The Steadiness Between Artwork and IP Theft in NFT Tradition
The most popular show in Netflix history, “Squid Game,” grossed the streaming company an estimated $900 million. And the producers don’t stop there. Preparing for even more revenue as they look towards Season 2, they’ve secured more than two dozen brands for ownership while completing a series of merchandising and licensing deals.
Sam Ewen is the head of CoinDesk Studios.
What the company didn’t approve of in its efforts to grow its pockets were the non-fungible token (NFT) collections for The Squid NFT, Squid Game Card. The two derivatives franchises – one a play-to-earn competition, the other a “Squid Game Metaverse” – have brought in a total of 245 ETH ($776,685 at current price) in secondary sales on OpenSea. None have ties to Netflix or the show’s creator, Hwang Dong-hyuk. Neither did the Squid Game Token, which ended in a pullback in November that left many investors wishing they had decided not to gamble.
In fact, none of the 682,569 items listed when searching for Squid Game on OpenSea are in any way related to the intellectual property (IP) owner as they have not licensed anyone to use the trademark on a blockchain digital asset. Yet all of these derivatives and, frankly, some directly stolen images can be bought or traded on the world’s largest NFT platform.
Memes and derivatives are at the heart of internet and NFT culture. Ever-evolving remixed combinations of images, audio, text, collages, video clips, and more speak to us as well as they speak to us (the idea that people use memes to both represent their feelings and have their own perspectives reflected back to them to see feeds from those they follow or from friends). But once you add a creator-centric economic marketplace and the value some NFT collections have achieved, brand owners begin to wonder why others are benefiting from their IP.
NFTs themselves aren’t the problem, it’s what the seller does with them. “NFTs themselves do not imply copyright at all, as they usually just consist of a URL pointing to an image,” Brian Frye, a professor at Britain’s Rosenberg College of Law, told me. “But including the image under the URL implies copyright and usually constitutes infringement if the person putting it under the URL does not own the copyright or have permission to use the image in this way.”
Recently, at the Why We Can’t Have Pretty Things camp for creative opportunities, when brands and advocates get involved, the anything-goes approach to art and expression is starting to take hold. We saw the same thing in the late 1980s, when the music industry was targeting hip-hop in terms of sampling, and similar technology oversight for NFTs is coming.
Most recently, Non-Fungible Olive Gardens, the project that promised to own a virtual franchise of the family-friendly restaurant, began selling 880 NFTs at various Olive Garden locations. They went on sale for $20 each and prices went up. Within days, one was selling for 100 times the initial issue price. The meme value alone generated a lot of conversation on Crypto Twitter as more than 500 collectors bought the tokens at soaring values.
That is, until Darden Concepts, the owner of the actual Olive Garden chain, sent OpenSea a DMCA takedown order that matched it and removed the collection. We have already seen how this works. In the early days of YouTube, there were thousands of music videos and movie clips, so many that the industry couldn’t catch up. It took machine learning and extensive licensing deals to stem the tide, albeit only partially to this day.
Read more: Dan Kuhn – What you own when you own an NFT
What is copyrighted and what is artistic interpretation is a matter of open and ongoing debate. “Copyright provides a ‘set of rights’ that are exclusive to the copyright owner of a work. These rights include the right to reproduce, create derivative works, distribute copies, public performance, and public display,” said Moish E. Peltz, an NFT attorney, recently.
However, IP expert Frye says: “If a copyrighted image is used in a critical, parodic or scholarly manner, it could be a fair use and therefore not infringing.” A caveat is that NFT projects are commercial use, particularly if you are selling many NFTs of a particular image, which could violate a fair use determination.”
That’s a pretty big interpretation gap that can challenge those creators who push the boundaries of what art is and what is trademark infringement when it comes to NFTs.
Another example of legal ambiguity surrounding NFTs: the ongoing battle between Hermès and artist Mason Rothschild over his MetaBirkins. Not only did Rothschild include “Birkin” (an iconic women’s bag) in the name of the NFT collection, but he uses the product’s signature silhouette in many of his works along with some of the notable accessories, such as a padlock. Legally, brands often not only secure their logos, but can protect anything from a tone to a silhouette. Just as Harley Davidson owns its engine sound and CocaCola owns the shape of its bottle, Hermès seems to be on the right track in this case. Additionally, the fact that Rothschild has not created a single artistic derivative, but essentially has a “product line” of 100 highly valuable digital assets, might lead one to view its presence on Rarible as more of a showcase than an art gallery.
“Art is anything you can get free breadsticks with” – Andy Warhol pic.twitter.com/Q2XZlGa6hL
— Unacceptable Olive Gardens (@NFOGtweets) January 3, 2022
“It’s more annoying to see the work of gifted digital artists being ripped off, but there seems to be no shortage of branded IP in the mix, much of which is created without much care or imagination,” says Matthew Davis, co-author early NFT patents at Nike were referred to as “Cryptokicks”. “It has more to do with the unfortunately transactional dimension of it all. I imagine brands would be more receptive if they weren’t so derivative, messy and made for profit.”
Cultural marks are probably the easiest target for copyright infringement and have the widest collector base. Searches on NFT platforms for Supreme, adidas, PlayStation, Gucci, LEGO, Off-White and others yield countless results and representations of brands, often in ways that would make any brand’s creative director go out of business. But it’s not just the fashion industry. Ford, Ikea, KFC and many other logos are clapped on NFT projects for sale or auction.
Not only is the line between trademark and NFT creative use blurring, but it can also be difficult to determine who owns the rights to sell NFTs between an IP holder and those who originally developed the concept. No one would dispute that Quentin Tarantino wrote and directed Pulp Fiction. But Miramax is still trying to prevent him from selling the pages from his handwritten script as NFTs, arguing that it owns the IP rights to the work.
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Creators of original memes have copyright protection for their original work. For example, Chris Torres, the creator of Nyan Cat, sold a unique version of the much-copied and duplicated meme for nearly $600,000 early last year.
As more companies and brands jump into NFTs and the Metaverse, we should expect them and their legal teams to aggressively challenge those trying to profit from their brands. Meanwhile, popular properties like Bored Ape Yacht Club, Crypto Punks, Aku Dreams, and World of Women may face similar issues of infringing on their own work (there are many Ape copycats already).
As Web 2 transitions into a decentralized Web 3, it brings tremendous opportunity for many builders and creators. But as both the music industry and YouTube have taught us, there are only limited ways to deal with stolen IP. Combine that with the blockchain’s unique asset ownership traceability, and this time it may not just be the creators paying the price, but the collectors as well.