Why it’s better

The token-bound license distinguishes itself from traditional IP right management systems on at least two levels:

1. While collecting societies like SACEM act as trusted intermediaries, our system leverages blockchain technology to create an immutable, transparent record of rights. As opposed to traditional right management systems (e.g. collecting societies) which rely on centralized intermediaries, the token-bound license operates on a purely peer-to-peer basis… The rights associated with every piece of content are enshrined into a digital certificate (i.e. blockchain token) which serves as the vehicle for assigning and transferring these rights. This not only adds in simplicity and efficiency, but also eliminates the problem of having to rely on a trusted intermediary authority.
2. In contrast to traditional Digital Rights Management systems, which come with an automated enforcement of rights (e.g. by precluding access to content to those who did not obtain an explicit permission to do so), the token-bound license is a purely informative and descriptive layer of rights. The blockchain ledger only serves as the authoritative record for ensuring the verification and traceability of rights over time. This, of course, does not preclude others from deploying Digital Rights Management systems that rely on these digital certificates for automated enforcement.

Legal considerations

The Token-Bound License is designed to work within existing legal frameworks, leveraging copyright law to stipulate the conditions under which people are allowed to use, modify, and communicate the licensed works to the public. 

While the Token-Bound License is associated with a particular NFT, its validity does not depend on the legal status of NFTs themselves; it operates like any other public license, where rights transfer according to the terms embedded in the license. Specifically, as a general public license (like the majority of open source and Creative Commons licenses), the Token-Bound License is structured in such a way as to ensure that the beneficiary of the license must be the current holder of the token that the license has been associated with. Therefore, when the token is transferred, the rights associated with the license are also transferred seamlessly to the new token holder. This ensures that the license terms are always tied to the token, making the transfer of rights automatic and inherent to the system itself, regardless of whether a blockchain transaction is explicitly recognized by local or international legal frameworks as a contractual transaction. In other words, the token itself isn't the contract—it's the license embedded within it that matters.  Even if a jurisdiction does not provide legal recognition for the NFT or blockchain transaction, the license’s terms can still be enforced through traditional legal channels, supported by blockchain as proof.

It should be noted that, just like with any other license, the Token-Bound license operates as a descriptive layer of rights, meaning the enforcement of those rights still relies on traditional legal mechanisms. In particular, because the Token-Bound license operates within the framework of copyright law, disputes over IP rights would still be handled in traditional courts based on the governing law of where the alleged copyright infringement has taken place.

The key benefit of the Token-Bound license is that, in cases of dispute, the token acts as proof of ownership, and the associated blockchain transactions can be regarded as strong evidence in legal proceedings. Indeed, given that the Token-Bound License is incorporated within a blockchain token, the blockchain ledger serves as a verifiable time-stamped record of licensed rights. This can contribute to increased transparency and traceability, but does as such not replace the enforcement mechanisms of established legal frameworks. 

Similarly, in the event of a dispute over the interpretation or obligations associated with the Token-Bound license, traditional legal mechanisms apply. The blockchain ledger provides evidence of IP ownership and licensing terms, but legal interpretation and enforcement must be managed through established judicial systems. The Token-Bound License does not include a built-in arbitration mechanism, so disputes would be handled by national courts based on applicable laws. To address potential gaps, implementing an independent arbitration framework or governance body for resolving disputes could be a consideration for the future.