NFTs and Copyright Infringement

Imagine you are the artist behind an image and you hold the copyright in it. On one of your leisurely strolls across the internet, you find that someone has made an NFT of your image and has minted a thousand of these NFTs. They are now recorded on the blockchain. Only, you never gave permission for any of it. Now the image is public and available for anyone to see. This is not just a hypothetical. There have already been instances of in-game paintings, tweets and digital artworks being tokenised without permission. So what do you do when this happens?

Is this infringement?

Well, it depends. NFTs can refer to an artwork in a couple of ways. Most commonly, the image is hosted on a server and the NFTs minted, and sold, refer to that image. Publishing an image on the internet without permission will almost certainly mean infringement, as it constitutes ‘making available to the public’, which is an exclusive right of the copyright holder in every country party to the Berne Convention. Making available to the public, under Dutch law, includes ’the publication of a reproduction of the whole or a part of the work’, which is easily established in this case.

Another option is that the NFTs refer to an image which has not been published online. Either because the file the NFT’s hash refers to has been sent to the NFT buyers privately, or because they do not have access to the file at all (in which case you should think twice about what you have actually bought). If the file has been sent privately, that could still be infringement, as it may be seen as distribution, which is also an exclusive right of the copyright holder. If the buyers do not have access to the file at all, then there is no infringement, because although the NFTs refer to a file which has certain copyright-protected properties, the file itself has never been made public.

A last option is that the image itself is stored on the blockchain along with the other elements of the NFT. That is not often the case, as it is very expensive to store larger files on the blockchain. Even CryptoPunks, for example, which are only 8-bit images, are not stored directly on the blockchain. Instead, your token includes a hash and metadata which refer to a composite image.

Figure I: CryptoPunk 7488
Source: https://www.larvalabs.com/cryptopunks/details/7488

If that is the case, however, it is certainly infringement, as it means that all thousand instances of the image are now recorded on the blockchain and thus made available to the public. Anyone can view any of them.

How to proceed?

Unfortunately, establishing infringement was the easier part. The question is how to handle NFTs that constitute an infringement. That, too, depends on the way the image is referenced.

In the first case, where the image file the hash refers to is hosted on a server, it makes the most sense to approach whoever hosts it. After all, the actual infringing instance of your art is being made available to the public there. If the image is hosted on a centralised server and the administrator agrees to remove it, the issue is solved. The effect is that all the minted NFTs now reference nothing. In other words, the NFT has become ’empty’. This will probably mean that the seller has to refund the buyer, but that is not certain. After all, what is bought with an NFT is not the image but rather something akin to a certificate of authenticity, a collectible in its own right.

There is a very real possibility, though, that the image is hosted on a decentralised server. That will make removing the image close to impossible, as information is stored in a peer-to-peer way, which means the image could be stored on many devices rather than one. Anyone who has used that server network could have saved or exchanged part of the image. Even tracking who exactly has done so is not feasible. This is similar to how torrents work, where thousands of people may store a certain file to facilitate exchange.

If that is the case, or the image is stored on the blockchain itself, there is no easy solution. Blockchain technology was developed to store information reliably and permanently, so removing that information is almost impossible. In theory, a hard fork could remove the images. A hard fork is a radical change to the protocol of a blockchain network that can make previously valid blocks or transactions invalid (or vice versa). It is a very extreme measure, though, and could cause collateral damage. Usually, such forks are only implemented to reverse hacks or to correct important faults or security risks. All nodes or users would have to upgrade after the fork.

Figure II: A hard fork, which essentially splits the path in two. Users would have to upgrade to be able to follow the new path.
Source: https://www.investopedia.com/terms/h/hard-fork.asp

We do not yet know whether a court would impose such a drastic measure, but it seems unlikely. Given the severity of the measure, it may amount to an abuse of rights. A hard fork carried out to put right an infringement would cause annoyance or damage to many others, as it is not a casual change. The means would be disproportionate to the ends. You may have to accept that the image is now public forever, and settle for damages rather than removal. In all likelihood, you will have to take legal action.

Conclusion

If someone has minted NFTs of an artwork of yours without permission, it might constitute copyright infringement. That depends on how the NFT references your image, though. If the protected image is not actually included in the NFT on the blockchain itself, nor hosted on a server without your permission, then there is no infringing instance. That is unlikely, because an NFT containing nothing and referring to a hidden image would probably not sell very well. Then again, NFTs of single pixels have been sold, so never say never.

As we all know, it is very difficult to remove things from the internet. Even more so when we are talking about blockchain or decentralised servers. In the former, that is due to the permanent nature of blockchain. In the latter, it is due to multiple storage devices as well as the difficulty of tracking. So even if you can establish infringement in these instances, it will not be easy to have the infringing images removed. In most cases it will not even be possible. It may therefore be ’easiest’ to take legal action for damages rather than removal.

As yet, there is no EU legislation or case law directly concerning matters like these. It will be very interesting to see how courts conduct the balancing act of protecting copyright holders and preserving modern technology like blockchain.

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In cooperation with Saar Hoek