Reflections of an IP lawyer on BAYC’s revolutionary NFT license
Yuga Labs was one of the first NFT projects to popularize issuing an IP license that grants commercial rights to NFT holders – first with Bored Ape Yacht Club, and then with CryptoPunks and Meebits. Leveraging the rights granted to them by Yuga, BAYC holders have launched restaurants, digital comics, food trucks, video games, hot sauce brands, music labels, production companies, and more.
As a longtime copyright and IP lawyer who has worked closely with Yuga and other top NFT projects in the industry, I get a lot of questions and, unfortunately, see much confusion, about NFTs and their associated IP. Recently, reports surrounding a trademark infringement lawsuit brought by Yuga have raised questions about the ownership rights that are granted to BAYC holders. Some have gone so far as to suggest that Yuga’s grant of the IP license to holders is invalid because, they argue, Yuga does not own the copyright in the BAYC artwork. They’re mistaken.
I’m here to explain why and help demystify the IP rights holders get with their BAYC NFTs. Let’s dig in.
Yuga Labs Owns the Copyright in the Bored Ape Yacht Club
Let’s deal with the copyright issue first.
Of course Yuga owns the copyright in their artwork. “The sine qua non of copyright is originality,” and the “requisite level of creativity is extremely low.” I don’t think it’s debatable whether the BAYC artwork “possesses at least some minimal degree of creativity.” If a simple fabric of stars and clouds or a logo of a boat made up of basic geometric shapes are sufficiently original and creative for copyright protection, then surely the motley crew of grungy, adorned, and Bored Apes easily pass the “extremely low” threshold.
Copyright also requires human authorship. It’s true that, like most PFP projects, part of the creative process for the BAYC artwork involved the use of a script custom designed for Yuga to mix and match traits. However, in the case of BAYC, humans performed the “lion’s share” of the work and ignited the project’s “creative spark.”
The BAYC artwork was conceived not by generative AI, but by Yuga’s artists who, like all digital artists, used computer tools to help them. Humans used their imagination and hands to conceptualize and develop the entire collection, design each individual base layer, trait, and accessory, arrange those elements to create the characters, and iterate repeatedly until they were satisfied with the finished product.
What is not needed for copyright ownership is a copyright registration. Copyright arises automatically the moment an original work of authorship is fixed in a tangible medium of expression, which includes digital art stored in computer memory. Registration is an administrative process run by the U.S. Library of Congress and – this’ll be a shocker – the government-run registration system isn’t exactly up to speed with 10k PFP projects. While obtaining a copyright registration has benefits, it is not a condition of copyright ownership and hasn’t been in the U.S. for nearly 50 years. Indeed, only an infinitesimally small percentage of copyrightable works in the world are ever submitted for registration.
In short, Yuga, like all creators, owns the copyright in their artwork regardless of whether they went through the administrative slog of registration.
Ape Holders Own Their Digital Artwork + A Broad License to Exploit Their Digital Artwork
As the copyright owner of the BAYC artwork, Yuga holds the exclusive right to use and authorize others to use these works of authorship.
Through the holy trinity of NFTs, digital artwork, and a license, Yuga exercised its copyright by conveying to BAYC holders two separate property rights, as further explained below: (1) ownership of the digital artwork (i.e., the image depicted by the “JPEG” or other image file), and (2) a broad license to exploit that digital artwork. These two categories are features of copyright law, which establishes a simple but essential distinction between “ownership of a copyright,” on the one hand, and “ownership of any material object in which the work is embodied,” on the other. Thus, for example, if an artist creates a painting and sells it to a collector, the collector will own the painting, but the artist will still own the copyright in the painting. The copyright and the material object are separate and distinct property rights. A BAYC NFT gives you rights in both.
(1) Digital Artwork. Owning a BAYC NFT is the equivalent of owning the “material object” of the digital artwork, as I’ve previously laid out. It’s like owning a physical painting signed by the artist, except the painting is a digital file and the signature – the proof of authenticity – is the NFT provably minted by the official smart contract. When the BAYC Terms say “you own the underlying Bored Ape, the Art, completely,” that’s what they’re talking about. You are the owner of the unique piece of digital art associated with your NFT. Note that ownership of the digital art is separate and distinct from ownership of any copyright interest in the art–that comes from the rights granted by the license, discussed next.
(2) Commercial License. Ordinarily, when you purchase a piece of art or a collectible, your purchase doesn’t come with any IP rights other than the rights to display and sell it. One of the great innovations of the NFT art industry, which Yuga helped pioneer with the BAYC license, was giving purchasers an IP license that allows and encourages them to use their artwork for commercial purposes. Make no mistake about it: the rights granted under the BAYC license are a form of IP ownership and functionally equivalent to owning the copyright itself (though Yuga remains the copyright owner/licensor). While Yuga’s newer CryptoPunks license is more detailed, including by expressly stating that the grant of rights is “exclusive” (it’s implied by the BAYC license), the spirit of the two licenses is the same. Holders may use their Apes for commercial purposes, including to make money and create new projects based on their BAYC artwork, subject only to a handful of restrictions.
In sum, Yuga Labs owns the copyright in the digital artwork associated with BAYC NFTs and grants the holders of BAYC NFTs ownership of the digital artwork and a license to use the artwork for commercial and other purposes.
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Hopefully, this post sheds some light on the complex issues arising at the intersection of IP and NFTs and helps clarify once and for all the IP rights that holders get with their BAYC NFTs.
Jeremy S. Goldman co-chairs the Blockchain Technology group of Frankfurt Kurnit Klein + Selz PC, where he has been litigating cases and counseling clients on novel issues at the intersection of intellectual property and technology for 15 years. Jeremy is recognized as an “IP NFT Pioneer” and represents some of the top NFT project creators and platforms.
(This blog has been republished, the original is on Jeremy Goldman’s law firm’s blog).