It would seem somewhat foolish,
at least to this lawyer, to outlay
significant amounts of money
on NFTs without an agreement
with the seller that sets out:
1. What the buyer can, and can’t
do, with the underlying digital
asset, including in relation to the
intellectual property rights and
commercialising the work;
2. If the licence is for a fixed term,
what happens upon the expiration
of that term particularly where
the licence permits for derivative
works to be created or products
created incorporating the work;
3. Who is responsible for the
maintenance, security and
protection of any webpage or
URL where the digital art is stored,
including, but not limited to, the
hardware and payment of any fees
associated with the webpage;
4. Liability and indemnity provisions
to allocate risk between the buyer
and the seller; and
5. Representations and warranties as
to the ownership of the underlying
work, noting that the risk of fraud
is rife with NFTs.

NFTs give us an
insight into the direction
that the digital economy
may be headed and
provide new business
models for artists
to exploit their
intellectual property.

Licenses are a critical part of
everyday business for many
organisations, artists and creatives.

There have been a few attempts at
NFT licenses including one by Dapper
Labs, the creators of CryptoKitties,
however these licenses largely deal
with intellectual property issues by
trying to balance the rights between
the copyright owner and the licensee,
rather than the risks associated with
the potentially ephemeral nature of
the storage. It can be challenging to
document all the necessary rights,
responsibilities and obligations in any
copyright license agreement – even
where the subject matter is generally
understood, let alone when you have
a digital work stored ‘off-chain’.

Whilst NFTs may have some issues
that need to be addressed, they
should be considered as more than
merely a passing fad. NFTs give us
an insight into the direction that the
digital economy may be headed and
provide new business models for
artists to exploit their intellectual
property. Whilst the technology
isn’t quite there yet, NFTs provide
the possibility that in the future
intellectual property owners
could use the blockchain ledger
technology, smart contracting and
carefully drafted agreements to
have greater control over how their
creative works are used and to
benefit financially from such use.

Inspire June 2021
Should NFTs come
with contracts, smart
or otherwise?
7 Melissa Wingard | Special Counsel
BA(Eng&Hist) LLB(Hons) GradDipLegPrac
GradDipAppFin&Inv MCyberSecOps
melissa.wingard@pof.com.au