The Coming Copyright/Trademark Storm for NFTs
Last week, the NFT and crypto world saw its headlines dominated by the rapid rise and fall of the company HitPiece.
Dubbed “The Fyre Festival of NFT Startups“, the company had an ambitious plan to sell NFTs of every song ever made. To achieve this, they accessed Spotify’s public API and simply started minting NFTs on their own “HitChain”, which runs alongside Ethereum.
The company had made previous claims about how they had partnered with many in the music industry but, once their activities became broader knowledge, musicians turned out of the woodwork to decry the operation and demand that their work be removed.
Eventually, the RIAA itself got involved, sending a cease and desist letter to Hitpiece on February 4. This backlash prompted Hitpiece to shut down operations, telling the world that, “We started the conversation And we’re listening.”
However, this was far from the only legal drama to take place last week surrounding NFTs.
The same day that the RIAA sent its cease and deist letter to Hitpiece, Nike filed a trademark infringement lawsuit against reseller StockX over Nike-themed NFTs. A week before that, French luxury brand Hermes began legal proceedings against an NFT artist who used their names and bags.
Even other NFT artists are getting involved as Larval Labs, the creator of the CryptoPunks NFT collection, is considering legal action against a community project that reuses images from a previously “disassociated” NFT release.
This says nothing about the “dozens of artists” that are said to be preparing lawsuits against OpenSea over infringements, according to Jeff Gluck, the CEO of XCIP Labs in an interview for Cointelegraph.
One thing is becoming apparent, a legal reckoning is coming for NFTs. While that may be scary for the marketplace, it may be precisely what is needed for the market to enjoy any mainstream success.
Shades of Napster
In many ways, the current NFT and crypto marketplace has a great deal in common with the internet of the late 90s and early 2000s.
It is a space where there is little regard for copyright law (or other kinds of intellectual property), large amounts of money are being thrown around on dubious investments and there is a lack of understanding as to what this will be and how it will change the larger world.
A reckoning came both financially and legally. The RIAA famously sued Napster in 1999 and the Dotcom bubble in the early 2000s forced a reconsideration of just what the internet was going to be long-term. Piracy didn’t end, and the internet didn’t die, but both were changed forever.
The current standard is not tenable. OpenSea, the largest marketplace for NFTs, admits that some 80% of the NFTs it hosts are infringing in one way or another. You simply cannot have a legitimate market that trades almost entirely in illegitimate goods.
This legal reckoning will hurt, but if the technology and its supporters can survive it and adjust, it may wind up being the best thing that happened to it.
To be clear, there are still many unknowns. The biggest is how copyright law will apply to marketplaces like OpenSea. Will the Digital Millennium Copyright Act (DMCA) protect them, or are their activities outside the bounds? We honestly don’t know.
What is clear is that the courts are going to have their say on NFTs and that includes a myriad of areas including trademark, copyright, fraud, contract law and other issues. The “wild west” days of NFTs are likely coming to a close.
However, there wasn’t much of a way those days could last. Courts and legal cases were always a certainty. It just appears that they are now on the horizon rather than a distant problem.