A guide to Non-Fungible Tokens (NFTs), 2023 - Flipbook - Page 20
Transfer and sale of IP rights in the underlying asset
As set out in Creation, where the “minter” of the NFT is not the current owner
of the underlying asset embodied in the NFT, care should be taken to establish
the identity of the owner of any IP rights in the underlying asset of the NFT and
to ensure that consent is obtained. A due diligence process can and should
be undertaken here. In any due diligence review, the buyer should consider, in
relation to the asset underlying the NFT:
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Whether the minter or seller is the IP rights owner.
If not, whether the IP-rights owner has licensed the minter or seller to use
the IP rights.
How to ensure protection, if at all, from the possibility that the minter or
seller is not validly licensed to mint or sell the NFT.
How to ensure protection from reuse of the underlying asset to create
other NFTs and otherwise. This is a critical and often overlooked point as,
while the token part of an NFT is non-fungible, the asset the token points to
is not and could be used as the basis for future NFTs.
All of the above points can be dealt with either before purchase as a due
diligence review, or by protection within a contract for sale. See Smart contracts
for details of use of a hybrid contract incorporating non-smart terms such as
these.
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