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NFTs and Copyright Infringement

Imagine you are the artist of an image and you hold the associated copyrights, as well. On one of your leisurely strolls across the internet, you find that someone has made an NFT of your image and has minted a thousand of these NFTs. These are now recorded on the blockchain. Only, you have never given permission to do such a thing. Now, the image is public and available for anyone to see. This issue is not just a hypothetical, there have already been instances of in-game paintings, tweets and digital artworks being tokenised without permission. So, what do you do when this happens?

Is this infringement?

Well, it depends. NFTs can refer to an artwork in a couple of ways. Most commonly, the image will be hosted on a server and the NFTs minted – and sold – will refer to this image. Publishing an image on the internet without permission will almost certainly mean infringement, as this constitutes ‘making available to the public’ which is an exclusive right of the copyright holder in every country party to the Berne Convention. Making available to the public, under Dutch law, includes ‘the publication of a reproduction of the whole or a part of the work’, which is easily established in this case. 

Another option is that the NFTs refer to an image which has not been published online. Either because the file which the NFT’s hash refers to has been sent to the NFT-buyers privately, or because they do not have access to the file at all (in which case one should think twice about what you have actually bought). If the file has been sent privately, this could still be infringement, as this may be seen as distribution, which is also an exclusive right of the copyright holder. If the buyers do not have access to the file at all, then there is no infringement, because though the NFTs refer to a file which has certain copyright-protected properties, this file itself has never been made public.

A last option is that the image itself is stored on the blockchain along with the other elements of the NFT. This is not often the case, as it is very expensive to store larger files on the blockchain. An example, even CryptoPunks, which are only 8-bit images, are not stored directly on the blockchain, rather your token includes a hash and metadata which refer to a composition image. 

Figure I: Cryptopunk 7488
Source: https://www.larvalabs.com/cryptopunks/details/7488

If this is the case, however, it is certainly infringement, as it means that all thousand instances of the image are now recorded on the blockchain and thus made available to the public. Anyone can view any of these instances. 

How to proceed?

Unfortunately, establishing infringement was the easier part. The question is how to handle NFTs that constitute an infringement. This also depends on the way the image is referenced.

In the first case, where the imagefile that the hash refers to is hosted on a server, it would make the most sense to approach the server. After all, the actual infringing instance of your art is being made available to the public there. If the image is hosted on a centralised server, and the administrator complies with removing the image, then the issue is solved. The effect of this is that all the minted NFTs now reference nothing. Meaning, the NFT has become ‘empty’. It is likely this will entail that the seller is obliged to refund, but that is not certain. After all, it is not the image that is bought with an NFT but rather something akin to a certificate of authenticity, a collectible in its own right.

However, there is a very real possibility that the image is hosted on a decentralised server. This will make removing the image close to impossible, as information is stored in a peer-to-peer way. Meaning that the image could be stored on several devices rather than one. Anyone who has used that server network could have saved or exchanged part of the image. Even just tracking who exactly has done so, is unfeasible. This is similar to how torrents work, where thousands of people may store a certain file to facilitate exchange. 

If this is the case, or the image is stored on the blockchain itself, there is not really an easy solution. Blockchain technology has been developed to reliably and permanently store information, removing that information is almost impossible. In theory, a hard fork could remove the images. A hard fork is a radical change to the protocol of a blockchain network that can make previously valid blocks/transactions invalid (or vice versa). This is a very extreme measure, though, and could cause collateral damage. Usually, such forks would only be implemented to reverse hacks or correct important faults or security risks. All nodes or users would have to upgrade after the fork.

Figure II: A hard fork, which essentially splits the path in two. Users would have to upgrade to be able to follow the new path.
Source: https://www.investopedia.com/terms/h/hard-fork.asp

We do not yet know whether a judge would impose such a drastic measure, but it is not likely. Due to the severity of the measure, it may constitute an abuse of rights. A hard fork in order to rectify an infringement would cause annoyance or damage to many others, as this is not a casual change. The means would be disproportionate to the ends. You may have to accept that the image is now public forever, and settle for monetary damages rather than rectification. In all likelihood, you will have to take legal action. 

Conclusion

If someone has minted NFTs of an artwork of yours without permission, it might constitute copyright infringement. This depends on how the NFT references your image, though. If the protected image is not actually included in the NFT on the blockchain itself nor hosted on a server without your permission, then there is no infringing instance. This is unlikely, though, because an NFT containing nothing and referring to a hidden image would probably not sell very well. Although, NFTs of single pixels have been sold, so never say never. 

As we all know, it is very difficult to remove things from the internet. Even more so when we are talking about blockchain or decentralised servers. In the former, this is due to the permanent nature of blockchain. In the latter, this is due to multiple storage devices as well as issues with tracking. So, even if you can establish infringement in these instances, it will not be easy to have the infringing images removed. In most cases, it will not even be possible. Therefore, it may be ‘easiest’ to take legal action for damages, rather than rectification. 

As of yet, there is no EU legislation or case law directly concerning matters like these. It will be very interesting to see how judges will conduct the balancing act of protecting copyright holders and preserving modern technology like blockchain. 

19 July 2021 - Blockchain and law, Copyright, NFT

About Jetse Sprey

Jetse Sprey advocaat

Jetse finds solutions instead of problems and is able to break stalemates again and again. He speaks his mind and is not guided by what he thinks his clients want to hear.

He writes sharp, readable contracts. He has extensive experience with Blockchain and is an entrepreneur in this field himself. He writes convincing procedural documents and advice. He is knowledgeable in intellectual property, privacy and corporate law.

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