The CryptoPunks owners got a new EXCLUSIVE license with full commercial rights, including the ability to trademark. But no hate speech, class actions allowed. Is the new license valid? Probably.

  • The big news this week is that owners of the CryptoPunks finally received a new license granting them full commercial IP rights with no limit (the last limit was $100,000 annually of commercialization of CryptoPunks). As you may recall, the CryptoPunks NFTs were first issued in 2017 without any content license.

TIMELINE of CryptoPunks licenses

  • June 23, 2017: Larva Labs launched CryptoPunks without IP licenses.
  • May 17, 2019: John Watkinson, co-founder of Larva Labs, told CryptoPunks owners on Discord that company is adopting the open-source NFT License (originally for CryptoKitties) for the CryptoPunks. Commercialization of CryptoPunks for each owner is capped at $100,000. [Check out my essay on how this occurred.]
  • August 17, 2022: After Yuga Labs shockingly acquired the IP rights to CryptoPunks from Larva Labs, Yuga Labs posts a new license for CryptoPunks owners giving full commercialization rights with no cap. Plus, CryptoPunks owners can file their own trademarks based on commercialization of their CryptoPunks through actual use (no intent to use trademark applications allowed).

Is the CryptoPunks license any good for owners?

  • Initially, I was struck by how complex the CryptoPunks license is. It’s 3,768 words! That’s more than double the NFT license (1,591 words). And it’s more than 6 times the length of the Bored Ape license (562 words). Yuga Labs has lawyered up.
  • After having time to review the complicated CryptoPunks license, I think it’s GREAT for the owners. It’s even better than the Bored Ape license. Here’s why.
  • DISCLAIMER: This is not legal advice. My analysis is for academic research on the growing development of Decentralized Collaboration licenses.

What CryptoPunks owners get under the license

  • Full IP commercialization rights for their CryptoPunks character/artwork; but must use entire artwork, can’t extract elements from the artwork. No cap on revenues. Owners keep all profits.
  • Exclusive license: WOW. Owners are getting an exclusive license to their CryptoPunks artwork, meaning they own exclusively–no other third parties can receive from Yuga Labs–the licensed copyright interests granted, subject to the restrictions in the license. With an exclusive license, they can now file copyright infringement lawsuits (see below). Owners grant a non-exclusive license back to Yuga Labs to “use Your CryptoPunk Art alongside other CryptoPunk Art for the purpose of promoting or exhibiting the entire CryptoPunks collection.”
  • Derivative works: Owners get ownership of any copyright and other IP for derivative works owners develop from their CryptoPunks (Yuga Labs retains IP in the original CryptoPunks).
  • Own trademarks: Owners get the ability to file for trademark registration of trademarks developed from commercialization of their CryptoPunks. But it must be based on actual use of a trademark in commerce. No intent-to-use applications allowed. [My comment: never seen this kind of provision before for NFTs. Great for owners. This is HUGE.]
  • Sublicensable: Owners get the ability to license the rights received under this license to third parties. For example, owners might sublicense their rights to another entity that commercializes their CryptoPunks for them. [Same comment: never seen this kind of provision before for NFTs, outside of complete transfer of IP rights. Great for owners. This is HUGE.]
  • Utility: Owners get “utility, benefits, or entitlements” that Yuga Labs may confer based on NFT ownership. [My comment: this formalizes what utility NFT collections are already doing.]
  • Possible ability to file infringement lawsuit against others to the extent permitted by law: Under copyright law, “[e]xclusive licensees may sue without joining the copyright owners.” Davis v. Blige, 505 F.3d 90, 100 (2d Cir. 2007). The license includes a clause specifically recognizing the ability of owners to sue, but limited to infringement claims “based solely upon the unauthorized use of Your CryptoPunkArt, not other CryptoPunk Art.”

What restrictions are imposed on CryptoPunks owners

  • No hate speech: no “use Your CryptoPunk Art in a manner that expresses hate or encourages violence towards a person or group based on membership in a protected class, such as race, religion, gender, orientation, or disability.” [My comment: very interesting provision.]
  • No class actions against Yuga Labs: owners agree to individual arbitration for any dispute (unless the jurisdiction prohibits mandatory arbitration).
  • No use of Yuga Labs’ trademarks: owners get no rights to use the trademarks “CryptoPunks” or “Yuga Labs,” or any other trademarks of Yuga Labs. [What’s unclear: can the owners use the specific NFT name, such as “CryptoPunk #1234” as a part of their commercialization?]

Is a unilateral change or modification in the CryptoPunks license valid?

  • Unilateral changes to licenses have faced scrutiny in the United States. Such changes are often implemented in so-called “browser-wrap” provisions by which the licensee agrees to changes by continuing to use the licensor’s website. None of the CryptoPunks licenses (in 2019 or now in 2022) include this kind of “brower-wrap” provision.
  • Technically speaking, the validity of the license even back in 2019 could be at least challenged. The 2022 license just states: “Subject to your acceptance of, and compliance with, these Terms….”
  • On the other hand, both the 2019 license and the 2022 license are far more favorable to owners of CryptoPunks than having no express license at all (which would lack any commercialization rights).
  • So, it’s hard to imagine a scenario in which the CryptoPunks owners would ever want to challenge the validity of the 2022 license. Perhaps if some owners wanted to use their CryptoPunks for hate speech? But the 2022 license is a far better deal than the 2019 license or no license at all.

Why is the new CryptoPunks license so significant?

  • We are witnessing a fundamental shift in how commercial IP licenses are being deployed for creative production. This shift I call Decentralized IP or De-IP. [Read my article explaining my theory of De-IP.]
  • And the licenses being used are Decentralized Collaboration or De-Collab licenses. [Read my essay explaining my theory of De-Collab licenses.]
  • The CryptoPunks license goes beyond the Bored Ape license in granting an exclusive license to owners that specifically authorizes the owners to seek their own trademarks based on their actual use and commercialization of their CryptoPunks.
  • Put those ingredients together, the CryptoPunks can build their own businesses, trademark their names, and monetize their Punks and derivative works.
  • And, all of their development helps to build the CryptoPunks brand, which redounds to the benefit of Yuga Labs, the owner of the CryptoPunks intellectual property.