Juicy news: the first NFT digital house, so-called “Mars House”, has been sold for over $500.000! It seems that digital art, together with NFTs, is attracting a great deal of interest. Many artists are nowadays focusing on digital art and see NFTs as a new way to carry out transactions. Likewise, consumers can access specific NFT art marketplaces, follow artists’ works and purchase them.
But what are NFTs and why are they so relevant?
An NFT is a non-fungible token, that is a unique cryptographic asset (just like cryptocurrencies, but these are fungible) linked to an object. NFTs are typically linked to digital art, music, GIFs, or even tweets, and constitute a kind of ownership and authenticity certificate over the item.
NFTs use blockchain technology to record ownership and validate authenticity. One of the most well-known is Ethereum, used on Cryptokitties (the first blockchain game) and SuperRare, which is the peer-to-peer art marketplace for NFTs on which Mars House was sold. It is important to take into account that to acquire NFTs you need cryptocurrency. For instance, all transactions on SuperRare are made using Ether, the native cryptocurrency to the Ethereum network.
The relevance of NFTs can be seen as a new way to interact with art and culture. SuperRare allows to collect and trade unique, single-edition digital works. Each artwork is authentically created by an artist in the network and tokenized as a crypto-collectable digital item (i.e. NFT) that can be owned or traded securely since it can be tracked on the blockchain. SuperRare works in fact as an art gallery. When an individual buys an artwork there is a 3% transaction fee for the purchase. Likewise, the platform imposes gallery commissions to the artists (e.g. for primary sales, there is a 15% commission and creators receive 85%; for secondary sales, creators receive a 10% commission, providing passive revenue from an artwork if it continues to trade on the secondary market).
Mars House: the case of the first NFT digital house sold
SuperRare is quite new and allows access to few creators, there are only a small number of hand-picked artists on the marketplace. Nevertheless, the platform has become the talk of the town because it was the scene of the sale of the first NFT digital house in the world for 288 Ether (i.e. more or less $512,000). Mars House was presented on the platform as the creation of Krista Kim, a contemporary artist promoting the confluence of art and technology, who uses light for her creations.
As it is indicated in the description of the artwork, the creation is “comprised entirely of light, the visual effects of her cryptohome are meant to omit a zen, healing atmosphere. The artist also partnered with musician Jeff Schroeder of The Smashing Pumpkins to create a calming musical accompaniment”.
Furthermore, it states that “the home and all of the furniture in it can be built in real life by glass furniture makers in Italy, as well as through MicroLED screen technology”, which is a bit confusing since afterwards it indicates that “Mars House NFT physical furniture pieces, made of tempered printed glass in Italy, could be commissioned by the collector as NFT physical pieces” (where did the “home” go?).
You can have a look at the whole creation here.
Upon purchase of the artwork, the buyer agrees to a series of terms and conditions that can be summarised as follows:
- the collector would own one copy of Mars House NFT and would receive the corresponding 3D files from Krista Kim Studio Inc. through a Metaverse platform (a shared virtual space), and is required to register the ownership with Krista Kim Studio Inc.
- In case that Mars House NFT is resold, the collector would be required to delete all the 3D files of the artwork from the Metaverse and provide verification of deletion, then the artist would send new 3D files to the new owner, that would be required to register the ownership with Krista Kim Studio Inc. as well.
- Krista Kim Studio Inc. retains the ownership of Mars House NFT copyright, and in this sense, all reproductions of the artwork —in both digital and physical formats— are restricted.
Mars House: the potential copyright issue
Leaving aside some of the questions that have arisen here for the humble writer (e.g. Is it really possible to reproduce in glass the “home” in real life? Is it suitable for architecture? Who are those glass furniture makers in Italy and why them?), it is important to highlight that the collector/buyer is just the owner of the NFT and the author of the artwork keeps his or her IP rights.
The latter aspect, regarding Intellectual Property and authorship, has clouded the sale of the well-known first NFT digital house giving rise to an interesting and potential copyright dispute. According to Kim, Mars House is her own creation and therefore she possesses the copyright, but it seems that other artists have intervened in the creation of this artwork. Firstly, as the description states, the artwork contains calming music created by Jeff Schroeder with whom Kim partnered. Secondly, and this is the core of the copyright issue, it seems that Kim collaborated with or hired an Argentine 3D modeller, to create 3D visualisations of Mars House, and he is now accusing Kim of “fraud”, claiming that he possesses the full intellectual property rights over the project.
The key to this potential copyright issue is to determine the copyright law governing it, but for this, we need to take several aspects into account:
- Kim seems to be based in Canada;
- the 3D modeller in Argentina;
- SuperRare in the United States.
In this sense, which of those copyright laws should be applicable? Depending on the applicable law, the answers to the following questions may differ: is it a co-authored artwork? Is it the result of a work made for hire? Is it a collaboration? Is it the result of a freelance creation?
Kim has always acknowledged Jeff Schroeder’s music creation for Mars House, but the same cannot be said for the work of the 3D modeller. Maybe, the reason behind this is the contract between Kim and the 3D modeller.
Kim contracted him to work on the project through Freelancer (US) and claims that she did not agree to give the 3D visualiser any rights to the artwork and that he was compensated for his services. This situation could be understood as “work made for hire”. The tricky part of this figure is that it is very diversely regulated globally. In some countries the employee does not receive any rights (e.g. USA), in others, this figure does not even exist and as a general rule, the authorship of a work made under a contract remains with the employee or contractor, even where the ownership is held by the employer, therefore the author owns the rights to the work he or she has created (e.g. Canada, where Kim is based).
Nevertheless, we should keep in mind the figure of freelancers. A freelancer traditionally maintains rights in his or her creations, however, Kim stated that the 3D modeller “signed away any intellectual property rights in the project to Krista Kim Studio” by way of a confidential agreement in April 2020. Consequently, the terms and conditions of the contract between Kim and the 3D modeller are key, as well as whether any applicable law clause was introduced in the contract since this law would be the one governing the issue.
As for 3D modeller’s statements, those can be labelled as confusing. He claims that he possesses the full IP of the project but he also claims that he was a co-author of Mars House; or that he created the project with Kim’s directions (you can see this statement here as a comment).
There’s no doubt that the 3D visualisations can be protected through copyright as long as they are original, and are the result of intellectual activity, and these were created in 2020 using Unreal Engine (a 3D rendering platform) by the 3D modeller. However, Kim claimed that he does not need to be credited because she owns the copyright, but let’s remind that authorship and copyright are not entirely the same. The copyright owner may change, but the author is always the author. This is important because certain rights, like moral rights, belong to the author and cannot be waived. But once more, which is essential in this conflict is to determine the terms of the contract between both parties.
What is also quite interesting about this conflict is that the issue of the ownership of Mars House did not start until after the sale of the artwork. Until then, the 3D modeller shared on his Behance site that Mars House was a work for Krista Kim Studios Inc.:
But afterwards, it was “conveniently amended”:
Maybe this interest has arisen due to the possible commission that he could claim over the sale on SuperRare (let’s remember that first sales’ 85% goes to the artists, so as a co-authored he could perceive a considerable amount). The 3D modeller has announced that he will take legal action, so let’s keep an eye on this dispute.
An EU perspective
Given the great interest and activity in marketplaces using NFTs, it is not surprising that it will not take long to see copyright issues in the EU.
If the Mars House conflict were to take place in the EU, and we were dealing with a “work for hire” case, the issue would still be complicated, so the contract between the parties would be essential. As all IP people know, there is no such thing as ‘European Union copyright law’ (un vrai casse-tête!). Therefore, each member state has its own copyright regulation and there is freedom regarding the “work for hire” approach.
As a result, most of the EU members do not recognise the “work for hire” principle, stating that only the natural person who creates the work can be its author. Nevertheless, a middle ground can be found, for instance, in the Spanish copyright system since it recognises “work made for hire” under limited circumstances.
Interesting times ahead for the art world…