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Expert Analysis
June 20, 2022

NFT Artists Must Unite Against IP Trolls

Without a Digital Art Defense Fund, artists will soon be forced to foot hefty legal bills all on their own
Credit: Ganbrood, Untitled, 2021. Courtesy of the artist
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NFT Artists Must Unite Against IP Trolls

If you have ever taken an Uber or Lyft in New York City, you may have noticed you were charged a small fee on top of the price of your ride. If you ask your driver the reason, they will tell you every rider pays it, and it goes into The Black Car Fund to support drivers injured on the job. Before New York state legislators created The Fund in 1999, livery drivers were on their own if they got injured. Today, the Fund pools resources to cover medical bills, physical therapy expenses, and lost wages. 

Digital artists are now working under conditions just as precarious as drivers once were, and they deserve their own version of The Black Car Fund.

As we’ve noted previously, artists who are creating innovative digital works take on a potentially costly burden when they mint NFTs — that they will have to defend themselves against copyright or trademark infringement lawsuits. 

Copyright law is intended to promote progress in the arts, and US courts should ultimately decide that NFTs made using GANs do not infringe copyright. US trademark law also recognizes “fair use,” a category into which many fine art NFTs should fall. However, those decisions will likely come at a steep cost. Some unlucky artists will have to pay the price of making the arguments in federal court. Not only is it unfair that they’ll be answering individually for the activities of the whole community, but the whole community will be impacted by the outcomes. How persuasive these initial defenses are will set a precedent for the field as a whole.

Ganbrood, Of Exploration and New Found Riches, 2021. Courtesy of the artist

NFT artists who are sued for infringement in the coming months and years will need access to resources, just like injured ride-share drivers. We are therefore proposing that a fund be created to offer support with the legal fees. The Digital Art Defense Fund would operate in much the same way as The Black Car Fund.

All participating NFT marketplaces will charge a 3% fee on all purchases, to be paid by the buyer. These funds will be collected by the marketplaces, and sent to the Fund.

The Fund can then disperse the funds, according to predetermined criteria, to artists defending themselves against infringement lawsuits. The Fund could be managed via DAO, or through another trust-like mechanism. 

The Digital Art Defense Fund would serve many purposes. First, it would dampen the coercive effects of the threat of suit. The current Notice-and-Takedown process makes it easy to complain about copyright violations and have materials quickly removed. For the most part, host sites simply remove the object of alleged infringement, leaving creators with little ability to push back. This is because to object (by filing a “counter notice,” in the terms of the statute) is to agree to show up in court wherever it is requested. Few people take this lightly since federal litigation is expensive. The Fund would give creators more leeway, freeing them from the burden of defending their work alone. This should embolden artists to fight back against takedowns, keeping more material online and accessible to the public. 

Ganbrood, Latent Space Folded, 2021. Courtesy of the artist

The Fund might also support artists in taking even more aggressive action. For example, our last post described an NFT artist receiving a notice and takedown letter from Lamborghini. The artist responded publicly and confidently that his use was fair. But if The Digital Art Defense Fund had existed at the time, he might have reached out for support to file for a declaratory judgment, offering assurance from a court that his use was not infringing. Few artists are in the position to take this type of action independently, but with pooled resources, companies would need to rethink their strategy of using takedown notices to intimidate artists, and only file these kinds of notices when they actually had a strong case. 

With the Fund, artists would not have to sit back while their work is taken down or settle suits for fear of an expensive legal battle they cannot afford.

This would expedite the courts addressing issues around copyright and trademark infringement, lending clarity to what is currently an extremely gray area. The uncertainty surrounding NFTs has had negative impacts on the market, and clarity could lead to both artists and buyers feeling more comfortable with the technology.

The Fund would also correct the balance of power between artists and marketplaces, allowing artists to decide which suits they wish to defend. In the current system, it is the marketplaces, not the artists, that generally receive takedown notices, with the statute incentivizing marketplaces to respond by taking down the “offending” work quickly rather than assessing the validity of the complaint, or helping the artist to do so. Marketplaces also try to push infringement liability onto each individual artist through their terms of use, even as they benefit commercially by offering a wide range of works for sale. As we’ve argued, though, no individual artist is well-positioned to push back, either against a site’s terms, or a confusing, legalistic takedown notice. The Fund would support artists themselves in deciding whether and how to respond.

Ganbrood, Affectionate Iconoclasm., 2021. Courtesy of the artist

When judgment is finally passed, The Digital Art Defense Fund would increase the likelihood of the right decision being reached because the defense would be better funded. As discussed in our previous post, the US legal system means that once this issue is litigated and a court renders a decision, that decision is binding on all others in a similar position. Subsequent actors would not be able to argue that the initial defense was underfunded, leaving arguments on the table. A Digital Art Defense Fund would ensure that this decision is made with all of the necessary information available.

Although The Black Car Fund was created by statute, parallel programs are not statutorily required. We propose that the NFT community pressures marketplaces to participate voluntarily, in much the same way that collective action was used to pressure NFT marketplaces into adopting standard minimum royalties for artists. Since there are a relatively small number of NFT marketplaces all competing for artists, that pressure is likely to be effective once again. The Digital Artist Defense Fund would give marketplaces a competitive advantage by making them more appealing to artists, at the same time as it offers artists greater autonomy in building their reputations. 

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Maude Wilson is a member of the Harvard Law School class of 2022. She is co-president of the Harvard Law School Blockchain and FinTech Initiative and an advanced student at the Cyberlaw Clinic at the Berkman Klein Center for Internet & Society. She serves as an advisor to the Blockchain for Social Impact Coalition and as research assistant to Christian Catalini at MIT. She will join Davis Polk & Wardell as an associate in the Fall of 2022. 

Samantha Altschuler is a member of the Harvard Law School class of 2022 and co-president of the Harvard Law School Blockchain and FinTech Initiative. She is also an advanced student at Harvard’s Cyberlaw Clinic. In addition to her role as an advisor to the Blockchain for Social Impact Coalition (BSIC), she has served as a research assistant for the Berkman Klein Center for Internet & Society. Her work has been published in the Stanford Journal of Blockchain Law & Policy. She will join Wachtell, Lipton, Rosen & Katz as an associate in the Fall of 2022.