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NFT Licences That “Can’t Be Evil”: Are They Any Good? – Fin Tech


Licences connected to Non-Fungible Tokens (NFTs) are still far
from being the norm. As a result, most NFTs still do not convey
sufficient or appropriate IP rights to their underlying content.
Moreover, they have to deal with practical difficulties inherent to
the nature of NFTs. The need for licences tailored to the NFT
market is therefore evident.

To overcome the practical difficulties and tackle these issues,
publicly available NFT licence systems have emerged. But are they
any good?

In the past few years, we have seen NFTs become a mainstream
phenomenon. Even if the hype has calmed down a bit, we can expect
that NFTs are here to stay. After all, new NFT projects continue to
emerge seemingly every day and the dawn of Web3 and its metaverse
pave the way for many more creative possibilities and opportunities
for NFTs.

Last year we reported on our NFT-Self Experiment, where we also highlighted
the importance of licences to be linked to NFTs (“Tokenized copyrights: Linking an NFT to a
copyright licence
“). You will recall that ownership of an
NFT can be used to give substantial control over the creative work
connected to it, but that control is not automatic. Rather, a
licence is necessary to connect the NFT with rights of use or
exploitation to the creative work attached.

Now, we want to return and have a look at the current state as
well as give an outlook on the possible use of NFT licence
regimes.

Current issues and legal uncertainties

The NFT market still has to deal with significant ambiguities
and legal risks. Pursuant to a recently published report by Galaxy
Digital on NFT licences1, the vast majority of NFTs
convey zero intellectual property ownership of their underlying
content. Furthermore, it was found that there is a discrepancy
between what the public thinks they are buying and what they are
actually buying with an NFT.

These ambiguities are further stressed by the fact that, if
licences exist, they are often kept off-chain,2 e.g. in
the terms of use on the website of an NFT creator. Such terms of
use may, however, be altered without it being comprehensible. While
this does in general (unless otherwise agreed) not change the
licence acquired by the NFT holder, it may create difficulties of
traceability and transparency.

In addition, there still might be a lack of knowledge,
understanding and foreseeability about what rights should be
included in an NFT. What happens, for example, if an NFT creator
has included comprehensive rights (maybe even on-chain and thus
more or less irrevocable), but these turn out to be incompatible
with the actual use of the work or the mere transfer and sale of an
NFT (having in mind, for instance, sublicences granted or
derivatives created)?

All of this puts a strain on the industry and the development of
NFTs.

The emergence of NFT licences that “can’t be
evil”

To tackle these issues, NFT licence systems have emerged.

The Silicon Valley venture capital firm Andreessen Horowitz
(also called a16z), for example, has recently proposed a
new licence regime tailored to the NFT market. It includes six
types of broadly applicable NFT licences that are freely available
online.

The so-called “Can’t Be Evil” (CBE)3
licences were developed by lawyers and operators who have a deep
understanding of NFTs and address some of the legal uncertainties
and risks that come with them.4 According to
a16z, the aim of their CBE licences is to “make
NFT ecosystems more trustless, providing holders with a minimum
baseline of standard real-world rights, thereby harmonizing
real-world ownership with on-chain
ownership.
5 Following the example of Creative
Commons6, they provide a set of simple, standardised
licences each type having slightly different permissions and
requirements. The CBE licences range from a comprehensive licence
granting exclusive commercial rights to the NFT owner (CBE-ECR) to
the granting of personal, non-commercial rights (CBE-PR) to a
licence which dedicates the copyright to the public domain
(CBE-CC0).

NFT creators can include a reference to their preferred CBE
licence directly into their smart contracts on-chain. With this the
CBE licence is affixed to the respective NFT and one can follow
what rights are and are not connected to the NFT or the work
attached to it.7

Prospect and conclusions

NFT licence systems address legal issues and uncertainties that
come with NFTs and their connected work. They may lay a solid
foundation for a coherent and professional NFT licence regime. But
are such systems a definitive solution? When vastly accepted and
used, standardised licencing frameworks have the potential to
remove ambiguity around ownership, minimise confusion around
underlying rights, strengthen the legal enforceability of rights,
and thus, perhaps avoid future legal troubles and save creators
some of the burden (and expense) of creating their own licensing
regimes.

There are, however, some limitations to standardised
licences:

Practice shows that there is no such thing as an ultimate
licence that could be used for many different projects (in the on-
and offline worlds). Licences mostly ask to be tailored to the
individual needs and intentions.

CBE licences for instance are limited to copyright only.
Further, the CBE licence system is aligned to US law. Even
a16z recognises that “despite the options, these
licen[c]es won’t be right for every project, and that the
licensing needs of projects will change as rapid innovation
tirelessly drives the space in new directions
.”

Publicly available NFT licence systems, however, definitely
provide a helpful base and framework when drafting NFT licences
and, as a16z states, will set “a starting point
for fostering a trustless NFT licensing ecosystem and encouraging
greater standardization as the space grows.

Footnotes

1. Thorn/Marcantonio/Parker, A
Study of NFT Licenses: Facts & Fictions, available here (status: 23.09.2022).

Galaxy Digital examined the current top
25 most valuable NFT projects. The report was published in the end
of August 2022.

2. “off-chain” refers to being
off the blockchain/not stored on a blockchain. Information provided
“off-chain” can in general be changed freely.

NFTs and their metadata are stored on the
blockchain (thus “on-chain”). “On-chain”
information can in general not be altered (at least not without it
being traceable).

3. a16z explains the
“Can’t be Evil” branding as being a
“riff-off” of Google’s original “Don’t be
evil” mantra, but tweaked the name in order to reflect the
perceived immutability of blockchains: “[CBE] is a guiding
principle in web3 […] arising from a new computational paradigm:
blockchains are computers that can make strong commitments and that
are not controlled by people. In other words, blockchains enable a
new “trustless” version of the internet where users
don’t need to trust one another or rely on centralized services
and corporations to transact.

4. Jennings/Dixon, The Can’t
Be Evil NFT Licenses, available here.

The guidelines or terms and conditions
can be found here (status: 23.09.2022).

5. Jennings/Dixon, The Can’t
Be Evil NFT Licenses, available here.

6. Of course, there are significant
differences between Creative Commons (CC) licences and NFT licences
like CBE, starting with their addressees: CC licences are between a
creator and the public at large. CC licences provide a blanket
licence to the public and anyone can exploit the work
correspondingly to the chosen licence. NFT licences, however, are
between the creator of an NFT and the respective NFT holder.

7. CBE licences have been deployed on
Arweave (a decentralised storage system) ensuring they are stored
in a public way that is also permanent and immutable.

The CantBeEvil.sol contract exposes
getLicenseURI() and getLicenseName() functions in the NFT’s
smart contract that, when called, allows anybody to see what
creative licence applies to the NFT.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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