Since the NFT mania began, many artists have started to raise their voices concerning the continued theft of their digital artworks for Sale on NFT marketplaces. Banksy was just one victim of these new art heists.
Sabby Life, a pseudonymous artist who primarily works in virtual reality painting 3D sculptures, recently had one of her works, "Winter Landscape," go up for sale on VR NFT without her knowledge. It sold for $332. Sabby Life, perplexed by this theft, took to Twitter to complain about how many other artworks on NFT marketplaces may have been stolen.
In August, a hacker tricked a British collector into buying a fake Banksy NFT through the Banksy official website. A now-deleted page that linked to an online auction was posted on the site. While visitors thought the link to be genuine, the Banksy team put out a memo noting that "any Banksy NFT auctions are not affiliated with the artist in any shape or form."
These thefts raise the question: what are the copyright issues surrounding NFTs? What protections do NFT artists have? And what protections do traditional artists have against the use of their copyrighted work in unlicensed NFTs?
What Are NFTs?
An NFT is a one-of-a-kind, non-divisible digital asset that, unlike "fungible tokens'' like Bitcoin and Ethereum or fiat currency (government-issued currency that is not backed by a commodity), has no interchangeable value.
Although anyone can access an item associated with an NFT, they will only have a programmable certifiable copy of the item and will not be the owner of the original version. This means that NFTs are tokens representing an asset, and are separate from the asset itself.
The fundamental issue with NFTs is that anyone can issue them. You don't have to verify your ownership of something before putting it on the blockchain on OpenSea or Rarible, two major NFT marketplaces. As a result, you can claim ownership of artwork that you simply stole online, even if it won’t be part of an “official” collection.
Due to the novelty of this asset, there is a lack of laws guiding the purchase and reproduction of digital arts.
What Are The Copyright Issues Surrounding NFTs?
Because NFTs are a relatively new phenomenon, there aren't nearly enough legal safeguards in place to protect artists whose works have been stolen. Courts will have to grapple with defining what kind of assets NFTs are, whether smart contracts are enforceable, and what types of copyright claims can be established. Despite this being a problem, the answers to these issues have begun to emerge.
Firstly, a common myth about NFTs is that when you buy an NFT, you are acquiring the copyright of the artwork. This is a misconception. It's essentially the same as if you were purchasing a painting. When you buy a painting, you are only purchasing the physical artwork and not making and selling copies or creating new works that wholly or substantially replicate the original. The copyright remains with the artist.
Ownership of copyright grants the owner exclusive rights under 17 USC § 106 , including the right to reproduce the work, prepare derivative works, distribute copies, publicly display or perform the work.
Therefore, the minting or the creation of an NFT can be defined as creating a derivative of the original artwork. This means that the only copyright holder of an artwork should have the right to transform their work into an NFT.
For example, Larva Labs (the creators of CryptoPunks) submitted a Digital Millennium Copyright Act (DMCA) takedown request of Ryder Ripps minted punks on Foundation, an NFT marketplace. Larva Labs alleged that its copyright over the CryptoPunks on the internet had been infringed. Another CryptoPunk copycat project called CryptoPhunks, which markets itself as "Punks that Larva Labs does not want you to own," was taken down by OpenSea initially but has since found its way back on the platform.
NFTs and resale rights
Another issue to contend with is the problem of resale rights, especially when it comes to the international market. The NFT market lacks a solid legal infrastructure which means that issues relating to royalties and who has the right of resale are contentious.
The EU, UK, Australia, and the Philippines officially recognize artists' resale royalties. In the US, royalties have long been debated and limited. In a state like California, the right of resale is limited to resales that occurred during 1977.
NFTs offers a workaround for this, giving artists the possibility to claim royalties on the subsequent resale of their artworks. The problem emerges when a stolen artwork is minted; who collects resale royalties? The thief?
The problem of copyright fraud in the NFT space is covered by law. According to Section 504 of the US Copyright Act, the sale of an infringing work, even if done by a completely innocent actor who unknowingly violated someone else's copyright, automatically makes the seller liable for actual and/or statutory damages ranging from $750 to $30,000 per infringement. If the infringement is determined to be willful (i.e., the seller knew it was a copyright infringement but sold it anyway), the penalty is increased to $150,000 per infringement.
This law punishes willful and unintentional minting of stolen artworks. Hence, the sale of stolen artworks and resale royalties can be fined as the court deems fit according to the circumstances of each case.
NFTs and copyright Law: Looking Forward
The hype around NFTs and the tokenization of everything is a byproduct of blockchain technology. The exciting possibilities that this technology offers different industries will also mean the need for new laws that help to prevent bad actors from exploiting legal loopholes.
NFT platforms can play a pivotal role in helping to protect artists from thefts by ensuring to comply with traditional regulatory rules. They can also issue deeds of transfer hard-coded into their smart contracts to help show the sale of an artwork.
As we wait, the NFT world will need to comply with copyright law around the world which is uniform by virtue of international treaties.
