Mint Conditions: NFT Artist Agreements – Copyright

Legal issues arising from intellectual property-related concerns
have received wide coverage in recent months and, in some cases,
have derailed popular NFT projects. It’s no exaggeration to say
that the success of an NFT project may hinge on how well the NFT
artist agreement is drafted and how well it defines the terms under
which an NFT minter can use any underlying art. This article covers
the main ingredients in a strong NFT artist agreement and some
important points that NFT minters and artists must know to protect
their rights.

Meaning and Importance of an NFT Artist Agreement

An NFT artist agreement is a legal document that outlines the
terms and conditions under which the creator of an original work-a
piece of art, music, consumer good, or another type of intellectual
property-grants certain rights to the minter of an NFT based on
that work in exchange for compensation. Artists very reasonably
seek to protect their work (irrespective of the medium) from
unauthorized reproduction and sale and to participate in their
commercialization. An NFT artist agreement is the equivalent of a
license agreement used in traditional or digital media to say,
produce and sell T-shirts emblazoned with a sports team logo or a
cartoon mouse. It defines the scope of the grant of license in
advance, reducing the likelihood of conflict or disputes between
the NFT minter and the artist. The agreement may be called a
non-fungible token digital art commission contract, commission
agreement for NFT artwork, NFT digital artist commission agreement,
digital art agreement, artist commission agreement, licensing
agreement, or another similar term.

If NFT minters or developers fail to obtain a signed NFT artist
agreement before creating an NFT based on artwork they do not own,
they may be inviting conflicts down the road pertaining to the
underlying asset’s copyright, trademark, or other intellectual
property rights. For example, recently, an art collector has filed a lawsuit before a New York federal
court to clarify rights over celebrated Indian artist M.F.
Husain’s painting, Lightning or The Guernica of India. The art
collector purchased the 60-foot mural and plans to sell NFTs based
on it. The artist’s estate objected, claiming that buying the
painting does not convey the rights necessary to carry out the
plan. Because the purchase agreement makes no mention of NFT
rights, there is no clear way to assess each party’s position
on what actually changed hands when the collector bought the
piece.

Key Provisions in NFT Artist Agreements

A strong, comprehensive NFT artist agreement will delineate the
arrangement’s scope, each party’s rights and obligations,
the working relationship between parties, timelines and deadlines,
copyright ownership, and more:

• Scope of the Agreement
  
  At a minimum, the NFT artist agreement should clearly describe the
  artwork being licensed or purchased, the duration of the license,
  what fee, royalties, or other consideration the artist will receive
  in exchange for signing the contract, and what the licensor is
  allowed to do with the NFTs he or she creates.




• Relationship Between Parties
  
  In many cases, an NFT minter will simply commission artwork from
  artists on a work-for-hire basis. In this scenario, the minter
  would be considered a commissioning agent or commissioning party
  while the artist serves as a contractor who produces a product that
  will be owned by the minter. In other situations, a company might
  use in-house illustrators or graphic artists who produce works to
  be minted into NFTs. In this situation, the employer-employee
  relationship takes precedence. The worker would have no more right
  to the NFT than an assembly line worker to a car she helps build.
  Other cases are not so cut and dry. IP owners and artists may
  engage a third party to produce NFTs based on their owned works and
  display, market, sell, or otherwise leverage them in various
  partnership arrangements. These may include advance payments,
  royalty splits, profit sharing, options, and other sophisticated
  deals best drawn up by an experienced NFT attorney.




• Rights and Obligations
  
  The license should explain any obligations the artist, the NFT
  minter, and any future purchaser of the NFTs created must perform
  and the compensation they will receive. Agreements commonly spell
  out whether the artist is allowed to make physical or digital
  copies of the artwork, license the artwork to other parties, and
  receive royalties for the original and/or subsequent sales of NFTs
  based on the artwork. Similarly, the agreement should stipulate
  whether the minter can retain exclusive rights to the NFT for a
  certain period of time, determine its sale price, or sub-license
  the rights granted. The artist’s obligations may include the
  duty to produce high-quality artwork, deliver it in a timely
  manner, and ensure that the rights of any third party are not
  infringed in its production. The contract should lay out how and
  when the NFT minter will pay the artist and may require attribution
  of the work to the artist or author at all times and maintain the
  spirit of the art and reputation of the artist in any derivative
  works.




• Copyright
  
  Copyright ownership can cause significant issues when not
  sufficiently defined in an NFT artist agreement. The courts have
  decided that copyright to underlying assets does not automatically
  transfer to NFT minters, purchasers, and licensees. The artist
  retains the right to transfer the copyright, grant a license for
  specific purposes, or limit the use of NFTs. If the intent of the
  minter is for the artist to convey any of these rights, it must be
  expressly stated in the NFT artist agreement. If not, the artist
  who created the original artwork retains the copyright.




• Jurisdiction
  
  With NFT legislation still in its infancy and each state and
  country creating regulations and setting precedents within their
  borders, it is recommended that the NFT artist agreement specify
  which jurisdiction will rule should any disagreement arise. Some
  jurisdictions are proving to be sympathetic to NFT minters, while
  others tend to side with artists. The country in which the artist
  lives or the licensing company is incorporated may play a role,
  giving one side a “home field advantage.”




• Liability
  
  Since the rules surrounding NFTs are still evolving, it is
  important for the NFT artist agreement to include a clause laying
  out the consequences each party will face should they fail to
  deliver on their obligations. These consequences should take into
  account that the failure may be the result of forces beyond their
  control. For example, a jurisdiction may pass new regulatory
  controls that make minting NFTs more difficult or even illegal;
  natural disasters may destroy the means for creating the artwork or
  minting the NFT.

Any business or individual intending to create, sell, mint, or
develop NFTs should always protect their rights and clarify their
responsibilities by creating and entering into an NFT artist
agreement with their artist partners. It is best to hire an
attorney experienced in NFTs and contract law to draft the NFT
artist agreement as they can be complex documents. It is important
to note that many NFT artist agreements fail to adequately
safeguard the interests of both parties, as they are drafted either
by artist advocacy groups or NFT minter proponents.

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.