There is more to a Bored Ape Yacht Club NFT than merely an encrypted link to a JPEG image. According to the terms & conditions of acquiring an ape published by BAYC creator Yuga Labs, “Yuga Labs LLC grants you an unlimited, worldwide license to use, copy, and display the purchased Art for the purpose of creating derivative works based upon the Art (‘Commercial Use’).” That commercial-use license has been a key to the success of the BAYC brand. It has enabled an entire ecosystem of BAYC spinoffs and merchandise — derivative works — to flourish and greatly buoyed the value and price of the NFTs, at least until the recent market pullback.
But it has also created ambiguity. According to the T&C, “When you purchase an NFT, you own the underlying Bored Ape, the Art, completely. Ownership of the NFT is mediated entirely by the Smart Contract and the Ethereum Network” (emphasis mine).
Does that mean ownership of the intellectual property rights that were initially conveyed by the terms & conditions of purchase are also mediated entirely by the Smart Contract that comprises the NFT itself?
It’s not clear. And that ambiguity has now stopped actor and producer Seth Green, who originally purchased BAYC #8398, known as Fred Simian and planned to use his ape as a character in an animated series he was developing called White Horse Tavern, from moving ahead with the project. That’s because the NFT was stolen from Green through a phishing scam and subsequently resold (fenced?) through the OpenSea marketplace to someone known only as DarkWing84, who so far has resisted all of Green’s entreaties to return the chimp.
Does that mean DarkWing now owns the owns the IP to BAYC #8398, or does Green, as the original licensor, somehow still retain it? Again, it’s unclear. The BAYC T&C are silent on cases of theft. But the possibility that he could be sued for infringement if he went ahead with the White Horse Tavern project has apparently been enough to deter Green, at least so far.
While many legal experts believe a court would likely look askance at any claim brought by DarkWing, litigating is always a crap shoot, and potentially an expensive one at that.
That is precisely what’s happened, in fact, in another case involving a spinoff of Bored Apes, called Caked Apes, which features images of apes covered in frosting and candles. Members of the Caked Ape art project are suing each other over purported licensing and financial agreements made via text messages over Discord.
Artist Taylor Whitley has sued his other co-founders for infringing his artwork by cutting him out the project, along with his claimed share of the revenue from sales of the NFTs. The other co-founders, in turn, have sued Whitley for abusing copyright law to get OpenSea to remove the NFTs from its platform.
The two cases have drawn attention largely because of the relative success and high profile of the BAYC brand. But they highlight broader underlying questions about the suitability of NFTs as vehicles for conveying intellectual property rights and licenses, and whether cryptographic smart contracts can effectively replace the kind drawn up by lawyers and written down.
Code is law, except maybe when it isn’t.
ELSEWHERE: The deadline for submitting written comments in the U.S. Copyright Office’s inquiry into whether it should designate certain technologies as Standard Technical Measures under Section 512 (i) of the Digital Millennium Copyright Act is this Friday (5/27).
Section 512 prohibits online service providers from disabling or interfering with technical measures used by copyright owners to protect their works online as a condition of maintaining safe harbor protection from liability. But it also contemplates the development of Standard Technical Measures via multi-industry negotiations to be broadly adopted, without quite specifying how that is supposed to happen. Earlier this year, Congress asked the USCO to investigate whether it should convene such negotiations with the aim of identifying a limited number of STMs that OSPs would need to adopt to maintain safe harbor protection.
Federal Register notice is here https://docs.google.com/viewer?url=https%3A%2F%2Fwww.govinfo.gov%2Fcontent%2Fpkg%2FFR-2022-04-27%2Fpdf%2F2022-08946.pdf