Galaxy Digital Uncovers Truth Behind NFT IP Rights Of BAYC & Moonbirds

In their latest study, popular crypto merchant bank Galaxy Digital revealed the truth behind NFT IP rights offered by popular NFT collections like Bored Ape Yacht Club and Moonbirds.

According to the report, “Many issuers, including the largest Yuga Labs, appear to have misled NFT purchasers as to the intellectual property rights for the content they sell.”

The preceding phrase in the BAYC license agreement appears to imply that NFT token holders own the intellectual property that underpins the NFT. 

However, the entity that owns the intellectual property of the underlying work is the copyright holder, and Yuga’s agreement makes no conveyance of intellectual property to NFT holders.

The copyright holder has the only authority to grant a license to utilize the intellectual property that they control. Yuga indirectly accepts that the NFT holder does not own the art by specifically offering a license in their agreement.

In March, Yuga Labs acquired IP rights to Cryptopunks and Meebits NFT collections from Larva Labs. Last week, Yuga Labs released an IP rights agreement for Cryptopunks and Meebits. It just means Cryptopunks and Meebits NFT owners can now use their NFTs for commercial or personal purposes.

While the BAYC license is vague and perhaps deceptive, recent CryptoPunks and Meebits licenses are far more professional and specific in their ownership and license conditions. 

Given the differences between Yuga’s BAYC license and its newer licenses, it’s unclear whether Yuga Labs intends to grant Apes and Punks holders the same commercial use rights.

“If Yuga Labs does intend for the licenses to be functionally identical, they should update the BAYC license to remove misleading phrases like “you own the underlying Bored Ape, the Art, completely,” says Galaxy.

In the case of Moonbirds NFT collection, PROOF Collective announced that Moonbirds would transition from the commercial use license to the Creative Commons license (CC0) putting all Moonbird IP into the public domain. 

The fact that PROOF can and did amend the conditions of its license demonstrates that Moonbirds NFT holders did not, in fact, possess their NFT IP rights, according to Galaxy.

The World of Women NFT collection stands out by attempting to transfer entire IP rights to NFT holders. WoW aims to do this through the use of a new copyright assignment agreement trying to build a governance framework in which the copyright of each WoW NFT “runs with” the NFT, so that whoever controls the NFT owns the copyright.

Despite its commendable efforts, the difficulty with WoW’s framework is that it is unclear whether the IP assignment agreement continues to control downstream sales to secondary buyers.

Unlike the Azuki NFT collection, which can be monetized with no revenue ceiling, the Doodles NFT collection’s license limits token holders’ earnings from goods sales to $100,000. Furthermore, the Doodles license forbids altering the NFT artwork.

The Veefriends NFT collection, on the other hand, is an example of a severely limited, personal use-only license.

All IP linked to the land sales in Decentraland and Sandbox’s metaverses is retained by them. 

Decentraland and Sandbox do a good job of attempting to assign IP ownership to their users for user-generated material while clearly stating what users do and do not own.

While Decentraland and Sandbox focus on user-generated material, Yuga created Otherside to promote the utility of its present and future NFT collections.

Unlike the BAYC NFT collecting license, the Otherside agreement states unequivocally that acquiring Otherdeed NFTs grants no intellectual property rights.

If the NFT IP rights issues are not addressed soon, the ostensibly decentralized metaverses will be no different from those being constructed by Web2 behemoths like Meta, says Galaxy. 

The NFT community must start working on a framework to correctly grant IP rights to users before mainstream adoption, the Galaxy report highlights. If mass NFT adoption occurs without addressing these harmful issues of IP ownership, the NFT environment will clearly evolve into Web2 products that are sold and disguised as Web3 products.

Galaxy Digital urges the NFT holders to fight for their IP rights or” seek increased issuer transparency at a minimum.”

The report notes “Without improvements in the on-chain representation and transfer of intellectual property rights from NFT issuers to NFT token holders, the expansive vision of Web3 will remain unrealized.”