IMGL Magazine April 2022

NFTs and virtual digital assets

A vision of the metaverse

the transfer of certain rights in the Works to the purchaser. Some developers may want to retain ownership of all intellectual property and allied rights in the Works. In such a case, while offering the Works for purchase via NFTs, the developer can offer a limited license over the Works to the player. The player can be allowed to use the Works for a pre-determined purpose. For instance, French video game publisher Ubisoft Entertainment carves out serially numbered helmets and other in-game cosmetics as a progression reward in their game Tom Clancy’s Ghost Recon Breakpoint. Players who acquire NFTs for the helmets can use them in-game or trade them on third-party marketplaces. In its Terms of Use, Ubisoft expressly clarifies that the ownership in the visual representation of the ‘Digit’ (being the underlying asset), lies with Ubisoft and the player has a limited, non-exclusive, worldwide, revocable license to access, perform and display the visual representation of the Digit for the aforesaid purposes of using in-game or trading on third party platforms. The distinction of rights between the developer and players purchasing NFTs is not so straightforward in cases where such players are allowed to create derivative works from the Works. Take the example of games such as Axie

Infinity which allow players to breed new characters on the basis of the original characters they have purchased/earned in the game 3 . In case of a license, the intellectual property (“IP”) in the original characters created and minted by the developer can be argued to be owned by the developer being the author of such works. However, if the developer wishes to claim ownership of IP in the player- bred characters as well, it is prudent expressly to clarify the same in the terms of the license. In its terms, the developer may want to establish that although the player’s license extends to using the original characters for creating/breeding new characters (derivative works), the developer owns all IP in the original as well as the proposed derivative work, i.e., the player-bred characters, and the player only has the license to use and/or trade the derivative work for stipulated purposes. In conclusion, whatever the model for integrating NFTs maybe, whether on an ownership or license basis, the details must be clarified within the terms of use. If the Works are only being licensed, the terms of the license must specify the purposes for which the player can utilize the Works, such as whether the Works can be used for personal or commercial purposes, limited to in-game use, etc. There can even be prohibitions or restrictions on certain activities such as

3 Axie Infinity incorporates the playable characters themselves as digital assets to be purchased as NFTs. These characters can be purchased and traded on Axie’s owned and controlled marketplace with cryptocurrency earned as progression-based rewards. Cryptocurrencies can in turn be used for multiplying or ‘breed- ing’ these playable characters into new character NFTs or traded on crypto exchanges in return for real-world fiat currencies.

52 • IMGL Magazine • April 2022

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