NFT Market and Copyright Infringement

In a recent fiasco in the crypto space, Spice DAO Autonomous Distributed Crypto Organization (DAO) was ridiculed by the community for believing that owning a copy of the unpublished manuscript of the movie Dune also granted it its copyright. The DAO intended to produce an "original animated series" inspired by the book that would be sold to a streaming service for which it would demand copyright payments.

Copyright laws stipulate that copyright is valid throughout the life of the creators and even 70 years after their death, making it impossible for the DAO to create the animated series without the permission of the living partner, Alejandro Judorowski.

Andrew Rousseau, a technology lawyer and law professor in Ohio, said:

"The Spice DAO fiasco with Dune's copy was a significant event that sent a very strong message to all involved in the NFT space - creator or owner. The control of intellectual property in digital art is essential to its success and longevity."

While it may not be a secret that NFT ownership does not necessarily mean that the basic copyright of the work has been transferred to the owner of the NFT being sold, it does not seem clear to all market participants.

The Copyright Act grants six "packages of rights" or exclusive rights to the author, which together establish his copyright. The first four rights are essential to NFTs right now - the right to duplicate the work, the right to create derivative works, the right to distribute and the rights to perform in public.

Anyone who would do proper research and due diligence would know that a copy of the sold manuscript of the movie Dune has no copyright attached to it. There still seems to be a broader misconception about what exactly NFTs are and what is included when purchasing or trading NFTs in space. As the industry evolves, so will public knowledge about NFTs, and there will be a broader understanding among the market.

Lawsuits are starting to flow
As things stand now, brands and companies have begun to take action against NFT projects that infringe on intellectual property - copyrights, and trademarks. On February 4, Nike filed a lawsuit against StockX for trademark infringement using NFT Nike sneakers. The sneaker company has filed a 50-page lawsuit alleging that the retailer sold nearly 500 Nike brand NFT sneakers that affect Nike's reputation and legitimacy.

Even the prestigious French fashion house Hermes recently had a legal confrontation with Mason Rothschild, creator of the NFTs MetaBirkins inspired by the Hermes Birkin handbags. Hermes noted that "Defendant's MetaBirkins brand simply robs Hermes of Birkin's famous trademark by adding the generic 'meta' prefix to the famous Birkin trademark." In response, the creator compared himself to Andy Warhol who paints Campbell soup cans by making art from a well-known trademark.

Jeff Gluck, CEO of CXIP Labs - NFT Rings Platform is also an IP and copyright lawyer with over 14 years of experience in the field of legislation. In the context of NFTs, he was quoted as saying:

"There are dozens of artists who are making lawsuits against OpenSea for selling infringing NFTs. These examples are a preview of a wave of litigation towards the field of NFTs. It's both good and bad. It's bad that it prevents creativity and growth in some ways, but it's good because it will help In the end, provide some guidelines in terms of clear legal parameters and guidelines for the field. "

In addition, Glock noted that one of the biggest problems that NFT trading platforms are currently facing is that if they create NFTs for their users and / or provide some level of creation, they are not protected by the Digital Millennium Copyright Act (DMCA). And thus can be directly sued for copyright infringement by creators (again - the platforms themselves). The DMCA passed in 1998 to implement the 1996 World Intellectual Property Organization Copyright Convention. In part, it creates limitations on the liability of online service providers for copyright infringement.

Rousseau (above) believes that it is an essential requirement for any NFT creator to emphasize the copyrights, trademarks and intellectual property of the NFTs they launch: "It is the smart contract behind NFT that determines the rights as to how it is used. "They will be completely clear to their audience, before the IPO, about the rights that buyers will have with the purchase of the NFTs, as soon as they purchase the NFTs after the IPO."

Forgeries
The NFTs industry is growing faster than even its participants could have imagined. Market sales exceeded $ 40 billion in 2021. The main reason for this growth is the hype that has surrounded these assets over the past two years, ranging from IPOs, NFTs-related games, trading platforms, stock exchanges and more.

As a by-product of these high supply and demand, there are many scams, hacks and intentional violations of intellectual property laws that have become increasingly frequent. Given the many platforms that have made the embedding of NFTs quick and easy, this has allowed malicious intruders to produce and sell NFTs of copyrighted items.

The platforms will have to adapt quickly and present barriers to those seeking to abuse the system as they may face legal consequences, being the direct link between consumers and creators.

However, NFTs are also a relatively new innovation compared to existing copyright, intellectual property and trademark laws, which could be an opportunity to amend the law to give consideration to this new technology. Copyright laws should recognize NFTs as a revolutionary and evolving legal option, and accept the Owner of NFTs as the owner of the copyright.

It is known that the cryptocurrency community adapts to changes pretty quickly because of the emerging nature of the industry and technology. Thus, as the legal issues surrounding NFTs evolve and reveal more about the changes that need to be made in the currently common structure, it is highly likely that appropriate procedures will also be created to address the emerging legal issues.