Making IP programmable allows for automation, transparency and reliability. Programmable IP is enabled by two foundational pillars:

1. Assets tokenize intellectual property
   On Story, anyone can register their IP as something called an IP Asset on the blockchain. This on-chain record is a non-fungible token that represents the real-world IP and is stored in a consolidated registry, a kind of universal ledger that tracks all IP assets.

2. Modules drive interactions
   An asset on Story is not just a token. When an IP Asset is registered, it is equipped with its own IP Account, allowing the asset to take actions in the form of modules. Modules are powerful app-legos that enable complex business logic, like permissionless licensing or automatic royalty payments. Beyond the pre-configured licensing, royalty and dispute module, developers can create their own modules for advanced use cases.

In combination, these three foundations form a global intellectual property layer that digitalizes and decentralizes intellectual property.

Licensing is about defining how other people can use your work - or how you can use the work of others. Licensing involves someone that made the work (licensor) and someone that uses the work (licensee). The two parties clarify questions like: Can the licensee make money with the work? What will be the compensation for the creator? Or: can the licensee transfer the license? The answers to these questions are called licensing terms.

Setting up licensing terms is crucial for both parties: Creators have control over their work while licensees have legal certainty about how they can use it. The license terms are usually written up in a license contract. The process of reaching a license agreement, however, is confusing, complex and costly. Story's Proof-of-Creativity Protocol simplifies and accelerates licensing using the preconfigured licensing module, which includes:

1. Ready-to-use licensing contract
   Think: the Y-Combinator SAFE template for IP licensing.

   Attaches your customized license terms directly to an IP. The best part: Story provides a preconfigured legal contract that covers all media types, letting anyone start in seconds.

2. Automated licensing via license tokens
   Think: your licenses as digital assets.

   Story uses license tokens to manage licensing. This way, anyone can obtain a license token to create derivative work, with the creator’s preferred license terms attached. License tokens also create entirely new use cases, like license token trading (IPFi).

In combination, these two innovations let you define your usage terms within seconds and keep a clear track of how your IP is being used.

Royalties are closely related to the concept of licensing. Usually, when a creator and a licensee draft a licensing contract, royalty payments are almost always defined. Royalty payments are traditionally denominated as a revenue percentage flowing towards the creator of the original work. Given the important role of royalties in licensing agreements, it’s clear that their design, management and claiming must be executed diligently.

However, setting up royalty policies can be difficult, involving complex formulas. Also, when an intellectual property generates millions in sales, legal disputes frequently arise about details of the contract. Royalty payments can be delayed and thus create cashflow issues for artists, too. Finally, royalties rely on reported sales data, which can relatively easily be tampered with.

Story's royalty module enables secure, reliable and automatic royalty payments for intellectual property. Before royalties are paid out, all participating IP Assets are mapped into a so-called derivative chain. A custom royalty policy then defines how revenues are shared in a derivative chain. The current implementation used by Story is the Liquid Absolute Percentage (LAP). The basis of this policy is that any asset can choose the downstream distribution of royalties - downstream meaning each IP that is a derivative and thus sits below in the tree.

This mechanism has various advantages. On the one hand, the calculation of royalties is done automatically and is thus less prone to error. On the other hand, because all actions take place on the blockchain, the royalty payments are executed reliably and automatically, with no possibility of a third party stopping or hindering the process. This leads to efficient and timely royalty payments for creators, powered by programmable IP.