In recent times, there has been a contentious issue surrounding creator royalties in the NFT market, as leading marketplaces Blur and OpenSea compete to remove creators from the equation. The growing concerns for creator royalties have prompted Animoca Brands to take matters into their own hands, with chairperson Yat Siu at the forefront, advocating for creators’ rights.
In an interview, the chairperson shared his opinion that cutting out royalties from the fee structure of NFT marketplaces insults the creators. Interestingly, as part of its commitment to supporting NFT creator royalties, Animoca Brands has introduced a set of NFT licenses that legally bind creator royalties payments and other conditions.
According to the venture capitalist, royalties for NFT creators are essential to keep the web3 ecosystem healthy and are a critical part of the web3 ethos. Animoca Brands has rolled out a set of three NFT licenses that require the payment of creator royalties as a condition for using the underlying NFT.
The incentive alignment is strong when it comes to royalties & NFT marketplaces. Without them, high entry costs make participation difficult. @ysiu explains how royalties protect NFT projects like @BoredApeYC @coolcats or @Azuki, and benefit all involved:https://t.co/3sq7woX8bw pic.twitter.com/efaVUnjE5Y
— Animoca Brands (@animocabrands) March 2, 2023
The licenses fall under the jurisdiction of New York State Law and lay a clear framework for NFT usage rights for creators and holders with different restrictions and conditions. By signing the agreement, each party agrees to submit itself and its property to the jurisdiction of any New York State court or federal court in New York City.
Each license protects the creator’s trademark, trade name, business name, and logos and prohibits holders from using the licensed NFT artwork for anything that would bring the Creator into disrepute, such as promoting hate, pharmaceutical products, violence, and more. The license also protects the Licensed NFT from being used to violate applicable laws.
While royalty-fee, holders must agree to pay a creator fee or resale royalty for a percentage set by the creator. The license bars holders from selling on marketplaces that do not collect or enforce collector fees and prohibits holders from minting other NFTs using the licensed NFT artwork or using it to compete with the creator.
Despite some similarities in the terms and conditions, there are several differences between the licenses that adhere to the individual use cases. The personal use license grants holders a non-exclusive, non-transferable, and royalty-free license to use the underlying NFT artwork for personal use. On the other hand, the permitted commercial use license allows holders to use the NFT for commercial purposes.
The unlimited-use license is the highest form of the agreement, allowing for unlimited personal use with no monetary limit on commercial use. Holders with this license can use the licensed NFT for all purposes, but they must adhere to the other bylaws of all licenses mentioned above.
It is worth noting that OpenSea recently removed creator royalties for a limited time to compete with Blur’s 2.5% creator royalty fee, while Yuga Labs, creators of the BAYC, received 50 ETH or approximately $80,000 in royalties from the Golden Key Sewer Pass NFT sale.
In the crypto space, NFT licensing and creator royalties are some of the most debated topics. Animoca Brands stepping in and settling the debate with clear-cut guidelines is a significant achievement for the industry. These licenses will serve as a guide and help protect creators and holders from problems.