AI-Powered Content Ownership: NFT Licensing, Royalty Automation & Copyright on Blockchain

Copyright laws have existed for ages, but the problem was that they were designed for books, films, and music pressed on vinyl. As such, they are not exactly adequate in the modern day, leading to AI-generated content copyright issues.

Today, AI can generate images in seconds, while streaming platforms can distribute content globally. Creators can publish their art on platforms and make it available around the world with a single click of a button. Clearly, times have changed from when the old copyright laws were created, and the explosion of AI has only made things more challenging, as it is not easy to answer who owns AI-generated work.

So, how do you track and enforce royalties when infinite digital copies can easily be generated? The answer is simple - you use blockchain technology.

Blockchain, and its products, such as the Non-Fungible Tokens (NFTs), smart contracts, and decentralized ledgers, are perfect tools to keep track of copyrighted content, make it transparent, introduce automation, and enforce copyright laws. NFTs may have developed an unfavorable reputation due to all the hype when they exploded in the early 2020s, but since then, they have become an important part in licensing, managing royalties, and giving creators control over their digital assets.

Why Human Authorship is Still Important in AI Artworks

Artificial Intelligence has come a long way in only a few years, and is now able to generate photos, but also paintings, songs, texts, and more, all with a prompt and a click of a button. However, when it comes to AI content copyright, things start to get a bit messy.

On one hand, the law draws a firm line in claiming that the foundation of ownership is human creativity. Most courts in the US, UK, and EU have confirmed multiple times that works made solely by machines with no human input do not qualify for copyright protection. In other words, prompt-only artwork currently has little to no legal standing if challenged in court.

This is why human involvement remains necessary. The artist has to guide the process by designing prompts, curating outputs, and editing results. Alternatively, they can blend AI content into a broader composition, which is how their creative choices get to be the basis of establishing authorship.

In the eyes of the law, this turns the artwork into something that AI only assisted in creating, rather than creating it on its own, which is more defensible under the standing copyright laws.

While it may not sound like an important distinction, it represents a huge difference, especially in the world of business. Without that human element, companies risk investing in content that can neither be protected nor licensed. However, with the human element in the loop, creators can strengthen the companies’ rights and give their own works a better shot at maintaining long-term value and end up being resold someday.

NFTs as Digital Ownership Records - What They Are (and Are Not)

NFT ownership is often misunderstood, as many assume that the NFT is the artwork itself. Others may think that it represents the copyright. In truth, NFTs are neither. They are a unique digital record that is recorded on a blockchain. As such, it simply proves that you hold a token linked to a piece of content. To make it simpler, think of NFTs as receipts or deeds to physical goods, not the goods themselves.

What you really own when you hold an NFT depends on the smart contract tied to that NFT. Some smart contracts might embed licensing terms, for example, allowing commercial use or resale, while others grant nothing more than bragging rights.

The NFT is a token that contains metadata, including your wallet address, transaction history, and a link to where the artwork or anything else they are tied to is stored. If the storage happens to disappear, the NFT will be pointing to nothing, acting as a useless piece of code.

This is where the problem with using them for copyright emerges. Buyers may assume that owning an NFT means that you automatically have copyright ownership, but in most cases, this is not true. Unless the creator explicitly transfers the rights, copyright will remain with the artist.

Licensing via NFTs - New Models of Copyright Transfer

NFTs came into existence as digital collectibles, but by 2025, they will have evolved beyond being just that. These days, they are being used to license content in new ways - ways that traditional copyright could not easily automate. Two main models of NFT licensing exist right now: exclusive and non-exclusive licenses.

Licenses are typically included in smart contracts, which makes them automatically enforceable. That means that reselling an NFT can trigger royalty payments, while expiration dates can revoke usage. Also, any and all transfers of NFTs will be recorded on the blockchain.

Case studies:

• A generative art project issues exclusive-use NFTs for 100 collectors, where each NFT grants commercial rights and is automatically tracked via smart contracts. Resales will trigger a 10% royalty to the creator.
• A music producer releases tracks with non-exclusive NFT licenses, which allow multiple DAOs to use the song for their campaigns. Smart contracts will enforce royalty splits proportionally.

The important part is to clearly define the rights in both code and legal terms. That way, NFT projects can reduce ambiguity and increase transparency, which will also lead to reduced copyright disputes, and ensure that buyers know what they can and can’t do with the content they paid for.

Automated Royalties with Smart Contracts

Thanks to smart contracts, royalties are easy to distribute automatically whenever an NFT is sold or resold. AI can also enhance the process further by tracking usage across different platforms and monitoring derivative works. It can even detect unauthorized copies or distributions.

Combining AI with blockchain technology allows creators to get real-time insight into how their work is being distributed, used, and monetized. And, along the way, they also stand to benefit from it. These benefits may include:

• Instant payments: Royalties are triggered automatically each time an NFT is resold, removing the creator’s need to use middlemen.
• Global reach: Like cryptocurrencies, smart contracts are borderless, which makes international licensing much easier to handle
• Transparency: Blockchain is immutable, so any recorded transactions and sales are stored permanently and cannot be changed or falsified.
• Usage monitoring: AI tools can be used to flag misuse or unlicensed derivative works
• Flexible licensing: Creators can set tiered royalty rates for different types of usage of their artwork

AI as a Copyright Guardian

AI is rapidly developing as a copyright guardian. There are now numerous tools, such as Consent ID and other AI trackers, that can scan platforms to identify uploads that might be breaking smart contract terms.

In the blockchain and NFT arena, AI can also help make licensing easier by automatically linking content to the right usage rules. It can tag and read metadata, and even verify usage rights on decentralized platforms and networks.

While there are benefits, there are also many challenges that come from using AI as a copyright guardian. One example is that it is still imperfect, and AI models can easily make mistakes when it comes to classifying content, which could lead to false positives in identifying improper use. Enforcement can also be a bit tricky due to decentralized storage, assuming that content exists or can move outside of monitored networks.

Finally, legal recognition of evidence generated by AI is still evolving, so it is questionable how far this evidence could go in a legal setting. Still, AI is evolving rapidly, and combined with blockchain’s transparency, even these hurdles may quickly become a thing of the past.

Launch Your Own Tokenized Licensing Model

If you are looking to launch your own tokenized licensing model, doing so is quite easy through the use of NFTs and smart contracts. There are only a few steps that you need to follow, including:

• Define rights: Start by deciding what you are licensing. That could be commercial use, personal use, derivative works, or exclusive access. The important part is to clearly specify what the user can and can’t do with the content you are offering.
• Encode into smart contract: Once you define rights, translate them into smart contract logic. Also, include triggers for royalties resale, as well as transfer conditions, and expiration dates.
• Use Creative Commons or bespoke licenses: You can also use established licenses, such as Creative Commons, to add clarity. Alternatively, craft bespoke terms for unique business models.
• Automate royalties: Set up automated payments so resales of NFTs, or their use for commercial purposes, would grant you a percentage of the revenue.

The New Ownership Future

NFTs and smart contracts are slowly starting to change the way creators and authorities view and manage copyright and royalties. For now, there are still a few issues to sort through when it comes to AI-generated content copyright ownership, but these will likely be resolved in time, as the emerging technologies continue to mature.

For now, remember that NFTs provide a record of ownership, while smart contracts can automate royalty payments. AI itself can enhance monitoring and licensing, but human oversight and participation in creating art in the first place is still necessary.

Moving forward, the situation is likely to become more complex, with experts predicting even deeper AI integration with copyright enforcement and licensing. Royalty models are also likely to become more dynamic, adjusting rates based on usage and demand, while legal frameworks, currently still primitive, will evolve in time to match the demand for these new technologies.

Glossary

• NFT Licensing - A system where ownership or usage rights for digital content is tied to an NFT and controlled using smart contracts
• AI Content Copyright - The legal protection and rules that apply to content created by AI, or where AI assisted in its creation.