Joint Work vs. Work for Hire: Dispute over the First NFT House

 by Shekinah Apedo

Dubbed by Architectural Digest as the world's first digital NFT home, Mars House, sold for $512,712 on SuperRare in March. Shortly, after the sale, the project's 3-D modeler, Mateo Sanz Pedemonte, claimed copyright ownership for his contribution. Specializing in modelling digital homes, the Argentine freelancer rendered the Mars House using Unreal Engine and states he created the work combined with the artist's direction. The artist, Krista Kim, refutes his claim as co-author and states he was contracted and compensated for the 3-D visualizations. How can NFT artists avoid this common dilemma?

Under copyright law, there is a difference between joint work and work-for-hire agreements. If the wording in the contract stipulates that this is an artist collaboration, then there's a co-authorship, but if it's a work-for-hire, then the hiring party has sole copyright to the finished product. To break it down in legal terms, a joint work is defined as "prepared by two or more authors with the intention that their contributions be merged into inseparable or interdependent parts of a unitary whole." (17 U.S.C. § 101) A work-for-hire is something created by an employee or independent contractor during the course of employment. Section 101 of the Copyright Act also defines it as a commissioned work, "that the parties expressly agree in a written instrument signed by them that the work shall be considered a work made for hire."

For a joint work, the default split is 50/50, unless the artists decide otherwise in writing. And, if two artists complete the work and share in profits, who has the right to license? The way it works is both have the right to grant a nonexclusive license to a corporation or product manufacturer who desires to exploit the work. For the nonexclusive license, Artist A doesn't need to ask Artist B for her/his permission. But, in order to give an exclusive license or transfer the copyright, both artists must be in agreement. These default positions under copyright law can be altered by the artists, but it has to be in a contract.

Collaboration is common in the artist community and usually legal contracts are avoided, but with fast paced growth in the NFT market, it's essential to have ownership and licensing rights clarified in writing before the art is created. Additionally, 3-D modelers and other specialized digital artists who contribute to the main art, can and should negotiate their potential share of intellectual property rights, so that they can earn royalties on a piece that sells well. Reoccurring payment is always better than the one-time check. For more on identifying works covered by copyright registration or to learn about registering a copyright for a visual arts work, click the preceding links.

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

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.

Intellectual Property in Crypto Art: The Copyright

by Shekinah Apedo

It’s the first day of March in 2021, the interwebs are abuzz with defining NFTs (non-fungible tokens) and its various sectors that are taking the mainstream media (Forbes, CNBC, Bloomberg) by storm. NBA Top Shot is revolutionizing the trading card industry. Digital art is selling for $6.6 million on the secondary market. Most recently, a charm-studded virtual necklace sold for $88,888 in an online auction bid. NFTs are digitizing traditional industries and crossing them over into the metaverse. With the NFT space in its infancy, how do we protect the newfound wealth attained from these digital assets. 

The bull case for NFTs is their scarcity and one-of-a-kind ownership, but I propose the base value lies in the intellectual property rights. With a focus on the $200 million crypto art market, a common misconception by many artists is that there’s no need to register a copyright on their art, because it’s automatically protected upon creation; that’s half true. 

Common law copyright is the inherit right that every creator of a literary work, music composition, or art piece enjoys to protect their creation as their own. However, this common law protection is limited, and is often preempted by federal copyright. If a crypto artist wants to file a lawsuit against a major fashion label for using their artwork on a clothing line, they can’t claim copyright infringement in the lawsuit. “A copyright owner may not file an infringement suit until the Register of Copyrights has granted the application for registration.” (Fourth Estate Public Benefit Corp. v. Wall-Street.com, 2019)

In January 2021, in a federal court in California, graffiti artist, Leonard McGurr AKA Futura, filed a lawsuit against The North Face clothing label for unauthorized use of his work on their product line, FUTURELIGHT. Due to not registering a federal copyright for his graffiti art, Futura couldn’t claim copyright infringement, rather he brings the action under unfair competition, which may present challenges to his case. 

For the artist, intellectual property is their best asset. Why? Because you can protect your work and license use to corporations for a substantial fee. The benefits of filing a federal copyright include: access to federal courts, statutory damages (money), attorney fees, and disgorgement of profits, to a name a few. But, most importantly, to be eligible for these benefits, artists must register before the infringement occurs or within 3 months of creating the art piece. 

Should an artist copyright every piece of art? No, but it's up to them to ask: "Does my art have commercial appeal and how likely is it for someone to infringe for profit?" The NFT art space is growing and new marketplaces are popping up every month. If you have a unique style and an increasing fanbase, registering maybe a safer bet, because blockchain evidence has yet to be used in any state or federal court (as of the writing of this post). Copyright registration strengthens the value of the art and can create different streams of income. Paint onward ARTentrepreneurs, and consider registering a copyright.

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