Nfts And Copyright Presented by: Mr. Guadamuz, Mr. Thomas and Mrs. Kheria Date: 17 March 2022 Outline - What are NFTs and how they are created and traded? - What is the relationship between NFTs, and the artwork? - What are the futures of NFTs? What is an NFT? - Non-fungible = it cannot be sub-divided. - NFT is metadata information with an electronic signature How to create and trade an NFT? - Smart contract to mint NFTS - Apply my signature on this metadata - Here is your signed metadata (NFT)! - creator © and NFT creation - The smart contract does not check the truthfulness of metadata, it just wraps it in an esignature, meaning: • - No infringement or fraud detection, verification of authorship, etc. The smart contract usually does not require status or license related metadata (there is no specific token standard) - The creator supplied metadata can be literally anything. It can, but usually does not contain relevant information, and its veracity is unknown. - The NFT does not contain the artwork, only a link to it on the internet What About Copyright? In The Marketplace NFT marketplace operators - Curated marketplaces • Platform ex ante control over which NFTs are allowed to be minted, posted and sold directly • - - Platform ex post copyright enforcement Open marketplaces • Anyone can mint and post NFTs. • Creators can connect to a wallet and mint the NFTs. • Existing owners of NFTs can list their NFTs for resale. • Ex post enforcement focus Collection-based marketplaces • NFT control and ownership only from the marketplace company • Participation control Open Marketplaces And Copyright - Terms of service • Non-custodial service, mere conduits for the transactions between buyers and sellers. • Silent on a standard horizontally applied copyright license • Contain representations and warranties on the seller's responsibility to verify the accuracy of the information provided and to ascertain that they own related copyrights to the underlying traded content. • - Freedom to create an NFT-specific license Copyright enforcement measures • The tender, paired with the offered chance for the new owner to destroy the original work, was removed from OpenSea after a complaint from the Basquiat estate. Standalone Asset Class Or Programmable ©? - Circulation of digital artefacts - NFTS - Circulation of digital copyrights - Works have a unique digital representation - © licenses can be written in code - Smart contracts can automate licensing, remuneration, circulation - PROBLEM: who makes sure that the digital and the paper-based truth is in sync? - NFTs have no legal link with the artwork or with © - NFT circulation is independent of the circulation of the other two - Creating confusion, conflicts, uncertainty - NFTs are an asset class of its own Standalone Asset Class Or Programmable ©? - - Standalone asset • Digital "collectibles" • Digital "original" • Investment • Monetization of pre-existing fame • Link rot • Asset bubbles, fraud • New value regime (will NFT price dictate license value?) Programmable © • Digital-native assets existing in walled gardens, controlled by centralized entities:  In-game assets (money, artefacts), Player profiles, VR 3D assets • NFTs is a regulatory technology (DRM 3.0) ISSUES - Authorship - What rights are transferred with an NFT? - Royalties - Licenses - Copyright infringement - Platform enforcement and centrality - Moral rights AUTHORSHIP - First owner is the author of the work. - Question about collective works, joint authorship, work for hite, some works generated by unprofessional outfits. - There could be a question about lack of originality, lots of procedurally generated works. These works could be in the public domain. - Ethos is to circumvent/disrupt IP. TRANSFER OF RIGHTS - For the most part, an NFT does not transfer any ownership. - Ownership of the token, not the underlying asset. - Some NFTs claim to transfer copyright, but they don't meet formal requirements (transfer must be in writing and signed). - Some NFT projects give licenses. ROYALTIES - One of the potentially best use cases for NFTs is royalties. - Innovative ways of distributing royalties, also allows users to "own" a part of the work. - Some projects are playing with the technology with interesting results. - Built-in royalties in some platforms, artist gets percentage of each resale. This is however platform specific. LICENCES... - When present, licenses are often contradictory, confusing, badly drafted. - Personal use (as profile pictures), and limited commercial rights (merch), but not many other rights. - What about buyers down the chain of resales who have not agreed to the license? FUNDING - This image has been released into the public domain after sale of NFT. - Potential for funding using NFTs, the copyright element is irrelevant, people sell items to fund projects. COPYRIGHT INFRINGEMENT? - People are minting works that do not belong to them, or without permission. - Is it infringement? - Minting is not an exclusive right of the author, it's not copying, not publishing, could be communication to the public, but the link could direct to an existing work (is it a new public? Svensson et al). - I don't think so, my most controversial statement so far is that minting a work without permission need not be copyright infringement. COPYFRAUD - Copyfraud is generally understood as making a false or dubious copyright claim over a work that is in the public domain. - Works that are in the public domain can be used by anyone, but sometimes an institution will make a copyright claim over one such work. There is little or no effect to copyfraud, (only Chile has made it a criminal offence to falsely make a copyright claim over a work in the public domain). - Reputational damage? DAOS - Decentralised Autonomous Organisations. - Governance token is issued by a group to organize and manage funds with some underlying function. Use smart contracts to organize the group. - Patchy history, some spectacular failures. - What are they? Who owns the assets? Is it a co-op? PLATFORM ENFORCEMENT (PLATFORM IS LAW) - Most disputes are being resolved by the platforms (and strong community enforcement). - Infringing or stolen items removed from sale, which makes this an issue of intermediary liability. - Web3 is supposed to favor decentralization, but platforms have lots of power potentially. SOME STATISTICS - "the average sale price of NFTs is lower than 15 dollars for 75% of the assets, and larger than 1594 dollars, for 1% of the assets." - "the top 10% of traders alone perform 85% of all transactions and trade at least once 97% of all assets." - "NFT's price correlates strongly with the price of NFTs previously sold within the same collection".