Yes, You Need An NFT Artist Contract! – Trademark

In the relatively new frontier of non-fungible tokens, or
“NFTs,” carefully drafted contracts with
artists are essential to protecting any NFT collection. NFTs are
crypto assets with identifying codes that make them unique. Each
NFT is made up primarily of two parts: its digital representation,
normally in the form of artwork, and its coded identification on a
blockchain. Most NFT projects are the result of a healthy collaboration between a coding expert and an
artist. Because digital representation is so important to an
NFT’s creation, sale, and retention of rights conferred, it is
important that creators spend adequate time on the underlying NFT
artist contract. The failure to carefully craft an NFT artist
agreement can not only lead to the artist’s detriment, but also
open the entire NFT project to risks, such as intellectual property
piracy and outright theft.

Piracy and Theft in the World of NFTs

One of the main traits of NFTs that attracts buyers is that they
allow owners verifiable, exclusive ownership over the assets.
Ironically, piracy and theft run rampant in the world of NFTs, due to
the fact that adequate protections and regulations are still
developing in this relatively new market. While a foundation built
upon digital artwork allows greater entry to artists of all
proficiencies and geographies, it creates an innumerable number of
opportunities for bad actors to strike as well. For example, this
past June, the creators of Goblinass.town NFTs discovered that
their entire collection of 8,888 unique Goblin Asses had been
copied and posted as a separate collection for sale on the OpenSea
marketplace. While OpenSea has its own authenticity safeguards, they are not always adequate. For
starters, the speed at which transactions are executed through the
platform allows hijackers to sell a large amount of their illicit
collections before their ploy is discovered and shut down.
Therefore, it is up to the NFT project’s creators, the coders
and the artists, to do all that they can to protect themselves on
the front end. In the case of Globinass.town, one major shortcoming
was that the collection’s creators failed to copyright protect
their artwork. As a result, they were unable to file a Digital
Millennium Copyright Act (“DMCA”) takedown request.

Protecting NFT Artwork Through NFT Artist Contracts

The coder/minter and an artist are the foundation of every NFT
project. Usually, they enter into a work-for-hire agreement. In a
typical NFT work-for-hire arrangement, the artist, or independent
contractor, grants the coder/minter ownership (or exclusive
license) in and to his/her artwork as a digital representation of
each NFT in the prospective collection. This arrangement must be
carefully memorialized in the form of a contract before the artwork
is created. The NFT artist contract should include, among other
things, the following: 1) services to be performed by the
independent contractor, 2) compensation, 3) legal ramifications of
the “work-for-hire” relationship, 4) length of the
agreement, and 5) limitations of liability. Key provisions of any
NFT artist contract should also include a description of the
minter’s authority to obtain copyright and trademark rights in
and to the underlying artwork. If these intellectual property
rights are not clearly delineated in the NFT artist agreement,
among other shortcomings, the project’s creators will not be
able to take quick and decisive action in the event of piracy or
theft.

What Can You Do to Protect Your NFT Collection?

If you plan to develop an NFT collection of your own, make sure
that your intellectual property is protected. Not only is the NFT
landscape rapidly changing, but the provisions contained in
comprehensive NFT artist agreements are also very nuanced and
complicated. Given the foregoing, it is important that you consult
with attorneys experienced in the NFT space when preparing NFT
artist contracts.

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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.