Llamas on the chain

Most of the writing about the legal issues surrounding NFTs has been rightly concentrated on two topics, what rights does the buyer acquire when purchasing a token, and the issue of copyright infringement. But I have been thinking for a while that perhaps one of the most interesting legal subjects is going relatively unnoticed, and it is the potential fact that a lot of NFTs may not even be protected under copyright in the first place.

The biggest share of the market in NFTs right now is in collectibles, and specifically profile picture (PFP) collectibles such as Bored Apes, Cryptopunks, and Sollamas (pictured above). These tend to be characters that look almost the same, but each token has a set of unique characteristics such as hair, eyewear, hats, clothes, background, etc.

Normally, any artwork used for the creation of an NFT would carry full copyright if it meets the requirement for protection, namely it has to be an original artistic work. Originality here has a different meaning to the common use, it means that the work is an intellectual creation that reflects the personality of the author. It is at this point that many PFP projects could fall short of protection, this is because in many instances these projects are created automatically in a process that is known as generative art, there is very little human intervention, and the final picture is mostly the result of code and randomness.

Let’s use the Sollamas to illustrate the point. Disclaimer: I’m not connected in any way to Sollamas, I bought one for research (if I’m going to own an NFT, it might as well be a llama).

This project is made up of a stock picture of a llama.

This picture is then embellished with a number of traits, some more rare than others, which is often part of the scarcity that gives value to the resulting picture. In the Sollama environment, there are hats, glasses, mowhawks, moles, pipes, earrings, beards, blankets, and bandanas.

Each picture in the collection (8,888 in total) is algorithmically generated to have a unique combination of traits, with a rarity distribution for some of the traits to enhance their value. Here is where projects have a choice. They can generate the pictures before minting the tokens, or they can add some excitement to the minting itself, so the picture is generated when someone buys an NFT, so they don’t know exactly which traits they will receive. What is common in most projects is that the resulting picture will have been generated randomly with the mixing of pre-determined traits, the resulting image is then minted into an NFT. Here is mine:

Rafay the Precious

As mentioned, most of the above does not require any human intervention other than the artistic creation of the stock character and of each of the traits, which is just something that is added on later randomly.

The generative process is so widespread that there are tutorials online that tell people how to have a collection of generative profile pictures in less that 15 minutes, most of the code that allows users to create a generative collection is open source and easily accessible. There is even artwork that can be re-used by a project. See for example this video explaining generative NFTs. I have no idea of how many projects use generative code, but certainly the biggest names in collectible NFT generate their pictures by bringing together stock character and traits using code.

It is this combination that could prove problematic from a copyright perspective. Because some originality and/or creativity is required for copyright to subsist, then these generative images have to meet those requirements, otherwise they will all be in the public domain and can be used by anyone at will, with the exception perhaps of the very first stock character. This is generally a disputed area of law that has been in vogue in recent years due to the rise in AI-generated works (see my article on the subject here). However, in the case of generative PFPs there is no artificial intelligence involved, we are dealing with low-level code that is easily deployed, it’s just a simple algorithm that brings together stock and traits, but it is an automated and random process.

This area of law is entirely dependent on your jurisdiction. There is a good argument to be made that generative pfp art has copyright protection in the UK under s9(3) of the CDPA, which states that the author of a computer-generated work is the person who made the arrangements necessary for the work to be created. This would mean that whoever put together the code to generate the images would be the author. This provision exists in other Common law countries.

In European law it is generally understood that for there to be copyright in a work it has to be an intellectual creation reflecting the personality of the author, and one could argue that merely coding some generative algorithm to generate thousands of pictures may not meet that threshold. It will all depend on whether putting the code together, making the art for the stock character and for the traits is enough to prove the existence of an intellectual process that gave rise to the work. We will have to wait and see.

A lot of projects are being developed in the United States, and here we are starting to see also questions as to whether generative pfp collections have copyright. Just recently, the US Copyright Office refused an application by Dr Stephen Thaler (of DABUS fame) applied for registration of a work generated using artificial intelligence agent called “Creativity Machine”. The registration was denied as current practice is that authors have to be human, the decision was appealed, and the Review Board denied the appeal stating categorically that “human authorship is a prerequisite to copyright protection in the United States and that the Work therefore cannot be registered.”

A Recent Entrance to Paradise.

This decision could have wide-ranging consequences for NFTs, particularly those that are based on generative characters. As explained, there is little human interaction in the actual generation of each individual character, they are mostly an algorithmic combination of traits. If we interpret the US Copyright Office’s decision narrowly, then these images do not have copyright and are in the public domain.

What would be the effect for the NFTs? In principle, not so much. I will never get tired of repeating that an NFT is just code that links to a digital asset, and not the asset itself, so an owner of an NFT is not the owner of the underlying image. So even if that image is in the public domain, then the NFT owner still owns that token.

The consequence could be that if all of these thousands and thousands of profile pictures have no copyright, then anyone can do whatever they want with them, you can print them, put them on t-shirts, and even mint your own NFTs of the images without infringing any copyright. Successful projects such as Bored Apes may still protect their brand using trade marks, but the actual images would be in the public domain, and can be reused by the public as they see fit.

I am sure that this revelation will have no effect on the NFT market, it is already a hyped bubble where links to images go for millions of dollars, so the fact that the images are in the public domain may not change people’s irrational treatment of the tokens. Moreover, copyright still has little relevance in the space, as it has been mentioned in this blog, what matters is how the platforms respond to conflicts. But this could have an effect when litigation finally starts flying around, I can see the defendants in an infringement case arguing that the images in a dispute are in the public domain. Hilarity ensues.

For now, we need to talk about Dr Thaler, who is single-handedly giving us a wealth of case law in the area of IP and AI. Is he a robot sent from the future to push for AI rights?

I’ll be back.

Disclaimer: I’m not connected in any way to Sollamas.

Categories: NFTs

6 Comments

Avatar

Estêvão Diniz · February 21, 2022 at 3:13 pm

Great article, as always.

I have one question about the UK CR law you mentioned: “There is a good argument to be made that generative pfp art has copyright protection in the UK under s9(3) of the CDPA , which statesthat the author of a computer-generated work is the person who made the arrangements necessary for the work to be created. This would mean that whoever put together the code togenerate the images would be the author. This provision exists in other Common law countries.”.

Earlier in the text, you also pointed out that many NFT collections use open source code to generate their NFT’s and, sometimes, even reuse artwork of other projects. In this case, this could mean that the copyright of this “new” project would be shared between the code creator, the reused artwork creator and the person that put it all together to create the NFT collection?

    Avatar

    Andres Guadamuz · February 21, 2022 at 9:50 pm

    Hi Estêvão,

    Thanks for the question. The answer is no, the owner of open source software doesn’t own things that are created with their software. Think about OpenOffice, they don’t own what you write.

Avatar

Andrew Ducker · February 22, 2022 at 12:52 pm

Presumably the copyright would still be in the original Llama picture? And possibly the various additional addons for it. Someone drew those sunglasses by hand – I assume they own the copyright in them (presumably in both types of sunglasses – the changing colour wouldn’t, I assume, be enough to create a new work).

So if you’ve got a llama drawn by Bob and sunglasses drawn by Dave, then combining them wouldn’t tend to create a new copyright – but you would definitely want to make sure the licensing for both things allowed you to create derivative works.

    Avatar

    Andres Guadamuz · February 27, 2022 at 8:50 pm

    In principle each of the elements could have copyright, but things get complicated when putting all of the elements together with code, depending on the jurisdiction the derivatives will not have copyright, you can sometimes take elements protected by copyright and the result need not have it, no originality in many jurisdictions. But we need some test cases.

Avatar

Simon Deane-Johns · March 14, 2022 at 6:00 pm

Hi Andres, really insightful. I’m a little late to your Llama party 😉 but I wonder if NFTs that have no copyright may not be ‘non-fungible’, which could be significant from a financial regulatory perspective (as explained here by reference to voluntary carbon credits (which may also be tokenised), but happy to keep the conversation in your thread: https://sdj-thefineprint.blogspot.com/2022/03/are-nfts-really-non-fungible.html)

‘NFTs could have a generative art copyright problem’ | Private Law Theory - Obligations, property, legal theory · February 21, 2022 at 9:00 am

[…] “Most of the writing about the legal issues surrounding NFTs has been rightly concentrated on two topics, what rights does the buyer acquire when purchasing a token, and the issue of copyright infringement. But I have been thinking for a while that perhaps one of the most interesting legal subjects is going relatively unnoticed, and it is the potential fact that a lot of NFTs may not even be protected under copyright in the first place …” (more) […]

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

%d bloggers like this: