“You bought an NFT of a digital artwork for $50,000. But when you checked the fine print, you realized you don’t actually own the copyright—you just own a receipt on the blockchain.”
The NFT boom created massive confusion about ownership and copyright. Many NFT buyers think they own exclusive rights to the underlying digital asset. Many creators mistakenly give away copyrights when they mint NFTs. Both are expensive mistakes.
NFT copyright and digital asset copyright are fundamentally separate from blockchain ownership. You can own the NFT token (the certificate) without owning the intellectual property (the creative work). The smart contract is not a legal contract—it’s just code.
This guide explains what you actually own when you buy or create an NFT, what copyright rights exist in the blockchain space, how to license digital assets, and how to avoid disputes that can cost thousands in legal fees.
1. The Difference Between NFT Ownership & Copyright
This is the most critical distinction in NFT law. An NFT is a blockchain token proving ownership of a digital asset. But ownership of the token is NOT the same as ownership of the copyright.
What You Own (NFT/Token)
- A unique blockchain token (the NFT itself)
- The right to transfer or sell that token
- Proof of ownership (recorded on-chain)
- Access to the digital asset (depending on the smart contract)
What You May NOT Own (Unless Explicitly Granted)
- The copyright to the underlying work
- The right to reproduce or create derivatives
- The right to commercialize or license the asset
- The right to remove the original creator’s attribution
The Smart Contract Is Not a Legal Contract
Many NFT creators include terms in the metadata or IPFS files attached to the NFT (e.g., “CC0” or “All commercial rights granted”). While well-intentioned, these are not legally binding documents. A blockchain-based smart contract cannot override copyright law. You still need a proper legal agreement for any transfer of intellectual property rights.
2. What Rights Come With an NFT Purchase?
Rights vary widely depending on what the creator intended. This should be documented in a proper legal agreement, but it rarely is.
| Right | NFT Holder | Creator | Status |
|---|---|---|---|
| Display (Personal) | ✓ Yes | ✓ Yes | Almost always granted to NFT holder |
| Reproduce/Copy | ✗ No (Usually) | ✓ Yes | Creator retains unless explicitly transferred |
| Commercial Use | ✗ No (Usually) | ✓ Yes | Creator retains unless explicitly transferred |
| Create Derivatives | ✗ No (Usually) | ✓ Yes | Creator retains unless explicitly transferred |
| Sell/Transfer NFT | ✓ Yes | ✗ No (unless resale agreement) | NFT holder owns the token itself |
| Collect Royalties | ✗ No | ✓ Yes | Creator collects via on-chain royalties (if programmed) |
Common NFT License Models
Limited Personal Use Only
NFT holder can display the artwork personally (on their profile, in collections) but cannot commercialize, license, or create derivatives.
Typical For: Art NFTs, collectibles.
CC0 (Creative Commons Zero)
Creator waives all rights and releases the work into the public domain. Anyone can use, modify, and commercialize.
Typical For: Pfp (profile picture) projects like Pudgy Penguins, Milady.
Limited Commercial Rights
NFT holder can use the artwork commercially (merchandise, licensing) up to a capped amount (e.g., “up to $50,000 in annual revenue”).
Typical For: Mid-market NFTs, IP-focused collections.
Full Rights Transfer
Creator transfers complete copyright ownership to the NFT holder. The holder becomes the copyright owner.
Typical For: Rare, high-value purchases (six figures+).
3. Copyright Disputes in NFTs
The NFT space is still legally ambiguous, making disputes common. Here are the most frequent copyright problems.
Dispute #1: Stolen Artwork Minted as NFTsA bad actor mints someone else’s digital art as an NFT without permission. The original artist discovers it and demands takedown. The NFT marketplace (OpenSea, Rarible) may remove the listing, but the blockchain record remains. The dispute lands in court.
Legal Reality: Creating an NFT does not grant ownership. Minting stolen art is copyright infringement. The original creator owns the copyright, and the NFT has no legal standing.
Dispute #2: Ambiguous Rights ClausesA creator writes vague terms in the NFT metadata (e.g., “derivatives allowed”). Later, the holder creates merchandise and sells it. The creator sues. Both claim different interpretations of the metadata.
Legal Reality: Metadata is not a legal contract. Courts will look for a signed agreement. Without one, the default copyright law applies: the creator owns all rights unless explicitly transferred.
Dispute #3: Resale Royalties Not PaidAn NFT smart contract includes a 10% royalty to the creator on secondary sales. A buyer sells the NFT on a marketplace that doesn’t enforce royalties (like LooksRare or X2Y2). Creator doesn’t get paid.
Legal Reality: On-chain royalties are not legally enforceable. If the marketplace ignores them, the creator has no legal recourse (yet). Courts are still deciding whether royalties can be legally binding in Web3.
Dispute #4: Unlicensed Brand Use in NFTsA creator launches an NFT collection featuring recognizable characters or brands (Batman, Nike logos) without permission from the rights holders.
Legal Reality: The trademark/copyright holders can sue for infringement. Being “decentralized” or “on blockchain” offers no legal protection. The blockchain does not grant IP rights.
Dispute #5: Smart Contract Royalty Wording ConflictsA creator uses royalty code that conflicts with the marketplace’s royalty system or the license agreement. The contracts say different things. Payments get stuck or go to the wrong party.
Legal Reality: The smart contract code is not a substitute for clear legal documentation. If there is ambiguity, courts default to the written legal agreement (if one exists) or copyright law.
4. Creating & Minting NFTs Legally
Step 1: Ensure You Own the Underlying Asset
Before minting an NFT, you must own the copyright or have explicit permission from the copyright holder. Common mistakes:
- Using AI-generated art without understanding AI copyright liability.
- Using photos, music, or artwork from online without permission (even Creative Commons requires attribution).
- Minting collaborations without written agreements on rights ownership.
Step 2: Define Rights in a Written Agreement
Create a clear legal document specifying what rights the NFT buyer will receive:
- Personal display rights (always included).
- Commercial use rights (if any).
- Derivative rights (if any).
- Royalty terms (on-chain and legal binding).
Step 3: Include Proper Metadata/Documentation
While smart contracts are not legal contracts, include clear terms in your NFT description, terms of use document, or on your website. Reference the legal agreement.
Step 4: Consider On-Chain Royalties
Modern NFT contracts can include programmable royalties (e.g., 10% to creator on secondary sales). While not legally enforceable yet, they signal your intent and benefit buyers who use royalty-respecting marketplaces.
Step 5: Use Established Platforms
Mint on reputable platforms (OpenSea, Foundation, SuperRare) that have legal frameworks and DMCA takedown procedures. Avoid sketchy or unverified platforms.
5. NFT Licensing Best Practices
Use Existing License Templates
Adapt Creative Commons, CC0, or commercial licenses to NFT context. Be explicit about what rights transfer with the NFT.
Create a Separate Terms of Service
Publish clear terms on your website defining NFT ownership, rights granted, and restrictions. Reference this in the NFT metadata.
For Commercial NFTs, Cap Usage
If allowing commercial use, specify limits: “Commercial use allowed up to $100,000 in annual revenue” or “Limited to merchandise only.”
Be Clear About Resale Royalties
Clearly state whether resale royalties are programmed on-chain and which marketplaces enforce them. Set realistic expectations.
6. Red Flags in NFT Copyright Deals
Red Flag #1: “Smart Contract Rights Are Legally Binding.”They’re not. A smart contract is code, not a legal document. Courts will interpret copyright disputes based on written agreements and copyright law, not blockchain code.
Red Flag #2: Minting Without Proof of Ownership.If you are not the original creator or do not have written permission, minting is copyright infringement. Being on blockchain does not change this.
Red Flag #3: “CC0 Means I Can Use It Commercially Forever.”CC0 is one-way. Once the creator releases under CC0, you can use it, but be aware that the creator no longer has control. Disputes can still arise if branding or attribution is misused.
Red Flag #4: No Written Agreement, Just Metadata.Metadata is not sufficient for transferring copyright. Courts require signed, written agreements to interpret IP transfers. Metadata may support your case, but it is not a substitute.
Red Flag #5: Resale Royalties Not Programmed into Smart Contract.If you want guaranteed royalties on secondary sales, you must program them into the smart contract. Relying on marketplace “good faith” royalties is risky.
Red Flag #6: Using Recognizable Brands or Characters Without Permission.NFTs featuring Batman, Miley Cyrus, or Nike logos without permission are trademark/copyright infringement. The blockchain offers no protection.
7. NFT Creator Agreements & Royalty Structures
Standard Royalty Models
- No Royalties: Creator receives only the initial sale price. Secondary sales go entirely to the holder. (Common for low-value NFTs)
- Fixed Percentage: Creator receives X% of every secondary sale (e.g., 10%). This is programmed on-chain. (Most common for art NFTs)
- Tiered Royalties: Royalty percentage decreases as the NFT sells for more. (Example: 10% if sold under $10k, 5% if sold $10k-$100k, 2% above $100k)
- No Secondary Market (Locked): The NFT cannot be resold. Only the original purchase benefits the creator. (Rare, for exclusive access)
Important Considerations
Marketplace Enforcement: On-chain royalties are only enforced by certain “royalty-respecting” marketplaces. OpenSea now requires creator signatures and many other platforms (LooksRare, X2Y2) allow buyers to skip royalties entirely. There is no universal enforcement.
Legal Recourse: If a buyer sells on a non-respecting marketplace and the creator misses royalties, current law does not offer a clear remedy. This is still evolving.
Future Trends: Some jurisdictions are considering “inalienable resale rights” for creators, inspired by droit du suite (resale rights) in traditional art.
8. FAQ: NFT & Digital Asset Copyright
Protect Yourself in Web3
NFT copyright is still developing legally. The blockchain is a perfect record-keeping tool, but it is not a substitute for copyright law. Courts will decide disputes based on traditional IP law, not smart contract code.
For creators: Document your rights carefully. Write clear license terms. Mint only original or properly licensed work. Program royalties into smart contracts and know which marketplaces enforce them.
For buyers: Understand what you are actually getting. The NFT is a token; the copyright is separate. Read the creator’s terms before purchasing. If you plan to commercialize the artwork, negotiate explicit rights.
The future of NFTs and IP is promising, but only if creators and collectors treat copyright seriously. Blockchain transparency is valuable, but it cannot override copyright law. Get it in writing.