26 May 2021
NFTs, Obviously – Part 2
By Amalyah Keshet, Senior Consultant
In the month since we first tackled the subject of NFTs, art and copyright, a mountain of news and stories of increasing insight or just plain weirdness has accumulated. There is much to keep up with about the craze, the crypto tech involved, and speculation about the art market, much less the implications for copyright and the cultural heritage sector. A few examples here to illustrate the twists and turns.
Just the headline “Model Emily Ratajkowski Blasted Richard Prince for Stealing Her Image. Now, She’s Taking It Back—and Selling It as an NFT”[i]may suffice to indicate the legal acrobatics encountered in the NFT market. Simply put, one of artist Richard Prince’s provocative appropriation works from a few years ago involved reproducing (without permission, needless to say) one of this particular model’s Instagram posts, printing it on canvas, exhibiting it and selling it for $90,000[ii]. The model has now retaliated. “Model and actress Emily Ratajkowski is selling a link representing a composite image that features a photograph of herself in front of a print by another artist that contains a photo (of herself) taken by (presumably) yet another artist. In other words, she is selling an NFT”, as one report put it, under the headline “How many layers of copyright infringement are in Emily Ratakowski’s new NFT?”[iii]. Good question. Appropriation art, publicity rights, and copyright make exciting bedfellows, and adding the initials NFT to the mix obviously ups the game. This new NFT will be appropriately titled Buying Myself Back: A Model for Redistribution.
Then there is the case of an NFT of a Basquiat drawing withdrawn from auction when the artist’s estate intervened[iv]. This is a more straight forward incident: the estate pointed out that nothing had been authorised by the artist’s legal representatives and it was a clear infringement of copyright, amongst other things[v]. This brings up another, broader problem: without an active estate and/or copyright lawyer, most artists risk get ripped off in this game.
In another story, a sale by Sotheby’s featured, somewhat inevitably, “The Fungible Collection,” a “novel collection of digital art redefining our understanding of value.”[vi] In this case, more than $17 million. It included (with bids in excess of $1 million) The Switch by an artist known as Pak: a monochrome 3D construction that will be changed by the artist at some unspecified moment in the future. We can take down by a notch the claim that NFT’d digital artworks are permanent, and note in passing that NFTs themselves are actually selling at 70% less on average than in February.[vii][viii]
Indeed, not all NFTs have gone as planned, despite the claims that they are absolutely secure and permanent. An NFT is, after all, just metadata, a certificate of sorts, pointing to an URL. “And that pointer, … can be suppressed for a number of reasons, including a violation of a marketplace’s terms and conditions. Copyright violations and stolen artworks are a feature of the emerging NFT space.”[ix]
In addition, the vulnerability of the NFT market was exposed when a hacker going by the pseudonym Monsieur Personne produced a “second edition” of Beeple’s famous record-selling NFT work, as part of an ongoing project titled NFTheft[x]. He employed something called “sleepminting,” “a process that complicates, if not corrodes, one of the value propositions underlying non-fungible tokens.” In so doing, he raised questions about coding, copyright law, and consumer harm. Much more detail on this by clicking here.
In addition to this story, “established artists and newcomers alike have complained about their publicly viewable work being transformed into NFTs and peddled to potential buyers at eye-watering prices, without their permission. Those responsible sometimes hide behind anonymous Twitter accounts[xi], making it difficult to know where to start in order to contest copyright violations.”[xii]
There is a lot of uncharted territory here in the realm of things like intellectual property. In the opinion of one intellectual property lawyer specialising in the cryptocurrency exchange, “it’s the Wild West.” Leaving aside institutions that specialise in the cultural heritage of the western United States, it seems museums might choose to stay on the sidelines for now.
Those investors who do rush into the game tend to already be speculative buyers who are into crypto markets in general. More established art collectors are not running to buy NFT works, and are more attuned to the likelihood of fraud and copyright issues[xiii]. Questions of jurisdiction in a global crypto market also put established collectors off, and of course nothing has been tested in the courts yet. Risk is either part of the adrenaline high, or a reason to be wary of legal complications and their own sky-high cost.
Most recently, we entered new territory in the new territory. Dipping an experimental toe into the craze, New York art critics Jerry Saltz and Kenny Schachter decided to have fun and put an NFT work up for auction, just for the hell of it. It sold for $95,000, which they donated to charity. Saltz reports that the buyer apparently has been threatening to “shred” the NFT “unless I paid him “a transaction fee of anywhere between $2,000 – $10,000…but it can still be recovered by making one single Ethereum transaction (to him). If that doesn’t happen by May 28 then it’ll be shredded and lost forever.” Saltz’s reaction? “Do whatever you want with it. You paid like $95,000 for it.” So much for NFTs being “immutable,” serving as an indestructible provenance record, and so forth. But Saltz asked a very interesting question: “What [would] you artists do if a collector threatened to destroy your work if you did not pay him $2,000-$10,000?” The head-on collision of blackmail and artists’ moral rights, in the crypto market or in the traditional art world, is a whole new question legal scholars might have to dive into.[xiv]
This head-spinning tech, legal and financial maze leads one to think that most museums – you know, the stodgy old kind that care about maintaining professional ethics, public trust, fiscal and institutional reputation – might choose to install a moat, drawbridge and just in case a loaded catapult around its collections management strategy, in defence against the NFT dark arts. At least until museum boards and legal departments and collection managers and IT staff and everyone else really understands the thing. A detailed look at museums, intentional deaccession, and using the NFT market appeared this month. It is too long and thorough to summarise here, but relevant to our sector and it will repay careful reading for anyone who wants to dive in, click here to read it.
More to click on:
“There’s one aspect to NFT culture that can seem utterly bewildering to outsiders: Someone who buys an artwork NFT owns only the NFT. The NFT typically contains data that corresponds to information about the artwork, including the creator, the title and a link to an online copy of it. But the visible part of the art, the JPEG or animated GIF, the thing you look at? That is just a digital file hosted somewhere online, with the NFT commonly pointing to it. (If that site hosting the art goes down, the NFT no longer even points to anything.) Anyone can go to SuperRare or another NFT art site, right-click to copy the file, and then post it to Instagram or Facebook, say, or make it the background on a phone. So, what, precisely, do the collectors think they’re getting when they buy an NFT?”
A good summary article from the NY Times: The Untold Story of the NFT Boom, click here to read it.
We can’t overlook the environmental issues caused by NFTs and blockchain technology in general, which apparently will not be solved soon. “According to the Cambridge Bitcoin Electricity Consumption Index, bitcoin-mining operations worldwide now use energy at the rate of nearly a hundred and twenty terawatt-hours per year. This is about the annual domestic electricity consumption of the entire nation of Sweden… At a time when the world desperately needs to cut carbon emissions, does it make sense to be devoting a Sweden’s worth of electricity to a virtual currency? The answer would seem, pretty clearly, to be no. And, yet, here we are.” Click here to read the article in full.
© Naomi Korn Associates, 2021. Some Rights Reserved. The text is licensed for use under a Creative Commons Attribution Share Alike Licence (CC BY SA)
Disclaimer: The contents of this blog post are based on the assessment of Naomi Korn Associates Ltd at the time in which the resource was created (May 2021). The contents should not be considered legal advice. If such legal advice is required, the opinion of a suitably qualified legal professional should be sought.