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NFT Agreements Require Specific Terms

As non-fungible tokens (NFTs) become a new type of collectible, consider terms to include in transactional documents relating to NFTs.

An NFT is the data string that identifies a particular digitized file. The content of the file may be an image, video or sound recording. The NFT verifies ownership only of the particular digital image; it does not include the copyright, right to reproduce the digitized file or the original work of art from which the digital file is derived. It is similar to a certificate of ownership and authenticity of a painted canvas.

An agreement dealing with NFTs should consider who owns the original work and the specific digital image to which the NFT relates, and if there is a limit on how many digital copies and NFTs can be created from the original. Also, determine whether the copyright in the original work is granted with the NFT and what rights the NFT owner may have to copy the image.

For any NFT, safeguard all passwords and logins and consider who in the corporate structure should have access to them.

If marketing the NFT is part an arrangement, include a grant of name, image and likeness of the artist and be specific about other benefits that may be available to the NFT owner. Consider what channels or sales outlets are used for marketing, who determines pricing, what controls exist over resale, and what royalties are paid to the artist. If any owner will receive royalties for downstream transfers, have the agreement remain active to receive and distribute downstream royalties.


Ned T. Himmelrich
410-576-4171 •