CryptoPunks, Intellectual Property, and First Sale Doctrine

 by: Shekinah Apedo

Back in 2017, Larva Labs created and distributed 10,000 CryptoPunks, a 24x24 pixelated character. Fast forward to 2021, with the hype around NFTs, a new fandom around CryptoPunk personalities is gaining momentum. Bandana ape, Punk 4156, received a flurry of fan art on April 15th, celebrating #4156day. On April 12th, Save Art Space kicked off the month-long "Pixelated" exhibition featuring CryptoPunks on billboards and bus shelters in Miami, curated by Punk 8219 (a.k.a GMoney), a knit cap-wearing ape.  Then there's Spottie Pippen a.k.a. Punk 5528, the "world's first CryptoPunk rapper," who just dropped his debut single, "I'm Spottie". So, where is this all heading, who knows, but is it legal?

In March 2021, Larva Labs filed a federal trademark for its CryptoPunks project with a curious intent-to-use filing to sell hats, t-shirts, and sweatshirts, along with producing animated TV programs and motion picture films. As the creators of CryptoPunks ramp up their future plans for the classic NFTs, select punk owners are pursuing monetization to exploit the value of their asset. The primary issue is intellectual property rights. Larva Labs owns a registered copyright to the punk artwork and a trademark on the name. 

The First Sale Doctrine (17 U.S.C. § 109) gives purchasers the right to resale, display, or dispose of a copy of a copyrighted work, but it's not a defense to unauthorized reproductions. For example, if I bought a CryptoPunk on OpenSea or from the Larva Labs website, I can't put the punk I bought for a $60K on a t-shirt and sell it. Additionally, in 2013, a federal court held in Capitol Records, LLC v. ReDigi Inc. that the First Sale Doctrine does not apply to digital copies. So, I can buy and resale a pair of Nike Air Mags on the secondary market, and be protected, but not if I do the same with an NFT (i.e. CryptoPunk). 

Aside from this legal quagmire, the potential downside for punk influencers using CryptoPunks as the face of their brand is real. Legal consequences could include copyright infringement, trademark infringement, fraud, false designation of origin, unfair competition, and maybe, dilution by blurring.

With the growth of NFTs, this legal gray areas will need to be tested in a court of law to determine a more concrete stance. Either way, when it comes to CryptoPunks, Larva Labs owns the intellectual property and can choose to enforce their rights. Even with their being several unauthorized derivatives like the CryptoBabyPunks and Beeple Punks, if punk influencers pursue commercial opportunities, the question is, will Larva Labs file suit, or would it be bad for business to sue the consumers of your niche product?

The contents of this blog are for informational purposes only and may not be relied on as legal advice.