NFTs and IP: Navigating Ownership Rights in Digital Art

The rise of NFTs introduced new questions about ownership and intellectual property (IP). When you buy an NFT, you usually obtain a token that points to an artwork, but what legal rights transfer, and what remains with the creator? This article demystifies copyright, licensing, royalties, and practical advice for buyers and artists to avoid common pitfalls.

Token ownership vs copyright ownership

Buying an NFT typically conveys ownership of a token on a blockchain, which serves as proof of provenance and possession. However, the purchase does not automatically include copyright, unless explicitly stated in the sale terms. Copyright is a legal bundle of rights controlled by the creator unless transferred through an explicit written agreement.

Common licensing models in NFT sales

• Personal use license: Buyers may receive rights to display the artwork privately or on personal profiles, but not commercial use.
• Commercial license: Includes rights to reproduce and monetize the artwork—less common unless priced accordingly.
• Limited-transfer license: Grants specific uses for a limited time or within defined channels (e.g., merchandising for a set number of items).
• Creator retained copyright: The creator keeps copyright and may license derivative rights selectively.

"Clarity in licensing is the single most important element to maintain trust between creators and collectors." — Legal advisor specializing in digital art.

Creator royalties and enforcement

Many marketplaces implement on-chain royalty standards (e.g., creator receives a percentage on secondary sales). While marketplaces can honor these, enforcement off-market can be challenging. If a secondary market doesn't implement royalty logic, creators might not receive their cut unless rights are contractually enforced outside the marketplace.

Derivative works and collective IP

Derivative creation (e.g., remixes, fan art) often sits in a gray zone. Some creators grant explicit permission for derivatives or set terms in licensing text attached to the token metadata. Without clarity, derivative creators risk copyright claims. Projects that want community participation often adopt permissive licenses or dual licensing schemes to encourage remix culture.

Best practices for buyers

1. Read the license attached to the NFT carefully and check token metadata for URL links to terms.
2. Verify where and how royalties are enforced; trust but verify marketplace practices.
3. For commercial use, obtain explicit written permission or a commercial license from the creator.
4. Preserve provenance evidence: keep transaction receipts and metadata snapshots.

Best practices for creators

• Publish clear, accessible licensing terms linked in the metadata and on your project site.
• Consider smart contract-level royalty logic and legal contracts for high-value sales.
• Use recognized licenses when appropriate (Creative Commons variants, custom commercial licenses) and make derivative rules explicit.
• Document authorship and maintain copies of original work to defend copyright if necessary.

Special cases: fractionalized NFTs and DAOs

Fractionalization and DAO ownership can complicate IP ownership. If an artwork is fractionally owned, governance rules should specify how licensing income or commercialization decisions are made to avoid disputes between token holders and creators.

Legal landscape and jurisdictional differences

IP law varies by jurisdiction. Some countries have more explicit moral rights that cannot be waived, while others allow full copyright assignment. Both creators and buyers should consult legal counsel for high-value transactions, especially cross-border deals.

Conclusion

NFT ownership is a hybrid of technical proof and legal rights. The token proves provenance; the license determines legal rights. Clarity and transparency in licensing are essential to maintain a healthy marketplace. Whether you're a collector or an artist, make licensing terms explicit, document agreements, and seek legal counsel for complex transactions.

Action item: Next time you consider an NFT purchase, pause and read the licensing section. If you need commercial rights, contact the creator and get a written license before using the work commercially.