NFT License Breakdown: Exploring Different Marketplaces and Associated License Issues

Sheppard Mullin Richter & Hampton LLP

Sheppard Mullin Richter & Hampton LLP

[co-author: Molly Tomer*]

At least three different types of marketplaces facilitate the sale and/or resale of NFTs. These include open marketplaces, curated marketplaces and proprietary marketplaces. Other variations do exist, however, and it is likely that other alternatives will be developed. In the attached article, we examine some of the differences between these types of marketplaces and business models, highlight some of the different license terms of these marketplaces and discuss why IP owners who license their IP for NFTs often are best served by developing their own licenses to be used in connection with sale of their NFTs.

The NFT market is just getting started, as the innovation is only in its infancy. Careful consideration of potential, forthcoming legal issues will be necessary as more industries begin to utilize NFTs. As content creators get more creative, as business models change, and as NFTs represent more than static digital art, the licenses will evolve. The attached article explores just a snapshot of some of the licenses and license terms that are currently used. Even with these “basic” NFT license terms, there are many legal issues that may arise. It is likely some of the current licenses will lead to litigation. Companies getting involved with NFTs should definitely think through these and other issues that will arise and work with knowledgeable counsel to get ahead of the issues to come.

*Molly Tomer is a Summer Associate in Sheppard Mullin’s San Diego (Del Mar) office.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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