Company: EU-based project designing and offering for sale NFTs worldwide
Industry: Digital Art and Collections
Design, preparation and drafting of a Bespoke NFT Commercial Agreement
A newly formed EU based project – in conjunction with a fine art artist – has created and designed a number of digital art collectables on the Ethereum blockchain, generated from a number of hand drawn traits and original illustrations.
The client required a comprehensive commercial agreement dealing with the revenue opportunities and intellectual property rights in connection with their NFT Project including:
- advice in respect of regulation that could potentially affect elements of the project;
- specialist documentation in order to comply with relevant regulation;
- and bespoke agreements to, amongst other things, secure and protect intellectual property rights, revenue and royalties, moral rights, confidentiality, and restrictive covenants.
In addition, the client needed a professional team of legal experts, with comprehensive experience and understanding of intellectual property and commercial matters, to take a pragmatic approach to supporting the business operate within minimal regulator requirements.
Of high importance and value was the availability and flexibility of the team in response to the needs of the client and the ever-evolving landscape of the NFT sector.
It was important to listen to and understand the client’s main project objectives and how each may be influenced by regulation, taking account of the client’s preferred outcome(s) and deadlines.
Matters arising in connection with preferred legal and tax-efficient jurisdiction required assessment before agreeing on a course of action. It was essential to undertake a timely and thorough review of the client’s project aims in order to advise the client and enable them to make informed decisions in identifying which project matters could progress immediately, and which required regulatory approval.
A number of challenges were overcome in the successful design, preparation and drafting of the client’s bespoke NFT agreement including:
- assessing the project particulars and white paper to assess regulatory requirements;
- balancing the aims of the project with minimal regulatory compliance;
- identifying those elements of the project that could progress imminently with minimal or without requiring regulatory compliance to meet the intended NFT Drop;
- ensuring the intellectual property rights were assigned without conflict or otherwise encumbered by the artist’s moral rights;
- enabling the artist to undertake non-related work without conflict and maintaining the integrity of the project;
- navigating jurisdiction and tax considerations.
Upon conclusion of the project, the client:
- understood which elements of its project could progress imminently to meet its intended NFT Drop;
- identified which elements of its project required regulatory approval along with timescales;
- assessed appropriate legal and tax jurisdictions that would affect the project;
- obtained legal documentation to support its Smart contract;
- secured the necessary intellectual property rights in advance of the NFT Drop; and
- obtained a suite of legal documents enabling it to promote and sell the NFTs.
Navigating the uncharted legal territory of NFTs…
Even in a dynamic, creative new technological space, the law plays a critical role. Having worked with many new and established businesses in connection with intellectual property, software and commercial matters – including supporting those organisations operating within new market sectors, or within innovative technology – I understand the importance of due diligence in creating viable businesses around NFTs:
- Use an experienced and qualified lawyer to advise you in connection with jurisdiction, regulatory, and intellectual property rights as early as possible;
- Use an experienced advisor in connection with taxation as early as possible;
- Consider risks to your business and not only appreciate what could go wrong, but how to avoid or mitigate against possible situations;
- Consider appropriate registration of intellectual property rights;
- Poor and ineffective commercial contracts will adversely affect your business, and in particular ownership of intellectual property, licensing rights, and revenue opportunities;
- Suitable and comprehensive IP and contract advice will enable you to quickly and effectively manage potential disputes and enhance your profitability with less distraction to your business, as well as helping you to reduce future costs and risk.
NFTs haven’t created a totally new intellectual property regime, however much of the legal landscape remains unchartered. If you need help in navigating this emergent space, I can offer expert legal guidance.
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