Copyright for NFT Artworks Is Still In The Lab
In this WAC Weekly, we discussed what owning an NFT really means when copyright, commercial rights and IP are all still open questions.
Part of the promise of NFTs is protecting the IP of artists. But with fraud on the platforms, BAYC redefining what ownership means, and legal regulation of NFTs still pending, artists and collectors have to address these issues on their own.
What does an NFT holder really own?
Recently Bored Ape Yacht Club creators Yuga Labs bought the CryptoPunks IP from Larva Labs, announcing their first priority was giving full commercial rights to the NFT owners.
For some, this means the “age of innocence” is over. Before the ICO boom in 2017, the 10,000 CryptoPunks were freely distributed to anyone with an Ethereum wallet. For the creators it was an experiment, for the collectors it was fun: *using* an Ethereum wallet was still novel, gas prices were trivially low.
Bored Ape Yacht Club holders have long enjoyed full commercial rights to their ape characters, which became of increasing concern in 2021 as money flooded into the Ethereum ecosystem over “JPEG Summer”. Holders have since tried to use that IP for ventures like animated series or music videos. Just a few days ago, one restauranteur bought some apes to start a pop-up restaurant around the brand.
CryptoPunks comes from something like the early days of open-source software, when developers were happily sharing their work with no thought towards IP, copyright, or making money. With the Larva Labs purchase, long-time holders — some of whom might have a CryptoPunk stored in a lost wallet from 2017 — now find themselves holding IP worth hundreds of thousands of dollars each. When money and IP lawyers are involved, it’s no longer an experiment.
And it means the open question around copyright in NFTs becomes more urgent for artists and collectors. If commercial rights and copyright become the social norm in NFts, will that create market pressure on artists to offer those rights to crypto-native collectors? Or would this norm create a point of distinction between NFTs-as-art, and NFTs-as-utility?
Copyright on the blockchain
There’s an idea among optimistic artists in the NFT space that the blockchain protects their claim on their own ideas and creations.
One speaker brought up the comic book industry, one with famous cases of artists losing out on the riches from their work creating characters like Spider-Man and Superman. In an industry where artists make a lot of their income from conventions and selling editioned pieces to fans face-to-face, the provenance and community-building aspects of NFTs might do a lot for artists.
But another pointed out that nothing in the blockchain inherently protects the IP. When curating an NFT show, curators and gallerists have to arrange copyright and licensing rights as a totally separate concern from the actual NFT. Museums and galleries have lots of experience working with this, but in the NFT market, these concerns have largely been ignored until the valuations shot up.
On top of that, there have been a number of cases of fraud on platforms like OpenSea. People mint works that aren’t theirs on the blockchain, create a “conspiracy of interest” across different wallets to pump up the price, then make off with the money when they finally sell the work to a unknowing buyer. The anonymity of the blockchain makes it hard for platforms to enforce relevant fraud laws, and it makes IP enforcement on the blockchain inherently problematic.
Another copyright implication is in the nature of decentralized file storage systems like IPFS and Arweave. Any work stored there is inherently copied across thousands of servers without permission. Digital rights management in the traditional sense is impossible if the work has to be totally available to the public.
“On-chain maximalists” might suggest that copyright and IP should be enforced on a smart contract. (As discussed last time, the increasing gas fee per line of contract makes this prohibitively expensive.) Without legal reform like a title-transfer process specific to NFTs, copyright and IP protection will have to be dealt with off-chain.
Going off-chain
A lot of the problems here come down to fraud, which is nothing new in the art world. Platforms like OpenSea are able to delist fraudulent NFTs on a case-by-case basis, but there’s not much of a systemic solution that could scale to meet the amount of exchange happening there.
So for now, it’s up to the collector to verify the authenticity of the NFT works they’re interested in and be informed about what rights that purchase entails. But for artists and collectors who want to iron this out, solutions are becoming available as the market quickly matures.
Smart contracts might one day offer more robust protections for copyright and IP, and as regulation arrives in the next few years we might see them meet the standards of contract formation in whichever countries they’re made in.
For now, it’s up to museums and galleries to use their experience here to safeguard the IP on NFT works. But for artists who are operating outside of that world, Yayoi Shionoiri and Ryan Su created a simple purchase and sale letter agreement specifically for NFTs.
They write:
“We have taken inspiration from Seth Siegelaub’s and Robert Projanksy’s The Artist’s Reserved Rights Transfer and Sale Agreement (1971), which was formulated at a time when artworks were being auctioned off for astronomical sums in a rising market and artists had seemingly lost control of their market. The contract aimed to get a collector’s commitment to providing the artist a resale royalty should the artwork appreciate in value, and to bind subsequent purchasers to the same.”
The contract specifically states the buyer is purchasing a certificate of ownership, and that they do not own the digital asset to which the NFT points to. Commercial use is forbidden without the artist’s explicit permission, and artists can specify the resale cut that will be transferred to them on-chain.
The contract also covers the file storage platforms the digital assets are stored on, and what might happen if those systems fail. In the absence of specific laws and regulations covering NFTs, a clause in the contract might specify which laws and jurisdictions apply to the contract such that the artist has a “homeground advantage”.
NFTs are still in the lab
It’s possible that NFTs have exploded in popularity before they were quite ready for prime-time. Ethereum’s move to proof-of-stake is years late. A lack of regulation and the cost of smart contracts mean artists and collectors have to be vigilant about copyright.
As a result of these issues and uncertainties, the NFT technology takes up all the oxygen in the discussion, with a recent Rightclicksave article reading: “in today’s NFT culture, the cryptographically concretized, reified object is the only thing of any worth in the eyes of the market. By implication, anything outside of the token — including the “thing” itself — is ignored, externalized, or negated”.
As the technology matures, and the NFT-as-artwork is able to distinguish itself from the NFT-as-utility, it’s possible the technology will fade into the background of the discussion. No ink is spilt on whether an artwork is bought with cash or cheque.
But NFT developers, platforms, and “labs” are working in public and figuring issues out in the middle of rampant financial speculation. The writing is on the wall that regulation is coming. When it does, everyone involved is going to have to have the technology and the “infrastructure” to comply whether that’s on-chain or off.
Do you wonder how to exhibit new media art in virtual space? Join us on Wednesday 23rd at 6pm CET with Sammie Veeler, multimedia artist and Gallery Director of New Art City. Register here.
WAC Weekly is part of WAC Lab, a new program unleashing the full potential of Web3 for the arts and culture produced by We Are Museums in collaboration with TZ Connect and Blockchain Art Directory, and powered by the Tezos ecosystem.
