Summarize

Here is another professional opinion on the interrelation between NFTs and copyright.

Maria Boicova-Wynants

European Trademark Attorney, Partner at Starks IP and International Trade law firm (www.starks.be), Mediator

Copyright and NFTs: friends or foes?

Let me start with a disclaimer:

Non-fungible tokens (NFTs) related to the works of art differ from NFTs related to e.g. event memorabilia, digital fashion or any other use case. They are all different “beasts”. For some of them, copyright questions are relevant. However, there are also many NFT use cases, where the copyright element does not come into play. Thus, for this article, I will focus only the NFTs related to the art world.^[1]

To start unfolding the relationship between copyright and the art world NFTs, one has to address a number of questions:

• Copyright: what is it exactly?

First of all, copyright is also a term sometimes not fully understood correctly or just misplaced.

Copyright (or author's right) in the definition adopted by the World Intellectual Property Organization (WIPO), is a legal term used to describe the rights that creators have over their literary and artistic works.

These are exclusive rights of the author, that can be largely divided into two categories:

1. economic rights and
2. moral rights.

The latter includes, among others, the right of attribution and the right to protection against distortion or mutilation.

The three main economic rights harmonised by the InfoSoc Directive in the EU^[2] are the right of reproduction, communication to the public and distribution.  

• How can one violate copyright?

Generally speaking, copyright infringement occurs when the right holder’s consent has not been acquired prior to use for which the law requires it. Usually, the mere use of the work (e.g. listening, reading, looking at) does not amount to an infringement. In order to establish copyright infringement, the copyrighted work must have been “copied,” i.e., there must be a causal connection between the copyrighted work and the infringing “copy.”^[3]  In other words, the alleged infringer has to have access to the original work and has to copy it in full or at least in a substantial manner. If someone arrives at a similar creative result without the explicit act of copying, there can be no copyright infringement, because copyright does not protect ideas as such, only their specific embodiment.

To note, that in the digital context, having access to work requires a reproduction on a device, which in turn needs to be subject to authorization. In the absence of explicit authorization, there might be an infringement, unless the reproduction is covered by an exception, for example, private copying or transient copying.

Summing up, copyright is infringed by any person, who is not the owner of the copyright, who, without the license of (permission from) the owner does or causes any other person to do, within the jurisdiction, any act that the owner has the exclusive rights to do or to authorize.

• Where is copyright infringement in NFTs?

Having said the above, the logical question follows: given that an NFT is mostly nothing but metadata of a work, where is the “infringing copy”? Where is the copyright infringement and is there any?

Let us take a step back and first answer the question as to how do NFTs come into being. The answer to that is - one creates NFTs by minting them. But what is NFT minting? This is essentially a process of using a digital file to generate two core elements of NFT: a unique tokenID and a blockchain address.

• Can the process of minting NFTs be regarded a reproduction of the copyrighted work?

Probably not. To think about it, a string of code cannot constitute a reproduction of an image. Reproduction has to feature the whole or substantial part of the original work. That’s simply not the case with the NFT token, which is, as said before, a string of code.

• If it is not a reproduction, could it be an unauthorized adaptation?

Unlikely.

There is, of course, a concept of copyright violation by format-shifting, which can be legal under the private use doctrine (or under fair use doctrine in the US). However, in connection with NFTs, even though they are minted for a commercial purpose, the format-shifting would most probably not be applicable either.

In format-shifting, while the medium changes, the recognizable element of the original work remains, which is - again - not the case with NFTs. Can anyone recognize the artwork simply by looking at the code behind the token? I highly doubt that.

• Can minting be regarded as communication to the public then?

Perhaps; but then again, first communication to the public by the author would exhaust this right of the author. Only the communication to the “new public” could potentially violate the right of communication to the public.

And what about linking? Could a hyperlink to a distributed IPFS (Inter Planetary File System) service or any other cloud service be considered a communication to the public at all?

There are some cases of the Court of Justice for the European Union (CJEU) dealing with the matter of linking / hyperlinking that one might call upon in trying to answer this question. While these cases were not considered in connection with NFTs, at least some of them could also be taken into account when reasoning on their matter.

• Thus, in the Svensson case (C-466/12), the CJEU ruled that “making available the works concerned by means of a clickable link would not be a communication to the public, as the work had already been shared by the rightsholder”.
• In another famous case, Bestwater (C-318/13), the CJEU dealt with framing or embedding without the consent of the rightsholder. Also here, communication to the public was not found.
• However, in the GS Media case (C-160/15), the CJEU analysed the question of whether a link from the magazine to a file hosted in file storage containing the unauthorized copyright protected images would constitute a copyright violation. The court has emphasized two required elements here: (1) the knowledge of the infringement so that the alleged infringer should be fully aware that the link points to unauthorized images and (2) the very purpose of linking is commercial, hence it is done for profit. If these two elements are proven, then there is a copyright violation.

What does the above give us in the context of NFTs and the links potentially included in the metadata^[4]?

First and foremost, the thing to remember is that when an NFT is minted, there is theoretically no more need to share the work. If the creator of the NFT token just makes a private copy of the copyrighted work, mints the NFT based on it and does not link to the underlying work, there is no communication to the public and hence, no copyright infringement.

Yes, even if the copyrighted work has been used without obtaining permission from the copyright holder.

If, on the other hand, the link points to the publicly available work, then what?

I consider that if someone knowingly took someone else’s work and minted it as his/hers to create and sell the NFT based on that work, the two criteria coined in the GS Media case fully apply.

In other words, there would be (1) the knowledge of the infringement and (2) the linking would undoubtedly be commercial. Therefore, such a link included in the metadata of an NFT could potentially be regarded as communication to the public, hence as copyright infringement. In any case, that would be a reason enough to request the marketplace to take the respective NFT down.

To conclude, while NFT space largely remains a Wild Wild West, step-by-step, the market is adjusting and also the court rulings start coming (like the Lavinia Osbourne’s case, where the UK court acknowledged NFTs as assets). I believe that there is hope that soon we will have more clarity also on the exact interplay between copyright and NFTs. In the meantime, while we can try to rely on the general legal principles and the existing case law for guidance (especially the GS Media), in connection with NFTs there is no certainty, only opinions.

P.S.

As a postscriptum, I cannot neglect the topic of the public domain. What about public domain works — the works where no copyright exists (at all or anymore)?

A while ago, the Global Art Museum conducted, as they called it - “a social experiment” - when they minted several artworks in the public domain from the collections of famous museums into NFTs. You can read more about it at Artnet^[5]. This “experiment” prompts a question whether aside from moral considerations, there would be any copyright violation in such a case? I reckon that not. There is no copyright in them after all.

Yet, reflecting on the matter further, if the Rijksmuseum in Amsterdam would mint its Vermeer into the NFT, then the value would be fundraising for the museum and supporting the museum for the buyer. A form of patronage if you will. At the same time if an unrelated third party would mint the same Vermeer, the buyer of such NFT would essentially buy… a big fat nothing.

And that is what many NFT buyers also buy. But this is already a different discussion subject.