[Guest post] Can the owner of an artistic work convert it into an NFT for its use in the Metaverse?

A few days ago The IPKat reported on the injunction issued by the Rome Court of First Instance regarding the unauthorized minting of NFTs from a trade mark perspective. Now, a further development on IP and NFTs comes from Spain, as Katfriend Mercedes Morán Ruiz (CEDRO) reports:

Can the owner of an artistic work convert it into an NFT for its use in the Metaverse?

by Mercedes Morán Ruiz

This question, among other issues, will have to be resolved by a Spanish court in an unprecedented dispute in this country.

Kat contemplating a mango ...

In May this year, MANGO, like many other companies, announced its commitment to the metaverse, despite the fact that, at the moment, neither the existence of such a world nor its accessibility can be assured, beyond some virtual spaces, as Second Life, where we have been interacting and playing for years.

On the occasion of the opening of a new store in NY, the well-known clothing brand created a collection of NFTs based on digital copies of works of famous artists such as Miró, Tàpies and Barceló, incorporating various outfits of the collection available at the store, to be displayed in the Decentraland Metaverse, at the coordinates 16.78 of the Museum District and uploaded on the OpenSea marketplace. MANGO is owner of the original paintings.

In this case, minting the NFTs by MANGO required the digitization of the physical paintings and presumably also uploading those digital copies on a storage web service or an IPFS (a kind of peer-to-peer network). In general, these acts, require the consent of the authors or rightsholders of the original works the NFTs referred to (In this sense, see Intellectual Property Rights and Distributed Ledger Technology with a focus on art NFTs and tokenized art, commissioned by the European Parliament’s Policy Department for Citizens’ Rights and Constitutional Affairs at the request of the JURI Committee). Moreover, it seems that MANGO also transformed the original works, including new elements on them, and displayed the output on OpenSea. As a result, also the exclusive rights of adaptation (covered by Spanish law) and public communication are involved in this matter.

Obviously, the response of rightholders was immediate. Last week the media reported (see here) that the Commercial Court Number 9 of Barcelona has issued a decision on the precautionary measures filed by VEGAP, the sole copyright collecting society which in Spain represents authors of artworks against the well-known Spanish fashion brand. What is interesting about the order on precautionary measures is the fact that the judge, in addition to questioning the right of MANGO to digitalise and convert some of the paintings it owns into NFTs, requires those responsible for the Opensea platform to transfer the disputed NFTs to a physical wallet designated by Vegap for their custody until a final judgment beyond appeal is issued.

We will have to wait until the final judgment is issued. Pending that, this cat lover (and dog lover, and also lover of NFTs) wonders about the following few issues.

Corpus mysticum Vs. Corpus mechanicum

We all know, and in particular the owners of paintings and other artworks should know, that the ownership of a material medium in which an original work, for example, a painting, has been incorporated, does not confer any copyright on such work. Thus, the owner of a canvas, in general, cannot make reproductions of the work it contains and distribute these copies or make them available on the Internet, unless such work is in the public domain or is subject to any limitation or exception to the rights of its author [see IPKat here].

Public exhibition Vs making available in the metaverse

The list of E&L to copyrights contained in Directive 29/2001, which may be voluntarily adopted by the State members, includes a limitation to the reproduction right and right of communication to the public in Art. 5(3)(j): “for the purpose of advertising the public exhibition or sale of artistic works, to the extent necessary to promote the event, excluding any other commercial use”.

The Spanish legislator decided not to incorporate this limitation in the legislation. However, since 1987, the Spanish Intellectual Property Act has granted the buyer of artworks the right of public exhibition of the work acquired, unless established otherwise in the sales agreement (Art. 56(2)).

Bearing in mind that: (1) Spanish legislation allows the buyer of artworks to publicly exhibit these, but not any other way of “making available”; (2) the acts of exploitation are independent from one another and the consent for each one of them is required; and (3) any limitation to the copyrights must be subject to a strict interpretation (see inter alia CJEU Judgment C‑5/08, paragraph 56; C‑435/12, paragraph 23), in Spain, the owner of an original artistic work could not create a digital twin of their works for its use in any metaverse. This would not be the case if the work were in the public domain or if it could be considered an orphan work owned by a museum or a library.

In any case, MANGO did not create some digital twins of its works for the purpose of advertising a public exhibition, but rather, as can be concluded from the press articles, a different commercial use which would also include the transformation of the original works. We will have to wait, however, for the final decision on this interesting matter.

In short, the lovers of copyright have plenty of time for fun ahead.