Getting sued for $150k for flipping an NFT

Here’s an nft you might have seen before It’s a crypto punk and the cheapest one You can buy today is 73 eth that’s down From a high of 132 eth back in august Which isn’t a great look for what’s Supposed to be the bluest of all blue Chip nft collectibles now take a look at This bad boy this is a crypto funk with A ph the art is the same as a crypto Punk but only with the flipped image you Can’t even buy this on openc anymore Because it was taken down after getting A copyright strike but you can buy it on Their own website and the floor on this Collection has been on the rise and is Now at about 1.8 e so why are the punks Declining while the funks are moving up Well part of the reason comes down to a Change of attitude in the market about How certain nfts should be valued and This affects all projects to some degree Not just the crypto punks so basically What you need to know is that when you Buy some nfts they give you more in Terms of ownership than when you buy Others and more investors are starting To pay attention to what an nft is Offering and guys i recommend you watch This entire video because this is an Incredibly important factor that affects You know one whether you’re able to use The art of your nft in any way other Than just you know looking at it and two The likelihood that your nft will

Perform well on the secondary market in The coming years on top of that we’re Gonna talk about why the rise of crypto Funks and many other similar collections Are putting people at risk and there’s a Very realistic scenario where we could See lawyers show up in the nft space Start suing people for millions of Dollars left and right and as you’ll see You can get hit with one of these Lawsuits just by flipping an nft just by Buying and selling and this isn’t fear Mongering i actually do think that this Is a bigger risk than many people think So let’s get right into it first we have To ask what do you actually own when you Buy an nft well we know that you own a Token that will live on the blockchain Forever and this token can point to some Other object by using metadata the Object can be many things but this early In the nft space you know it tends to be An image you know a jpeg and this image Can be either fully on chain which means That everything you need to recreate the Image is found in the metadata of the Token or it can be a url pointing to an Image that lives on a third-party Website so far so good but things get Trickier when we talk about the Intellectual property rights of that Image because if we look at the you know Traditional content world we buy things All the time without expectations that

We’re gonna get full copyrights to the Content itself when you buy an album you Don’t all of a sudden get the right to Commercialize that music for your own Profit and this is usually also the case When you buy a piece of art from a Traditional art gallery and that’s Because at least in the united states All works of art are by default Protected by federal law and a copyright Exists automatically and it belongs to The original creator but when it comes To nfts we’ve seen all types of Experiments that go above and beyond This kind of relationship so let’s take A few examples of these new types of Ownership models and keep in mind i’m Not an ip expert so definitely do your Own research before you start a business With your nft or something like that now The first model i want to talk about is The traditional one where all of the Copyrights to the artwork belong with The original creator this is the model That crypto punks use and why they’ve Been getting a lot of heat lately if you Own a punk the only thing you’re buying Is the right to display your punk and The right to resell the nft and you do Also get some utility out of you know Being able to access the discord or Getting air drops from larva labs but That’s a separate topic but what you Cannot do for example is go out and

Start a tv show that’s starring your Crypto punk and even in the case of Punk’s comics they had to create Completely new characters because of This very reason and that’s because all Of the ip rights belong with larva labs You know the creators of crypto punks And this is why they’re the ones that Are going out and signing all the big Money deals with hollywood talent Agencies and if you’ve been around the Nft space long enough you’ll know that No other brand has gotten more Derivative nfts than crypto punks there Are maybe hundreds of nfts at this point That have copied this design in one way Or another and let’s be clear many of These are illegal because of copyright Infringement not all of course but more Than you think and one of the most Egregious examples of this was Cryptofunks and they actually received a Dmca takedown request by larva labs Which tells us that they do care about Enforcing this law to some degree Personally i’m never buying a crypto Funk or another clear derivative of a Copyrighted work that’s because you know I recognize that there’s a clear risk of Getting sued as we’ll get into in a Minute and it’s just not worth it given That there’s you know amazing Opportunities in the space that don’t Come with those strings attached to

Illustrate why i think this is a big Risk i’m going to refer to this blog by Jonathan schmalfeld aka the nft attorney And so here he writes that under current Copyright laws any person who sells an Infringing work even if that person is a Completely innocent actor who had no Idea what they were selling violated Somebody else’s copyright is liable for Actual damages or 750 to 30 000 per Infringement if that infringement is Found to be willful i.e the person knew This was a copyright infringement but Sold it anyways that number bumps up to 150 000 So yes if you buy and sell one of these Nfts you are likely putting a target on Your back and let’s look at a very Specific example so jonathan points out This one post with a collector bragging About making a hundred k by flipping a Crypto funk and he says right now if Larva labs or the individual punk holder Which this funk emulates hired me or any Other attorney it would be one of the Easiest cases of willful infringement That attorney had ever handled this Person knows about punks he knows about The cease and desist from larval labs to Open sea and subsequent removal of funks From that marketplace which means that This person could easily be on the hook For a hundred and fifty thousand dollars Plus attorney fees plus court costs plus

Paying for his own attorney now whenever I make a post about you know some legal Risk associated with nfts i’ll always Get some commentator below saying Something along the lines of bro stop The flood it’s the wild west out here There’s no one gonna be suing me i’m Just built different and look it’s true That so far we haven’t had a ton of Legal activity although we have had some Such as this example from a couple of Weeks ago where quentin tarantino was Sued for selling an nft that infringed On miramax ip but it’s very likely that More and more lawyers are paying Attention to this space simply because Of the fact that you know the money Associated with nfts has grown Exponentially and the deals that some of These collections can sign have become Way more lucrative and so you know the Damages that they can realistically Claim are also going up and while it Might not be worth it to go after just One individual funk what you can do is Bundle a lot of these together hire a Law firm and tackle them all in one case As jonathan puts it think of the other 9 999 funks and now think of soul punks And all the other crypto punk knockoffs Suddenly it makes financial sense to go After these individuals now here’s the Funny part it’s not just the crypto Funks and other derivatives that are at

Risk of copyright infringement you also Have you know the crypto punk owners who Try to commercialize their punk beyond Just displaying it so hey we found Something both sides can agree on after All they can both be sued by larva labs Remember that people get really greedy When it comes to enforcing copyright Like in the case of facebook and tivo Fighting over who owned the rights to The thumbs up button and by the way the Stance here at giancarlo buys tokens is That the like button is meant to be free For all so please go ahead and smash it Without any fear whatsoever and look Even if you don’t get sued there’s a Good chance that these you know huge Marketplaces are going to be taking Copyright infringement more seriously in The future for example openc is Apparently considering you know going Public with an ipo we have the coinbase Platform which is coming and they’re Already public and then you have Kickstarter which is about to get into The game as well with a blockchain Fundraising platform of their own it’s True that nobody can take your nft away From you and you know it’s going to Exist forever on the blockchain but they Can certainly marginalize it to the Point where it barely gets any liquidity All right so with that said let’s take a Look at the second copyright model that

Is gaining popularity with nfts and this Is the one where not the creator but the Owner of the nft holds the full Copyrights to the artwork the example i Always use for this model is the board Ape yacht club where you completely own The rights to the artwork for your Specific ape what this means is that you Can commercialize your own ape and we’ve Seen this already as in the cases of Jenkins of valet signing with caa and With kingship signing with universal Music group if any of these individual Brands take off well first you know the Owner is gonna make a lot of money but Second it’s gonna bring value back to The collection as a whole and raise the Profile for the bordeape yacht club Brand so if your priority is complete Ownership of the entire stack so not Just the nft but the artwork itself then This is probably going to be your Preferred model this means that people Can right click save your ape all they Want but if they do try to commercialize It beyond that you can sue the hell out Of them if that is your style okay so Far we’ve spoken about two major models Right one where the creator owns the ip And the other where the ip carries along To whoever owns the nft now there are Other variations of course you know that We don’t have time to talk about but There is a third major category that we

Do need to discuss and that is cc0 or Creative commons this means that the Intellectual property is not protected By any copyright law and anyone is free To use the artwork as they see fit and They can even commercialize it if they Want the mona lisa perhaps the most Famous painting of all time falls under This category as well as art from other Painters like vincent van gogh some of The biggest nfc projects have also Chosen to go down this route including Nouns which i did an entire video on That you can check up here as well as Cryptos this means that anyone is free To use these designs for their own Projects and as a result we’ve seen a Ton of derivatives come out like nodes Which is a combination of both projects Now understanding why an investor would Prefer not owning any of the Intellectual property that they’re Buying requires some jedi level meme Philosophy basically the argument goes That if you embrace the magic of the Internet and you encourage people to Take the artwork and run with it to make Derivatives and memes then it’s more Likely that they’re gonna make the brand Go viral and that’s gonna bring value Back to the original collection beyond That there’s an even more philosophical Reason why some people do prefer to have Their nft in the public domain as we see

Here in a tweet by punk4156 who was one Of the founders behind nouns it’s not About copyright versus no copyright it’s About making the pixels as censorship Resistant as a token they’re attached to And 4156 believes in this argument so Much that just yesterday he very Publicly sold his crypto punk that he Had built his entire brand around Although i wouldn’t necessarily call him A martyr since he also made it 10 Million dollars from the sale after Having bought it for 1 million dollars Earlier this year what’s funny about the Public domain argument is that you end Up agreeing with the right click savers In that anyone can and should copy the Artwork whenever they want so let’s sum Up these three categories as simply as Possible and keep in mind that you know Copyright law is complex and it’s like a Spectrum with many different flavors but I think this is a helpful way to at Least frame the most popular options so First you have creator copyrights this Is where the creator owns the ip and It’s the default case the pros here are That the original creator has highest Freedom to sign partnerships that Benefit the brand this is how it has Mostly worked in the past and we’ve seen Huge brands emerge from using this Framework the cons are that the Collectors only get display rights

Meaning that they can’t do much other Than look at the nft they also lose Potential benefits from the board api Club style decentralized studio model Okay second you can give full rights to The nft owner the example here is Boarded yacht club and the pros are that The buyers get full ownership and Maximum freedom also you can create a Decentralized ip studio that brings Value back to the collective the cons Here are that the og creator misses out On potential gains and it is more Difficult to craft a coherent franchise Without having central ownership of all The ip and finally you have cc0 or Public domain again this means that Everyone is free to use the artwork as They want and an example of this would Be cryptos the pros here are that by Letting others make derivatives it can Help a brand go viral and also it might Be the truest to crypto philosophy but That’s objective the cons are that both The original creator and the collectors Lose the ability to sign deals and they Can’t enforce against potential bad Actors that use the brand in shady ways Keep this in mind as you buy nfts Because it could affect the future value If the market starts preferring one Model over another if you’re not sure What you own with a specific nft head to Their terms of service page and see what

They’re saying around licensing alright Guys that’s it for today thanks for Watching and i’ll catch you the next Video