New NFT secondary sales and distribution platforms are requiring a rewrite of standard licensing agreements to reflect new terms. The big difference in the agreements are the royalties secondary sales, a clause not included in standard agreements that are based on the initial transaction only.
And the cost and responsibility of ensuring that an NFT remains operational and available on the blockchain, especially after the token is sold. Whether this responsibility falls on the needs of the licensor and licensees is defined by the contract. This is something that does not exist in standard agreements.
Pam Deese, a partner at Fox, commented a little about the new direction of the NFTs, check it out:
“There has to be a willingness on who keeps the NFT after it’s sold and what happens after a license is terminated. If someone buys an NFT, but the agreement doesn’t discuss preference for it, that customer may have bought something that when they open it on the blockchain there won’t be anything there.”
IP trades
How much IP a licensee has access to NFTs, like any licensing agreement, is a matter of negotiation. Many of the contracts have typical terms of 2-3 years, protect against forgery and have termination clauses.
However, what is unique may be the size of the minimum guarantees (MGs), which in some cases extend to “figures,” says Jed Ferdinand, Partner at Ferdinand IP Law Group. But when an NFT drop can generate “eight-digits” of revenue, MGs aren’t much of a problem, says Ferdinand.
“Like any other deal, the licensee would like to have an entire catalog and I’ve cut and cut the contracts into different drops,” says a film studio lawyer. “Hope is always green for sure and the platform will shake them so that they are not an offs, but a drop that almost leads to the next one. But there have been many unsuccessful downfalls of the NFT because they are not well thought out or planned. My experience is that you need to have successful content and market it very well to the right cryptocurrency buyers and collectors. “
Limited edition
For example, for the limited edition, single NFTs typically charge a higher price. A Limited Edition Disney Golden Moments collection from NFT developer VeVe, featuring 4,333 Disney Plus character and icon tokens, sold for $333 each. In this case, a 6% licensor fee was applied to Disney’s secondary market sales in addition to VeVe’s existing 2.5% fee.
In the event that the licensee provides marketing and other promotional services for the limited edition, it may receive 50-70% of the revenue from the initial sale, says Ferdinand. But when an NFT developer also handles marketing, the licensor’s share can drop to 20%, says Trevor George.
Trevor is a co-founder of NFT developer Recur, which signed a licensing agreement with Nickelodeon last fall and is expected to release NFTs in the spring. In secondary sales, those in which a token is resold, the number drops to 10%, says George.
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