An idea of leveraging blockchain technology to help make efficient intellectual property management accessible and affordable to all. We figured out the different pieces to enable a more streamline IP management experience to both artists, creative businesses and start ups through our platform.
Fast forward 2021, NFTs have become the new craze in town as artists and enthusiasts around the world are finding new ways to sell their work by turning them into digital art, on different blockchain enabled marketplaces.
Beside these news avenues at the reach of anyone, our team is still very much excited about the possibility NFTs and blockchain smart contract capabilities offer to intellectual property and other intangible asset management. Therefore we thought it would be a good idea to explain how NFTs help manage intellectual property rights, and this is exactly what we are going to cover in this post.
What are NFTs and how do they work?
NFT stands for non-fungible token. Fungible means something that can be replaced with another identical item. Money is a good example for explaining what fungible means.
You can trade a £10 note for another £10 note; which implies you're replacing something with something identical.
Now that you’ve formed a clear understanding of what fungible means, let’s talk about what non-fungible means.
A diamond is a non-fungible product. You can’t just trade a piece of diamond with another diamond and expect they will have the same value. A diamond can be worth £1500 or over £100,000 depending on factors such as purity, colour and size.
Now you know what NFTs are (non-fungible tokens), so let’s talk about how they work.
How do they work?
NFTs work as a digital license. They give you ownership of digital products.
An important thing to note is that NFTs only give you the right to use the product for non-commercial purposes.
NFTs agreement can include the commercial rights but this is not the default option and can't be done without the will of the original creator.
NFTs are usually created on Ethereum blockchain, and can represent tangible and intangible items.
What are NFTs used for?
NFTs are used for monetization. A good example involves artists. An artist has to give the painting to an art gallery which in turn will take a good portion of profits when the painting is sold to a buyer or collector.
NFTs allow the artist to sell their paintings directly to the user online and to earn from future resale. Meaning that everytime the painting is sold from one collector or buyer to another, the artist will still be able to earn a commission on those future sales. Because artists can get rid of the middle party, they earn more profits.
Another way content creators can monetize their content is by taking royalties. A singer can make a contract with various platforms and whenever someone downloads the song, the artist will receive their share.
Content creators can earn a lot of money using the royalty method.
How NFTs Help Manage Intellectual Property Rights?
We’ve kind of already discussed how NFTs help manage intellectual property rights but let’s discuss it again in a more simpler language.
NFTs bring a new strategy to the table. Companies and individuals can use the NFTs to create a new connection with the intellectual property. Because of NFT’s, the content creators don’t need a third party to reach the users.
Because of this new connection, IP owners can expect to increase their revenue, profile, and goodwill. But, all is not gloom and bloom. There is a downside to using NFTs.
Creating a NFT without truly understanding what exactly it is that you are getting licensed can cost a lot of trouble. Here is an example that shows why.
An artist who was fired from DC Comics owned IP and NFTs for the drawings of the characters he had drawn for the company. He sold the drawings for a whopping $1.85 million dollars.
DC Comics noticed that the guy sold the drawings for a huge amount of money and they decided to take legal actions. The artist didn’t know that the NFT license didn’t grant him the right to copy or distribute the product.
This example perfectly illustrates why thinking things through when creating an NFT is incredibly important.
When creating an NFT it is important to follow some best practices and here are a few tips:
Tips for IP owners
1. Know about all the potential infringement issues when using a third party IP.
Knowing all the points that can cause an issue before creating a NFT is important and we bet you know why. But why is it much more important when using a third party intellectual property?
Because if another person or company has the ownership rights to the product you’re creating you may not even be allowed to sell or even use the product online.
2. Seriously consider using IP protection for your original content.
As for the second point, if you are not using IP protection for your original content then you may not even have the rights to use the product solely for yourself. For this reason, you should seriously consider using IP protection for your original content.
Tips for NFT creators
There are three things we’re going to discuss in this section. Legal counselling, Get your IP rights first, and Early registration.
1. Legal counselling
While a person can create an NFT the right way by spending hours upon hours doing research, it doesn’t mean they should. The reason is it’ll take a ton of time and still there is a good chance that they will miss out on something.
As we know, missing out on information can be incredibly terrible, so it’s not a good idea to do everything on your own.
Therefore, we recommend referring to a lawyer with expertise on the matter. By hiring legal help you’ll spend money upfront, but it’ll save you an enormous amount of time and possible liabilities, which may be very likely to occur, later on.
2. Get your IP rights first
A lot of people don’t get IP rights before creating a NFT. What’s worse is not only these people have put their product in danger but we’ve often heard them telling other people to do the same.
They say, “I've been using a third-party IP for a long time and I didn’t have to face any problem.” Well, judging by what happened with DC comics and other new disputes coming to light, we strongly advise to not make the same mistake.
Our advice is to create an IP before creating the NFT. It saves a lot of time and money. But, even if you’ve already created a NFT and don’t own the rights to IP, we strongly suggest working on getting one right away.
Just because someone hasn’t taken no action doesn’t mean they won’t. Also, with the rapid increase in the awareness of NFT and IP rights, you could find yourself in troubes later on.
3. Early registration
Registration of rights is not a requirement for obtaining the ownership for your IP. But this does not mean that it should be ignored.
Actually, getting registration of rights for your NFT can be super beneficial. It can save you a lot of money in the future by taking care of take-down notices, desist and cease letters, attending courts, and in case you have to visit court it may save you the fee of hiring a lawyer.
It’s best to get the registration rights as early as possible, because you don’t know when you’re going to face trouble so in case it happens early, you’re covered already. This can easily be done through our IP Vault.
Innovative Intellectual Property Management
We are making effective intellectual property management affordable and accessible to all through our platform. WIth this purpose in mind and to celebrate the UN international year of Creative Economy for Sustainable Development we are launching a unique pilot project “IP & NFTs” . Through this project we aim to support amazing artists from developing nations and showcase the positive impact a combination of blockchain technology and well tough IP management strategies can have on the revenue they earn.
That’s it! It’s time to wrap up this post. If you’ve found this post helpful, share it so others can benefit as well. If any point is not clear, let us know in the comments section.
Don't forget to sign up to our newsletter to stay up to date with our platform and community developments.