'When a Series’ Main Protagonist Gets Stolen and Sold – A Study of NFTs and Their Approaches to Copyright Licensing' by Susan Bischoff in (2023) GRUR International comments
Over the past two years non-fungible tokens (NFTs) have become a highly popular, though extremely volatile trade asset. As mere data sets on the blockchain, NFTs are challenging the law to define the legal positions they entail. This article examines NFTs from the angle of copyright licensing, looking at it from a European perspective with the main focus on German law. Based on the technical specifics of NFTs, the paper evaluates the relevant legal position required for a permitted use of tokenized copyrighted content and how such a position may be obtained in the context of NFT trading. A review of the copyright schemes of 21 of the most sought-after NFT collections sets out the current state of licensing and identifies the prevailing legal uncertainties. The fact that these are not merely theoretical is then shown by the turbulent case of a ‘stolen’ ape avatar, tokenized by an NFT, that was set to star in a live-action animated series. ...
Imagine the leading actor of a TV show being abducted. Sensational headlines and immense media coverage would surely follow. In addition to concerns for the actor’s health and well-being, the show’s ongoing production would face an unexpected and precarious hiatus. Now turn your attention to a real case, where pre-production for a series centring ‘Bored Ape #8398’ had to be stopped, because an ape had been reported ‘stolen’ from the producer, actor Seth Green. Though the reports of a missing main protagonist sounded spectacular, it was always clear that no actress, actor or animal had actually been harmed, because this drama all happened in the digital world. The planned show ‘White Horse Tavern’ is no remake of ‘Planet of the Apes’ or a reboot of the long-running German TV classic ‘Unser Charly’, which involved a dressed chimpanzee – a scenario that tells you more than you need to know about German television in the 1990s and 2000s. In fact, Bored Ape #8398 is not a living being at all, but a two-dimensional profile picture of a cartoon ape, tokenized by an NFT, which had been stolen from Green. The reason for the production delay was therefore not an involuntary physical absence of a cast member, but rather the notion that with the NFT gone, using an animated version of the cartoon ape Fred Simian as a bartender in a live-action animated series would no longer be permitted under copyright law.
The case of the lost Bored Ape is symbolic of the multitude of legal and practical uncertainties in the realms of NFTs that condense at the interfaces of rights of use and the notion of ownership, and the incident suggests the need for an analysis of the legal situation and current market practice. This paper first outlines the factual characteristics and thus technical foundations of NFTs, including what it means when one gets ‘stolen’ (II.). It then assesses the relevant legal position required for making lawful use of artwork underlying an NFT such as the missing Bored Ape (III.). That is followed by an evaluation of the relation between the factual disposition over an NFT and the rights to use the tokenized work, taking the current licensing practice of individual and smaller NFT offerings into account (IV.). A market survey of the current approaches to copyright, if any, of the 21 most relevant and economically valuable NFT collections outlines the status quo of copyright licensing and its unresolved issues (V.). Against these findings, the case of the abducted Bored Ape #8398 is conclusively evaluated (VI.). As a recent phenomenon in the digital space with significant commercial interest, the NFT ecosystem is subject to fast-paced developments. This paper, which was completed on 15 January 2023, can therefore only provide a snapshot of the current situation in terms of market values, relevant players, legal approaches, and initial litigation between stakeholders. The relevant copyright issues, however, are general in nature overall and therefore likely to outlast short- and medium-term developments in the field.
The author is expressly aware that the value of actively traded NFTs has taken a massive hit due to the declining interest following the initial hype from 2021 into 2022, and to the recent crash(es) of cryptocurrencies. It is further acknowledged that NFTs have sparked a wide range of criticism and warnings. While being especially critical of irresponsible business models based on pressure tactics towards consumers and the intolerable environmental impact of most blockchain-based applications, the author recognizes the reality of NFTs as trade assets that have already opened up new exploitation possibilities for creators and artists, brands, and museums, and that might gain further importance in the looming Metaverse. Lastly, the topic is considered worth examining as a paradigm for the interplay between copyright law, which for the most part still carries an analogous view of the world that at most reflects the state of digitalization of the early 2000s, and the progressing emergence of digital-only use and distribution of copyrighted content.
