Court in Barcelona issues injunction against Mango’s NFT use in the metaverse

NFTs on the metaverse, we just need AI for buzzword bingo.

Courtesy of the Commercial Law Court in Barcelona (Juzgado de lo Mercantil), we are getting one of the very first rulings dealing with the interface between intellectual property, NFTs, and the metaverse (previous decisions have been about property itself). In other words, perfect Technollama territory (text of the decision here).

The dispute

The ruling involves the clothes chain Mango, and the Spanish collective society for artists VEGAP (Visual Entidad de Gestión de Artistas Plásticos). Back in March 2022, Mango announced that it was entering the metaverse, more specifically, it was going to be displaying a series of unique works by artist Farkas in a virtual museum located in the Web3 site Decentraland. The collection was set to re-interpret several works of art, including Oiseau volant vers le soleil and Tête et oiseau by Miró, Ulls i Creu and Esgrafiats  by Antoni Tàpies, and Dilatation by Miquel Barceló. All works are still under copyright, and are by Spanish artists. VEGAP sued for copyright infringement in its role as collective manager on behalf of Spanish artists, alleging that displaying them and turning them into NFTs infringes the exclusive moral rights of integrity and disclosure, and also the economic rights of communication to the public, reproduction, and adaptation.

Here is where things get interesting. Mango owns the physical copies of all of the works, and in its response, it claimed that by this fact it doesn’t infringe any rights. Moreover, it replied that the digitisation of the works does not infringe on the exclusive rights of the author, and that such adaptations are a “harmless use” which only affects the rights of the authors. They also argued that the works were not reproduced, that they were just re-imaginings of the artworks, in other words, adaptations, and that the NFTs are not reproductions of those either, they are digital assets that haven’t even been minted yet, and can only be viewed using an NFT platform. Even more interesting, as the assets have not been minted, they were actually not in the possession of Mango, and are therefore only in existence as a listing in OpenSea.

The injunction

This first resolution is not the final decision, it is just a response to a request for an injunction requested by the claimants. Here the court goes through some procedural considerations that I will not discuss, but the interesting aspect is the nature of the injunction that was eventually granted. As the process is ongoing, the court decided to make sure that the potential infringement could not continue, but how do you do that with an NFT?

Perhaps it is important here to try to determine the nature of the NFTs in question. The ruling doesn’t list the address of the offending NFTs, but from what I can gather from the press releases and accompanying social media posts, they consist of dresses and garments that have been created and inspired by the above mentioned artworks. Besides being on display in Decentraland, they were going to be sold on the platform OpenSea, the collection itself is still on display, but the tokens have been de-listed. I also went to Decentraland’s Mango store, and the items were not there. In fact, the place was deserted, but I digress.

If nobody inhabits the metaverse, does it still exist?

Here follows an interesting discussion about the potential for harm, and the nature of NFTs. The court understood that de-listing of a work is not the same as the destruction of the tokens. As the items are no longer listed, something has to be done with the tokens for the duration of the proceedings, and here is where one of the most eye-catching discussions took place. The court was not sure about what was going to happen with the NFTs, as they were in the custody of OpenSea for the time being. So the court came up with a very novel solution: the claimant will provide a cryptocurrency wallet, as well as 1,000 EUR as a deposit, this will be used to keep custody of the allegedly infringing NFTs. The wallet will be given into custody to the court for safe-keeping for the duration of the proceedings, and the injunction includes the order to OpenSea to transfer custody of said tokens to be deposited to the claimant’s wallet.

I haven’t decided if this is a useless and needless procedure, or absolutely genius. Or perhaps both.

The merits of the case

Firstly, I’m not a Spanish lawyer, so please take my musings with a pinch of salt, I’m discussing based on general principles, if I miss something important specific to Spanish law please let me know in the comments.

The first aspect of the dispute is the extent of Mango’s rights as the owners of the physical artworks. This may sound confusing to those unfamiliar with art copyright, but when one buys an art piece, one does not purchase its copyright, that would have to be transferred separately. Ownership of a physical work does not guarantee ownership of the copyright. It is stated in the ruling that VEGAP transferred the right to publicly display the physical works, but not others. Here the court is assuming that this right to display does not give the right to digitise the work and display it and sell it as an NFT.

The second question that the court will have to analyse, and to me it is the most important, is whether making an adaptation of a work in this manner is infringing copyright. I haven’t been able to find a side-by-side comparison of the original artworks and the adaptations, only a few dress screenshots. Based on the limited items that I have seen, I’m not convinced that this is infringement, but I will reserve my judgement for now. I will just point out that styles and ideas are not protected, only the expression of the idea. Are the artworks recognisable in these adaptations? Is there substantial copying?

If the court were to decide that these designs are indeed infringing (and based on what I have seen that is a big if), then we should ask the important question of whether minting an NFT of such an infringing work is in itself an infringement, and therefore selling and displaying such an NFT is a communication to the public.

This is a complex question that I cover extensively in one of my articles (here). To make a long story short, I do not think that the act of minting is protected under the exclusive rights of the author, this is because an NFT is not a digital representation of a work, it isn’t even encoded using the work by means of a hash or any similar operation, in fact, you do not even need a copy of a work in order to mint an NFT, it is quite simply a token comprising an address in a blockchain, as well as a TokenID, and it could contain other information such as the author, the title, and most importantly a link to a copy of the work, but not the work itself. The link may not even be permanent, and may even be broken.

The second consideration is whether this would be a communication to the public as it provides a link to the work, that could be the case, but for the most part the actual link to the work is not always easy to get to, so the answer is ” definitely maybe”. Moreover, if the link is to an IPFS file, you may not even be able to access it unless you use a special browser such as Brave, which can read IPFS links.

I will stick my neck out and say that this case should not be a copyright infringement case due to the nature of NFTs, but I will wait until I learn more about the nature of the tokens, the links, and whether there is even infringement in the first place.

Concluding

This is a fascinating case that has a bit of everything. Adaptation, novel procedural solutions, the first custodial NFT injunction, and even a bit of the metaverse to make things spicy.

I will be following the case closely, so as always, stay tuned. One thing is clear however, the metaverse is vast, and empty. Oh so empty!