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NFT Royalty and IP Guide | NFT Law 101

However, the royalties should only go to the NFT artists, creators, and founders. This is because when the royalties of an NFT go to its retail investors, it is considered as security, an entirely different process.

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“The transfer of the NFT does not transfer the intellectual property itself, so you’ll still keep those copyright, that’s very important and that’s advantageous to you as a content creator.”

This is the final note of Atty. Rafael Padilla, a Commercial Lawyer specializing in Fintech and Crypto, to the non-fungible token (NFT) artists, content creators and founders during a Twitter Space hosted by BitPinas last March 25, 2022.

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Note: Everything stated in this article must not be construed as legal or investment advice. See notes at the end of the article.

In the same twitter space, Padilla emphasized the importance of the royalty of an NFT.

NFT Royalty 101

Royalties give legal ownership to a certain work of art or any collectible—it gives ownership and payment for using any of the assets, including copyrighted works, franchises, and natural resources of the artist. NFT arts and collectibles, being in the web3, still have royalties.

However, the royalties should only go to the NFT artists, creators, and founders. This is because when the royalties of an NFT go to its retail investors, it is considered as security, an entirely different process.

[When are NFT arts and collectibles considered as security? Read here.]

Terms and Service Contract in NFTs

Meanwhile, the lawyer reiterated the importance of Terms and Service in a contract when buying and selling NFTs.

“But whatever you give to the buyers of NFT would have to be defined, in most cases, by the Terms of Service,” he added.

It is because the rights of both parties can be found in the contract’s Terms and Service section.

He also added that a contract that does not have a Terms and Service statement is not a good indication of a clean project.

Moreover, he suggested that there is a guide in making an NFT license, developed by Dapper Labs.

“Mayroong NFT License Template na dineveloped ng Dapper Labs, pwede niyo ‘yung magamit as a template to basically define whatever rights you are actually transferring to the buyer.”

[“There is an NFT License Template that is developed by Dapper Labs, you can use that template to basically basically define whatever rights you are actually transferring to the buyer.”]

The said template was the version 2.0 and was released last 2018.

It contains the detailed outline and its definition of an ideal NFT License in the “License” section; the pros and limitations of an ideal NFT License in the “Intro” section; and the frequently asked questions of an ideal NFT License in the “FAQ” section.

You can access the template in this website.

This article is published on BitPinas: NFT Royalty and IP Guide | NFT Law 101

Disclaimer: BitPinas articles and its external content are not financial advice. The team serves to deliver independent, unbiased news to provide information for Philippine-crypto and beyond.

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