTs are infinite. You can slice and dice the rights and limitations however you want. You can give broad rights, you can give limited rights. So you're going to need a lawyer that understands both NFTs and copyright licensing if you've got an NFT that is of any significant value or you simply want to do it right. So our goal is to provide some kind of as-is license language for you and your attorneys to leverage as part of an NFT sale. So right now we've got one standard license. We're in the process of developing some more licenses that you'll be able to use freely, modify, et cetera, as long as you provide attribution to Traverse Legal PLC, my law firm, as part of that modification of the license. So of course, if you wanted to bid on or purchase this particular digital asset here, you can go ahead and, and and buy it. We're not necessarily encouraging you to do so, as this is really for illustration purposes. And again, we add a link to the license, which is linked here, that what we call the NFTL, Non-Fungible Token License, version 1.0. All right, so before we get to that license, there's another spot in here that you can actually include license information. And that's in the properties section. And when you're creating your NFT, you're going to have the ability to create properties. And you could put whatever word here, up here, and you could put whatever information here. So what I've done is just simply customized those particular items to attach to this NFT by saying, hey, copyright ownership, right? So if we click on this, it's going to tell us a little bit about the copyright ownership piece of this particular NFT. Copyright owner remains— or copyright owner remains with the copyright owner. Okay. So you're not actually purchasing the copyright to this photo. Okay. You're going to be able to see that there are a number of other, essentially what are tags That I've placed on this. It's going to tell you about any further grants. It's going to tell you about this license. It's going to tell you what you cannot do with that particular digital asset, that photograph. It's going to tell you that you may not modify that particular photograph. It's going to tell you that you have to provide attribution. It's going to now provide you what your license rights are and the scope of your license rights. So let's take a look at one of those. And so this is really kind of a summary. You are getting a license to use, copy, and display this particular item. So this is a kind of a shorthand. So you're, you're really trying to tell the buyer, hey, look, there's license rights that are bound up with this particular NFT. This is a summary of some of those license rights, but let's go ahead and click on the license that is now going to be attached to this NFT sale. And you're going to see it's just a hyperlink that you can add to your NFT as a hyperlink when you do your markup. And it's a very simple license. I am not saying that this is the license that is going to work for your particular situation. It certainly is just one version of what will be kind of a standard license for an NFT sale. You can take this and you can modify it. Our license to this copyright protected work is set forth in the Creative Commons Attribution-ShareAlike 4.0 license, which you could click to. And it now tells you that as long as you provide credit to Traverse Legal and link to Traverse Legal, you can go ahead and use and modify this license. All right, or you could just simply link to it exactly as it is. So let's see what the license rights are. It's going to tell the buyer that they're buying the NFT, right? But they're getting a license to the associated digital works, which could be an image, a video, audio file, any other digital asset, which we're going to define as the works. The NFT seller is referred in this instance to the grantor. You could also say licensor. We're saying grantor. So the NFT seller is the grantor of the license. The NFT buyer is the grantee of the license. Here are the grants of rights, the limitations, and the warranties. All right. The copyright owner of the works shall remain the copyright owner. So the person selling isn't selling you or assigning you the copyright. They're retaining their copyright ownership. And the grantee, the buyer, is not receiving ownership of the works but is receiving certain limited rights in the works as set forth herein. All right, let's take a look at the first substantive item here, which is number 2. Upon confirming the NFT on the blockchain, buyer becomes the grantee and immediately receives a worldwide non-exclusive transferable license to the works. Now, in some instances You might just want— you might just— you might want this to be an exclusive license. You might want it to be non-transferable. These are all the variations that can be identified in the bundle of rights. This is a relatively standard transaction for an NFT. Let's see what else the grantee is getting. Grantee is granted the right to use the works, the image, to copy the image, which is going to happen every time you upload that image to, for instance, Instagram or Facebook. So if you want to show off your NFT, You're creating a copy, a digital copy onto Facebook servers. You don't necessarily have to provide the right to copy if you're the owner of the copyright, but standard is that you would in many cases provide that right. And of course, the key item, to display the works. So this is your basic grant of rights. This is what the buyer is in fact receiving. The grantee may not do is modify the work. So you can't take my image or that digital asset and mark it up with cartoonish or in any way. You can't change the colorization. You also cannot create derivative works, which means you can't take that piece of digital asset and turn it into something else by attaching to a different type of asset, digital or non-digital. You cannot transform the work. You have to— you're only getting it as it is provided to you. You cannot perform the work. That won't apply in this particular situation, but that's one of the rights that we talk about when we talk about copyright licensing. What else can't you do? You can't, in this license, make commercial use of the works except to resell the copyright license. Okay, so if you were to sell your NFT, your non-fungible token, to the next person, they would get this similar or exactly the same bundle of rights unless you made some modification to the license downstream which further limited the rights that the next person was getting. So this means you can't take that photo of me and put it on a cereal box or in a commercial or on your website in a way that would be a commercial use of the works. Fairly typical. That's usually not why people are buying NFTs, but if they are looking— if you're a buyer and you're looking for an NFT to use in a commercial like you would get if you were on a copyright site that's allowing you to access photographs that have built-in licenses that are variable that some say that you can simply use on the web, others say you can use off the web. Your purchase price is going to depend on the scope of rights, and you can use those for commercial purposes. If you need to make a commercial use of the works, check the license if you're the buyer because this is a very standard clause you may not use for commercial activities. Some of the NFT licenses that have been out there for a while do allow a limited commercial use of the works. So all these things are the slicing and dicing that come with copyrights. All right, what else can't you do? Number 6 here. You may not use the works in any way associated with hatred, intolerance, violence, cruelty, or otherwise. I don't want my photo or my digital art or my digital asset being used in a way to disparage someone else, or to engage in bigotry, these types of things. If you're the copyright owner, this is a very important clause. If you have a beautiful piece of digital art, you certainly don't want that to be used for hatred or intolerance. Or perhaps maybe you're okay with it. This is something that you can customize. All right, any exercise of the rights granted herein requires attribution to the copyright owner and creator. If they are listed in the NFT sale. So I have listed myself as the owner of the NFT. If you are going to exercise your rights to display my works, you need to identify myself as the copyright owner. If there's nothing in the sale that identifies the copyright owner or creator, then you wouldn't have to— no action would be required by you. So this is another clause that a seller may include or may not care about. You want to look for this type of clause if you're a buyer to see whether or not you have to provide attribution to the copyright owner as you continue to use the works down the line. All right, you're agreeing that you may not challenge copyright ownership of the works if you buy the NFT. Here's a key provision, number 9, and this is one that you want to be very careful about if you're the seller. I can go copy an image off the internet, but that doesn't mean that I can create an NFT and put it for sale or license it on OpenSea. You are warranting under this license, and I'm assuming under any of the different NFT sales this would at least be implied, that you are the owner or authorized to license the work consistent with the terms herein. So I'm warranting to you as the seller, to you as the buyer, that I am authorized to do this transaction, that I own the bundle of rights that I am giving to you, and that I have an ownership in the works. And many sellers screw this up. They have a photograph that doesn't belong to them, but that they have, and they think they can offer it up as an NFT. You cannot. Copyright owner in the works is the one that can control whether or not an NFT can be created and attached to that copyrighted work. All right, if you want more rights, you can contact the grantor and look at any further rights need to be in writing. It's a good standard clause to make sure there's nothing that's implied and nothing that is going to come back later to be a he said, she said. All right, this license only addresses the rights and the works attached to the NFT transaction, not the NFT itself. There may be additional terms on the NFT listing page. Mine had additional terms, but they're very— they're consistent with this. You can use this license and add different terms to the description to modify this. To the extent there's a direct conflict between this open source license and the NFT listing description or other license information, the listing information is going to control. So you can see how this is going to provide flexibility for people to still use this license and modify it by saying paragraph number 7 is in the NFT license linked to this NFT is modified as follows. Right. And here's an important piece to determine which version of the license applies to your transaction. You're going to you know, compare the timestamp of the NFT to the version of this particular license agreement. We're going to provide historical information with any changes so that we can track if there's a version change, which version was the one that you attached to your NFT sale. All right, so that's a lot. Let's recap. If you are going to create and mint an NFT and attach a digital asset to that NFT, you must tell the buyer what rights they are receiving in the digital asset. Nothing on this platform provides any licensing information. This is a platform to sell the NFT, not currently to license the work attached to the NFT. You as the seller have to create that license. Which is why you typically want to get a copyright attorney involved who understands NFTs so that you can create that license, especially if it's a high-value transaction. In this page, there is a detail section, which is a place when you're creating your NFT where you can put a link to a particular license, this, this NFTL 1.0 or some other license. You can create a license to your— and put it on your web page and link to it. You can provide the full license information in this details section, right? And if you want to help the buyer understand the license without going out to the outbound link, you can create some properties here which are going to attach to the, the NFT and are going to then allow you to be able to determine what the license is in a summary fashion. So that is a really good starting point for all of us in trying to upgrade our approach to NFT transactions. You now have information about what copyright is, why it's important, why your digital asset has to have copyright licensing language attached to it as part of the transaction, and provides you a free open-source starting point for your particular NFT license agreement. Again, we'll be adding more NFT licenses to nft-license.weebly.com, the NFT License Project. My name is NFT attorney Enrico Schaefer. We'll see you next time.