Note (3/16/2021): this post is kinda old and somewhat wrong, and i have some newer and better ideas on non-fungible tokens / NFTs.
Last week John pinged me on twitter to ask about a copyright license for CryptoPunks. I jumped at the chance to work on a weird digital blockchain art project.
Background. CryptoPunks are 8bit blockchain art. There are 10,000 unique punk portraits, with proof of ownership stored on the ethereum blockchain. The owner of a CryptoPunk can mathematically prove they are the single true owner. A CryptoPunk can be sold or transfered, but not copied or double-spent.
The Problem. Owning a copy of a thing doesn’t mean you own the copyright to that thing. 17 U.S. Code § 202. Just because you can prove you are the owner of a CryptoPunk doesn’t mean you also own the copyright to that CryptoPunk (let’s call this “Copyright-Owner” vs “Crypto-Owner”).
Goals. John wanted each Crypto-Owner of a punk to also be the Copyright-Owner. The primary goal is to give the Crypto-Owner the exclusive right to use punk as an avatar, to print the punk on physical media, to use copies of the punk for commercial purposes, etc. The secondary goal was to limit these exclusive rights, and ensure that third parties could do certain things with the CryptoPunk, like make a fan website.1 A third goal was to have the contract be short and easily readable.
Copyright is a legal right. A copyright owner has the right to prevent other people from doing certain stuff, like copying or displaying the protected art without permission.
A copyright is originally owned by the author of the work.2 The author can then only assign the copyright by a “writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” 17 U.S. Code § 204. More on this later.
Scenario 0: Just Blockchain
In this scenario, there’s no contract. By default, the original Copyright-Owner remains the Copyright-Owner, even as the CryptoPunk is passed from one Crypto-Owner to the next.
If the Crypto-Owner copies or displays her own CryptoPunk, she may be infringing the Copyright-Owner’s rights! That would be dumb. We need some kind of contract to fix this.
Scenario 1: Copyright Assignment
The most crypto punk way to accomplish our goals is to create a contract that forces a copyright assignment along with each transfer on the blockchain.
First, we’d have the original artist (e.g., John) assign the copyright to the first person to buy the CryptoPunk (Alice). Easy so far. We know John, and we know he wants to play along. We don’t really know Alice, but we can force her to sign a contract if she wants to buy the CryptoPunk.
But when Alice transfers the Crypto-Ownership to Bob on the blockchain, how do we force Alice to also transfer the Copyright-Ownership to Bob? And how do we force Alice to hold on to the Copyright-Ownership so that it’s available when the blockchain transaction happens? (i.e., how do we stop Alice from selling the Copyright-Ownership to Charlie before she transfers the Crypto-Ownership to Bob?)
The contract we wrote had a viral copyright assignment clause, inspired by the GNU General Public license. Each new owner, upon purchasing the CryptoPunk, would also have to agree to sell the copyright to (and only to) whoever buys the CryptoPunk on the blockchain.
Here’s the draft viral assignment contract.
One cool thing to do is to incorporate this viral copyright assignment clause directly into the ethereum smart contract. Sadly for CryptoPunks, the smart contract was already out in the world, and the code is not easy to edit. How could we get each Crypto-Owner to agree to this new viral copyright assignment? At this point, it was too late.
The CryptoPunks already had different Crypto-Owners all over the world, and we didn’t really know who they were. Since we couldn’t get their consent to the viral copyright assignment, we switched to plan B: the license.
Interlude: A “Signed Writing” is Required to Transfer Copyright
Can a blockchain smart-contract be a legally binding copyright assignment? Is all this legit? Yes, probably.
Unlike other types of contracts, copyright law specifically requires “an instrument of conveyance, or a note or memorandum of the transfer, in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.” 17 U.S.C. §204.
Does a blockchain transaction count as a signed memorandum of transfer? It should! The 4th Circuit has said that a “click to agree” box on an electronic form is sufficient to satisfy the copyright transfer requirements.
A blockchain isn’t a “click to agree” box, but it is … much better? It’s mathematical proof that someone with a certain private key agreed to the transaction. 3 I’d say it satisfies the legal requirements for copyright transfer under 17 U.S.C. §204, as long as the copyright assignment is a conspicuous part of the blockchain contract. Specht v. Netscape, 306 F.3d 17 (2d Cir. 2002).
Scenario 2: The Copyright License Arrangement
In the License Deal, Larva Labs, LLC would own the copyright, and it would license the copyright out to each Crypto-Owner. Larva Labs will always be the Copyright-Owner, but each Crypto-Owner becomes a Crypto-Licensee (i.e., a person who has permission to do certain set of things with the CryptoPunk).
There are a few advantages to this licensing system.
- We don’t have to worry about Alice selling the Copyright-Ownership to Charlie before she transfers the Crypto-Ownership to Bob. In this scenario, Alice never owns the copyright, so she can’t transfer it.4
- It will work with our current CryptoPunk smart contract. No need to adjust it, fork it or whatever. We can just slap on a legal layer on top of the crypto layer.
The disadvantage is that this license scenario requires a trusted central authority to operate (Larva labs), and is thus neither crypto nor punk. Larva Labs has the right to revoke or modify this copyright license. If the license is revoked, then certain uses of the CryptoPunks might be copyright infringement again.
Here’s the draft of the copyright license agreement.
We have a contract that accomplishes our main goals of aligning Crypto-Ownership with Copyright-Ownership. It is an adequate legal solution, but it is not crypto and it is not punk.
If you are starting a new blockchain art project, consider including some copyright provisions before you launch. You can incorporate creative legal maneuvers if you plan ahead.
somewhat related posts:
These exceptions were likely fair use anyway, but we just wanted to make a few of them explicit in the contract. ↩
here, the original author was John, but he assigned the copyright to his entity, Larva Labs, LLC. ↩
sure a private key can be stolen, but what is the baseline security we’re measuring against here? A docusign? A handwritten signature? Neither are super-duper secure. ↩
it’s a non-transferrable and non-sublicensable license. ↩