NFTs and Copyrights: What's the buzz all about?

Introduction

We are currently witnessing tidal waves of various technological trends. The latest one to have hit the shore is the one known as Non-Fungible Tokens (NFTs). While many of us are still recovering from this massive wave that has hit our faces, a few have begun testing the waters and many more are already riding it. Artist Chris Torres, the creator of Nyan Cat meme art, sold it as an NFT in an online auction for almost $600,000. In March 2021, American rock band Kings of Leon released their album titled "When You See Yourself" in the form of an NFT which consisted of three different tokens: a special album package, live show perks and exclusive audio-visual art. Interestingly, Amitabh Bachchan is all set to launch his collection of NFTs which will comprise of his recitals of poems from ‘Madhushala’, signed movie posters and other such collectables.

Before we find ourselves caught in this vortex of new knowledge, let us first dip our toes into the water and understand what exactly are NFTs.

'Nyan Cat' animation created by Chris Torres. (Video Courtesy: Giphy)

What’s the whole deal with NFTs?

NFTs are digital assets that rely on blockchain technology. When we describe something as ‘non-fungible’, it means that the said item is not interchangeable with any other item due to its unique nature. On the other hand, fungible tokens like cryptocurrencies are not unique and can therefore be exchanged for their actual value. Each NFT is distinctively coded and contains ownership data and transaction history which can be easily authenticated. To understand the whole frenzy behind NFTs, let us consider an example of physical art collection. Art collectors often almost end up in a tussle in an attempt to own original works of art. Apart from a deep appreciation for art, the mere idea of owning an original piece of work leads them to pay an exorbitant price. This concept of ownership is a key driving force behind the rise of NFTs. The possibility of getting to boast about owning the digital version of original, exclusive works of their favourite celebrities and artists has led fans to shell out as much as almost 70 million USD. Although the said works can be downloaded for free, they cannot be compared to the aforesaid feeling of ownership. Since the boom of NFTs, a plethora of NFT marketplaces have come up, like OpenSea, Rarible, Nifty Gateway, WazirX, etc.

What can be an NFT, you ask? Right from artworks to video clips and memes, anything that exists in a digital form can be an NFT. Twitter founder Jack Dorsey’s first tweet which says: “just setting up my twttr” was auctioned off as an NFT for over $2.9 million. Zoë Roth, who is also known as the kid from the famous ‘Disaster Girl’ meme, sold the original photo as an NFT for almost $500,000. Owning NFTs has come to be another way for sports fans to show their allegiance to their favourite sportsperson and teams. The National Basketball Association launched NBA Top Shot, an application that sells NFTs of the game’s highlights or ‘Moments’, as they are called. One such NFT of a video clip featuring LeBron James dunking sold for a whopping $208,000. NFTs have caused a huge uproar in the art world, and understandably so. Back in 2007, digital artist Mike Winkelmann (known as Beeple) created and posted digital pictures every day for 13 and a half years. These unique individual digital works were pieced together to form a huge collage titled ‘Everydays: the First 5000 Days’ which was minted as an NFT for Christie’s, a major auction house. The artwork helped Christie’s to venture into the previously unchartered territory of NFT sales and earn US$69,346,250.

‘Everydays: the First 5000 Days’ by Beeple. (Photo Courtesy: Christie's)

Tryst with IPR

How can one not mention intellectual property rights while talking about ownership and the exclusive nature of creative works? Let’s go back to our previous example of physical art collection. When the collector buys an original artwork, he does not automatically gain the copyrights vested in the said artwork. The artist continues to enjoy the copyright and earn royalties through his work. Similarly, when one purchases an NFT of say, a music track, he does not own the copyright to it. Typically, the artist retains the copyright, reproduction and other associated rights. (Click here to know more about the bundle of rights under copyright law). However, to quote the favourite catch-phrase of lawyers, it depends. The artist has the option to assign or license the work. To avoid any form of ambiguity, such assignment or license must be included in the contract governing the sale. Further, it should state the nature of rights conferred on the buyer. For instance, as a part of the Buyer’s Acknowledgments, Christie’s Conditions of Sale stipulates the following:

“Your purchase of the lot means you have full ownership rights in the NFT itself, including the right to store, sell and transfer your NFT. Your purchase does not provide any rights, express or implied, in (including, without limitation, any copyrights or other intellectual property rights in and to) the digital asset underlying the NFT other than the right to use, copy, and display the digital asset for your own personal, non-commercial use or in connection with a proposed sale or transfer of the NFT and any other right expressly contained in these Conditions of Sale. For the avoidance of doubt, you do not have the right to distribute, or otherwise, commercialize the digital asset without the prior authorization of the seller or the party(ies) that holds such rights.”[1]

It further says that the artist or any third party has the right to make additional copies of, and distribute, the digital asset, and could sell or otherwise assign the copyright or other intellectual property rights or economic rights in the digital asset.[2]

Similarly, the Terms of Use as laid down by NBA Top Shot mentions that:

(a) The purchase of a Moment, whether via the App or otherwise, does not give you any rights or licenses in or to the App Materials (including, without limitation, the copyright in and to the associated Art) other than those expressly contained in these Terms;

(b) You do not have the right, except as otherwise set forth in these Terms, to reproduce, distribute, or otherwise commercialize any elements of the App Materials (including, without limitation, any Art) without prior written consent in each case; and

(c) You will not apply for, register, or otherwise use or attempt to use any of the trademarks or service marks, or any confusingly similar marks, anywhere in the world without prior written consent in each case. [3]

Despite the existence of these terms and conditions, there have been increasing concerns about NFTs, majorly related to copyright infringement.

Prevailing Issues

One often assumes that when they see an artwork in the NFT marketplace, it has been placed so with the artist’s consent. Unfortunately, recent events prove otherwise. Many artists are finding their works minted as NFTs without their consent. A Russian artist who goes by the name Weird Undead was one such victim whose tweet, along with the embedded artwork, was up for auction on OpenSea. Similarly, other creators are falling prey to the phenomenon of copyfraud, where a third person is falsely claiming to own the copyright to the work. Deceased digital artist Qinni’s brother recently found out that fraudsters are stealing her identity to sell NFTs of her artwork on Twinci, an NFT social marketplace. Amidst numerous infringement complaints, a persistent offender emerges: an automated NFT tweet-bot called @tokenizedtweets. If a user comes across a tweet they would like to mint as an NFT, all they need to do is mention @tokenizedtweets as a reply to the said tweet, and voila, the deed is done. [4] It is, therefore, of no wonder that creators and artists are sounding an alarm about the tweet-bot, urging fellow creators to block the Twitter handle to prevent it from accessing their tweets and artworks. To combat the issues of infringement and counterfeiting, NFT platforms have incorporated measures like take-down claims in their ‘Terms of Use’, as per the Digital Millennium Copyright Act (DMCA).

In an interesting turn of events, a DMCA take-down notice itself was minted as an NFT. CryptoPunks were one of the earliest NFTs available on the Ethereum blockchain since 2017. American conceptual artist Ryder Ripps sold an NFT titled "CryptoPunk #3100" on Foundation, claiming it to be a “critique of NFT and Larva Labs, the creator of CryptoPunks”. As might be expected, Larva Labs did not ‘take’ this lightly, and submitted a take-down notice to Foundation. In response to the notice, not only did Ripps submit a counter-claim citing fair use, but he also minted the take-down notice and Larva Labs’ email as NFTs. [5]

Conclusion

Although NFTs have been around for a while, they have stepped into the limelight only recently. While many claim that the trend is here to stay, some opine that the show is nearing its end. Despite these debates, NFTs have managed to garner everyone’s attention towards unaddressed legal grey areas. Apart from submitting take-down notices, what remedies do the creators have? Will the traditional remedies enshrined in the copyright law suffice? And what happens in the instance that the author of the work minted into an NFT is unknown? One can only hope that these questions are answered soon. Till then, folks, do your homework before venturing out to buy NFTs. Make sure you know the nature of your rights vested in the digital asset, because while owning NFTs may be cool, infringing IP is not.

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References: [1] ‘Buyer’s Acknowledgements and Representations for NFTs’, New York Conditions Of Sale Buying At Christie’s [2] Ibid under ‘Transferring risk to you’ [3] NBA Top Shot, Terms of Service, accessible at: https://nbatopshot.com/terms [4]James Purtill, Artists report discovering their work is being stolen and sold as NFTs, ABC NEWS (16 Mar 16 2021), https://www.abc.net.au/news/science/2021-03-16/nfts-artists-report-their-work-is-being-stolen-and-sold/13249408 [5]Daniel Kuhn, CryptoPunks Get Punked, COINDESK (Aug 25, 2021), https://www.coindesk.com/markets/2021/07/06/cryptopunks-get-punked/