my name is adam sterling with berkeley law and it is a pleasure to be joined by all of you we're going to dive into frontier technologies in art we'll look at ai we'll dive in a bit deeper into nfts cover some of the legal issues before we do i want to ask that you join me in giving a big round of applause i don't see her but there she is deliviolante [Music] who i want to say has been working on this program for close to five years our finance and the law and uh had this idea for a program uh prior to the pandemic so it's just it's really incredible and i'm so proud to see it come to fruition today so delia thanks for your leadership here uh now for folks that may have felt a bit lost in the last session that is okay because we have uh quite a treat today uh my colleague professor sonya katyal will is going to kick things off we have a bit of a lecture uh highlighting nfts their use and art some of the intellectual property issues then i'll be joined by our other guests but we'll dig even a bit deeper and have some fun so sonia take it away great thanks so much it's so nice to be here in person and i just really want to thank the organizers um and also everyone at bicklebee um so uh i'm gonna talk a little bit about um the confluence of like three different moments um and i'm gonna go full-on law professor and give you guys a bit of a primer on some of the legal issues um so first we're going to talk a little bit about the rise of nfts and we're going to talk about the role of copyright and increasingly trademark law and then we're going to touch a little bit on kind of the questions of how the metaverse interacts with these kinds of areas there are a couple of areas that i'm not going to talk about with respect to nfts but that obviously deserve mention particularly given the panel that we just heard from issues of securities banking regulation and also really significantly issues of um environmental sustainability which i think are at the heart of some of the questions um around ethics um so uh just i'm gonna go through this pretty quickly because i'm assuming that a lot of people are familiar with this but in case not um nft stands for the um the term non-fungible token it's a digital asset that's considered to be unique by the nature of its technology so in contrast to fungible assets that can be exchangeable and nft is essentially unique it's a one of a kind it's a it's a code that sits on the blockchain and that represents an asset um so there's a bunch of different aspects associated with this there's a number that identifies the nft an address i doubt that identifies the owner and then a url that essentially links to the underlying asset and the reason why we call it non-fungible is because it's unique and cannot be substituted for something that is equivalent um where do they reside they reside in digital wallets the most uh popular cryptocurrency is ethereum and nft marketplaces which obviously we'll talk about about essentially allow users to create their own fts but as we talked about in the previous panel the value of them is really reputation driven it depends on the marketplace um nfts have been around for a while but obviously they've taken off very recently and just to give you a sense of the scale the market for nfts was 27 billion dollars whereas the market for global streaming music rights um less than 20 billion in the same year so really significant and something that i think many lawyers and individuals that are interested in creating value in in any marketplace should be thinking about but the question that i think is the most kind of complex is how nfts relate to existing theories of law and particularly because i'm an ip professor particularly thinking about how they relate to uh intellectual property so as was mentioned earlier an nft creator um basically includes a link to a digital file that uh can contain a copy of the work an article of visual art musical work whatever the nft comprises but here's the thing that's really important buying an nft does not include the sale of the underlying content or the copyright protection that the work enjoys it depends essentially so the sale involves a virtual token and really turns on the license that accompanies the token that determines the owner's scope of the rights and limitations that are associated with the work now what's significant about nfts particularly from an artist perspective is that they recognize a new right of the creator essentially to resale royalties and this is something that does not exist under copyright law and in fact has been rejected a bunch of times by congress um and uh and and also at the same time this right is also recognized um as a license and not a sale of the underlying work so this raises a really interesting question which is whether or not nfts are kind of new things in and of themselves or how they map onto pre-existing principles of copyright and trademark now um as was mentioned in the previous panel the blockchain is essentially immutable so nfts and any resulting transactions or transfers cannot be deleted or altered and this is where the provenance question comes into play so it's a lot easier to trace the buying and selling and trading of digital works of art they cannot be lost destroyed there's an interesting question about whether or not they can be stolen which just emerged regarding the the artist and creator seth green who just lost one of his nfts um but as i would argue i think the thing that's really interesting about nfts is that they raise this fundamental question about what the reach of public law and regulation is over this new emerging world that is essentially very much contract driven and so the question of how i p rights govern these kind of privatized worlds is really essentially at the heart of i think one of the more one of the more difficult areas of complexity now some law professors like edward lee in particular has argued that they're entirely new forms of property right they're created by computer code rather than regulation let's take a look a little bit of uh some different sorry this is not um could we go to the next oh great okay perfect um so uh there we go okay um so uh what are some use cases well we can see nfts emerging in a bunch of different areas uh in gaming uh in online games where people sell and exchange different commodities in art as we spoke about um establishing ownership of digital art um there's a fractionalization associated with that um collectibles like digital collectibles baseball cards and virtual assets as well um crypto domains uh and uh other things relating to the metaverse and virtual reality here are some could we go to the next slide please great um let's talk a little bit about some well-known nft projects uh the cryptokitties a video a video game uh where users can breed and collect uh nft cats crypto punks we'll talk about this a little bit more in a moment digital art collectibles that have a very similar style there's axi infinity virtual game there's open c a marketplace where users can buy and sell their own nfts and then obviously as it relates to sports nba top shot which involves types of nfts that essentially tokenize nba highlights um can we go to the next slide please and the thing that's significant about nfts is this kind of unencumbered possibility of commercialization so one digital asset can be linked to uh essentially a finite number of nfts artists can sell paintings to one person but they can actually create an nft that's linked to a photograph of the painting to another and so again this kind of development of multiple revenue strains is what's significant you can also fractionalize ownership as we talked about in the previous panel of the underlying asset so that multiple buyers can benefit proportionally to the amount that they that they own let's go to the next slide please so the other thing that's significant about nfts is the role of contract law so nft's code essentially forms a smart contract that's stored on the blockchain it can include a bunch of other aspects descriptions of the nfts traits financial terms specific rights this is where the license comes into play again as i mentioned earlier resale royalty rights so every time a transaction occurs the original creator can receive a portion of the royalties next slide please but here is the conflict so some experts argue that smart contracts essentially replace existing legal contracts for transactions and licensing agreements and because the blockchain can be autonomously enforced right uh it often is more effective than things like copyrights licensing systems and resale royalties but other people and other professors disagree and they say that because the smart contract is permanently on the blockchain there could be future problems that emerge from questions of wanting to change the contract terms if there's a change in ip protection and so this question of how the law sits aside these contracts is really significant can we go to the next slide please now let's talk a little bit about copyright law so the underlying work of an nft can depict an existing work but it can also be considered an infringing copy uh derivative right a derivative work in infringing distribution or a public performance and so that raises the question again of how intellectual property protections map on to nfts let's go to the next slide please let's talk a little bit about some complexity with respect to some very well-known nft projects so crypto punks um and the board yacht club nfts have actually spawned and this is really interesting from an ip perspective they've spawned a number of clones copyrights copycats alternative visions derivatives but here's the interesting thing the terms of the license right uh the owners of the nfts are not actually discouraging these derivatives so even the board ape license allows um owners of the nfts to create derivative works crypto kitties can sell merchandise as long as they don't make over a hundred thousand dollars um and this raises again this question of like ip versus these smart contracts now open c has tended to deal with this by removing versions that are very similar to the existing nfts so ones that are flipped or mirrored and but in the past when uh copyright notices have been sent to openc objecting to these kind of flipped versions there's been a backlash from the community that has essentially argued that nfts are an entirely new form of property and that they should include the following right to create derivative works which is something that crypto punks and the board 8 yacht club has done and so one person who sold their their nft argued if you don't assign the token and the image the same rights what's the point of binding them together eternally on the blockchain so again this question of like what happens to these bundles of rights is really at the heart of some of the more interesting issues um let's go to the next slide please and then um to show you kind of uh the the sort of opposing view from the idea that nfts represent an entirely new world are an emerging series of cases that stem from the question of how trademark rights attach to nfts so in contrast to this kind of new form of property approach trademark issues can arise when an nft uses a third party's trademark so companies like nike and birkin are involved in trademark lawsuits against retailers so in one example you have retailer stockx that's selling nfts of nike sneakers as nfts and a buyer can actually interestingly exchange the nft for the physical sneaker or trade and sell the nft for other nfts or cryptocurrency and nike has sued arguing essentially that these vault nfts are going to confuse customers and that they're using their trademark uh next slide please um very similarly or may recently sued an artist named mason rothschild for creating uh what's known of as a meta birkin nft um arguing that the nft is going to create consumer confusion now ermey does not have trademarks in digital versions of its leather goods at the time that it filed so rothschild essentially argued that his use of the trademark birkin is essentially social commentary that was protected by the first amendment freedom of expression and he argues this because his nfts depict birkin bags clad in fur and uh and and has argued that the nfts are nothing more than meaning and that they actually are a vehicle for commentary on the animal cruelty that is um associated with hermes manufacture of its bags now court the most recent district court to deal with this uh has rejected this view and i've found it very interesting that i found a video of the artist talking about the need for counterfeit protection over his uh meta birkin bags and he was like some people will pay 40 000 for these meta birkins and they don't realize that they're buying counterfeits and i just thought that was interesting um uh let's go to the next slide so another kind of interesting artistic issue involves nfts and moral rights uh so in the u.s neural rights are slightly more narrower than they are in other countries they protect the right of attribution and the right of integrity which protects against intentional distortion or mutilation of an underlying work of art recently a banksy work was burnt with an nft recording the event uh raising this interesting question of whether an nft that memorializes and publicizes a violation of moral rights whether or not that actually infringes on the artist's moral rights so interesting issues for uh people to kind of think about now um before we wrap up i also just want to say a couple of words about another big ip issue could we go to the next slide which involves copyright and ai we're sort of switching um gears a little bit here um and here the sort of interesting question involves um how uh copyright law attaches to generative ai so computer generated works and the like and the link obviously between this topic and the previous one involves this question of like what do we do with all these new technologies so with ai generated art the copyright office has ruled that copyright law only protects the fruits of intellectual labor that are founded in the creative powers of the mind um and if we could go to the next slide so um in in this particular instance uh the copyright office rejected copyright for a work i'm sorry that you can't see it that well with the slide but it's it's essentially part of a series that was generated by ai simulating a near-death experience where an algorithm reprocesses pictures to create kind of an image and a fictional narrative about the afterlife and the ai essentially does this with very minimal human intervention but the courts and copyright office have rejected the idea that this uh is subject to copyright protection and if we could go to the next slide um and this is what the copyright office has said in the past works that are produced by a machine or mirror mechanical process without any creative input or intervention from a human author are not registerable so the question is whether or not something that is produced by humans with the computer being something that assists the human or whether the traditional elements of authorship were actually conceived of and uh executed by man or machine and this i think is a real sort of interesting tangle because we have a world and if we could go to the next slide we have a world where computer generated works are essentially everywhere across the internet um so open ai just developed a system that actually generates images from natural language descriptions so you could have a description like this a painting of a fox sitting in a field at sunrise in the style of claude monet and this is the resulting process right the resulting product next slide um so last i think i just think it's useful to ask whether or not these issues represent something that is a truly new form of intellectual property or whether we are opening the door for a contract-driven world that essentially opens the door to even more restrictive licensing and these questions i think are going to be more and more important as we confront the advent of the metaverse right because it enables an even greater collection of uh content and i think it also just kind of introduces this question of how we should be creative about ownership right are we entering into a world where there's a kind of partiality associated with copyright authorship and even ownership or whether what we're seeing is kind of a hybrid economy of human and machine-driven creativity that requires us to find new answers to these questions and so these are some of the issues that uh you know i hope our um panelists will be able to confront um next slide uh and last uh but not least i'm quoting a dear friend of mine trevor paglin who has written about some of these issues and what he's basically said is something dramatic has happened to the world of images they've become detached from human eyes i call this the world of machine to machine image making invisible images because it's a form of vision that is in inaccessible to human eyes and this is the question that i would end on have we created a world of singularity where essentially machines are driving the very creative forces that we value in humanity thanks so much so sonia i'm going to ask you to join us and can we go back two slides to the open questions there we are great so i want to welcome our other panelists nick brown of super rare labs simon frankel of covington and burling who co-teaches with our host dean art law so simon has our practitioner legal practitioner on the panel i'm going to actually allow you to see if you want to address any of these concluding questions yeah so i come at this as a practitioner we try to solve clients problems so it's slightly different perspective perhaps and i mean my main answer to this is this is mostly for lack of a better phrase old wine and new bottles to me these are copyright and trademark issues uh maybe perhaps patent as well that we've confronted before for the most part just as an example it's always been the rule it's developed in some years that there has to be a human author to for a work to have copyright protection and be eligible for registration that's a difficult issue that's going to be it's an old rule it's been applied broadly it keeps being applied in this new world of ai but it's going to be applied it's either going to be changed or it's going to apply it's not like it's a new problem it's just a more difficult problem because there's a lot more creativity coming out now i think a lot of the the trademark issues that um sonya covered are are really just the same questions is um you know if if stockx is selling nfts that allow access to or redemption for nike shoes is that and they're using nike's trademark in marketing those nfts is that a trademark infringement does it create confusion as to the source of the goods or services there's an added issue in that case because i believe nike's now claiming that not only is stockx using nike's trademark to promote the nfts giving access to nike shoes but some of the nike shoes are not not actually authentic nike shoes it's an old problem it's in a new context uh similarly to me a lot of the questions about access of uh to nft a lot of questions about nfts are really questions we've been grappling with for 25 years in the digital world you've got a digital asset now there's new access to it there's new controls on it it's different because you can't just right click on an image on the internet someone has unique access to it but issues of whether it's infringing someone else's copyright well there's a new issue because maybe no one else can access it so the copyright owner won't know that their work was infringed we've seen that before but that may be a particular problem with nfts i do think the resale royalty issue is is a real it's not a new issue because going back to the 1970s many of you will know there were efforts to contract into resale royalties to artists would sell their work subject to a contract that would say when you sell it you will pay me five percent of the sale price and you will get the next buyer to agree to this contract and they'll do the same thing but they're obviously enforcement problems this technology solves the enforcement problems everyone has notice of the contract and they cannot buy the nft without x without agreeing to those terms and it's even mechanically done as as sonia said so to me there are some difficult issues here but they're we're we're playing with the same rules just like 10 15 when when was it we spent a lot of time talking about second life and how it was going to change all the rules of copyright and trademark and we got through that and they were the same rules so i i i'm not poo pooing it i'm just saying it's it's it's like a much bigger second life it's sad to think that saying second life like now is something that ages us because that felt that was the metaverse before there was a metaverse um so it's interesting and i i tend to agree i if someone has looked at this extensively from a securities law perspective i i think the traditional rules actually do apply remarkably well apologies to the last panel but i think howie does apply to nft's and crypto digital assets quite well um but i want to dive in and ask you know does the technology or will it evolve to a point where we do have to rethink some of those rules and to help us think about the technology i want to welcome nick who is a engineer and works on the technology side of things so nick tell us a bit about what you're doing at super rare and then you also as part of this panel have kind of agreed to talk about some of the uses of front tier technology elsewhere ai i know you've looked into the the open ai dahle program but i'll turn it over to you give us a little bit of a taste of how advanced the technology is becoming certainly uh thank you for having me um yeah so for a little bit of background i work at super rare labs and we have two primary focuses one of them is the super rare platform which is in nft marketplace specializing in one of one nfts or crypto artworks i say one of one to differentiate from some of the projects we just saw like crypto punks and board ape yacht club where you may own one of 10 000 of those so focusing on more what we think is the the more artistic side rather than these large series that are oftentimes used more as crowdfunding campaigns or purchased access to a specific community rather than truly just an interest in the art itself the second focus for super rare is the super rare network where we are building a premium kind of curation and discovery layer on top of the wider digital and crypto art markets so affording collectors the opportunity to kind of help discover the next generation of artists help promote them help draw attention to them through some some various models so kind of building on that before i came to super rare i was working building kind of ai driven products across the healthcare and voice data industries for about 10 years so i kind of arrive at this intersection of technology and art at a very interesting and exciting time and to kind of get back to the questions and kind of what technology is doing here i also tend to agree with most of what i've heard so far today and that we have a lot of laws that are almost all the way there maybe some addendums needed to cover these new situations but ultimately we can fall back and look at previous examples i appreciate you bringing up you know where the human element comes in because that's where i think there's there's a lot of trickiness in there ai in particular has kind of three big components we can think about one of it is the code that embodies the ai itself the second is you know the data used to train the ai and then the last as we saw with the you know dali is the name of that open ai project that produced that kind of fox in the style of monet there's the end user input you know i want this fox in this style in this field of green and so with those three separate components you know you have human input at each of those stages whether you know who owns that at the end of the day is that the the artists who produce the work the ai were trained on the engineers that built the code or wrote the code itself or that very end user who came in and provided two sentences of text that ultimately caused that ai to render that image so can we go back to the i think it's two slides back yeah there it is okay exactly thank you um and yeah this is where i think it gets really interesting so i would say that yes we fall back on those existing rules um but where you know we're we're kind of pulling back the rug on a lot of nuance of what uh what the human element here is and and how far that humanity goes there's some lovely go ahead so so help me just with this technology so openai it's a private company correct created they own arguably the technology that's being deployed here that's correct and then as a user i can go and provide this input a painting of a fox sitting in a field at sunrise in the style of cloud monet and then the technology the ai produces this image yes not only this but you could ask for dozens of variations based on that exact same input and get you know dozens of different versions of it and if i ask the same question a painting of a fox sitting etc would i get the same image or might i get a different image the next time it's certainly possible that you would get one of the same images but it is rendering these things on the fly it's producing these works on the fly that gets to the complexity of each individual ai but there would be no guarantee at all that this is the exact image that it would spit out in fact i would be surprised if it you know spit out that one reliably yeah and there have been cases about forms of ai and what comes out of them and the courts have said if if the output is determined by human choices then it can be uh protected by copyright and if not not and i would just say this is one where we have a rule it gives us answers but it might over time we might decide it's not the right answer because as more and more is generated by a there may be some right that ought to be granted yeah and sony how do you see this evolving and how does it and what's your view on on where we're at with our rules and regulations and i'll let you kind of what do you what do you think yeah i mean i i think that i i don't actually disagree with um simon's point about um the applicability of of rules to these situations i think what's so interesting about this from my perspective is if you take a step back um the standard of originality and creativity in copyright is extremely low right for something to be copyrightable and yet if we look at kind of what the copyright office has said about iai driven creativity you know even at a very high level of creative output it's refusing to grant recognition because of this issue of kind of what's driving the productivity or the product is it is it the author or is it the machine and that i think is an interesting kind of outlying sort of field where you have enormous kind of creativity and generativity in a.i that is really not recognized by the law and then you also have the increasing commoditization of these products that i think has opened this whole new world of the marketplace and so questions of kind of what we use to protect those interests if it's not copyright um you know raises a lot of wrinkles and just to kind of add one more to it um you know i i am really concerned um you know i'm somebody that came uh into ip because i was really inspired by things like the open source movement like i'm sure some of you were um and by the idea that this was kind of a new world where we had new roles and new possibilities i am concerned about the fact that we're letting everything being driven by contract law in the nft context because i do think that one of the values of copyright law even if it's been much maligned is the protection of fair use and i think that that becomes entirely foreclosed on the blockchain simon did you want to no i think that's a the point about uh it is interesting to think i mean the the the amount of creativity that um goes into if i hold my my iphone up to take a picture of you all and earlier today my kid played with the settings so i didn't even choose the settings and i told him every the copyright office say total copyright protection i would say no creativity and yet you have all this creativity going into the ai and yet we don't get protection it is a paradox i think um yeah um uh fair use that's another topic nick where's the technology going is it is it the kind of terminator style that dolly is gonna be just making this art on its own without the prompting what what is what do you see what's next i think uh you know it's a very branching road from here so not not a straight and narrow path but you know what you said is absolutely true getting to a point where you know we're already seeing nft's artworks that are responding you know have some ai components in them and they are evolving artworks over time as a collector you may may love that or you may hate that not unlike you know the the banksy work that was shredded the minute it closed at auction we will absolutely see more projects like dolly 2 and again it raises this question of is this just the most advanced paintbrush that we've seen to date you know photoshop became that in many ways for a lot of people and we still consider works that are produced with photoshop owned by that artist you know am i now an artist because i put in 12 words and outspit a masterpiece that people were willing to pay for so certainly many projects like this to come with much more complex input than you know just text or just one other image um and yeah i think really just getting to that point of raising the the human component in the human um layer of abstraction in thinking you know it's the it's the old does the conductor create music if they're conducting the orchestra i would say yes even though they haven't played any one of the individual notes and here again in this case you know in the same way that digital mediums like photoshop um took the many artists out of the tactical decisions of drawing a perfect circle or drawing a straight line so too a tool like this can help artists think at a higher level and create all new sorts of works maybe more rapidly than ever before i suppose there's a possibility that nfts will allow artists to limit access to their works obtaining through nfts sorry through their works created by ai allowing them to protect from copying the works that would not otherwise be protected by copyright i don't know if you have thoughts on them yeah no i mean i could easily see a world um that opens the door to even greater control definitely so i i i interested in the promise of a lot of this technology but i'm i'm like if we can maybe think a bit about how it's being deployed or how it's been deployed over the past few years and we started the day off i think with lance our critic talking about uh art being involved and created by a human and and then later on we heard on a panel i think one of the quotes from our our uh friend from an investment bank was about well you need to take the emotion out of art which is something i don't know if we want to be doing um and and where i have uh pause is you know watching the super bowl this year and seeing the amount of commercials around cryptocurrencies uh and nfts and looking at some of the prices of the board apes and and top shots and i it's hard for me to say that that's not driven more by speculation than any sort of underlying utility or connection to the underlying asset and so i guess any thoughts or comments on on kind of how this is being deployed and and from a consumer angle or just i'll i'll leave that there but i'm curious if anyone has any thoughts certainly um obviously plenty of opinions about this one but i would say similar to any new shiny technology there's this tendency to want to apply this new fun hammer to you know everything out there everything starts to look like a nail and so certainly we have an over application of this in in the case of blockchain and nfts a bit as well um certainly plenty would would argue with me um i think we tend to see these ebbs and flows a little bit we saw it with you know the the dot-com kind of boom and bust clearly the internet recovered from that and is doing just fine we've seen it with some other trends with big data that gave rise to ai and certainly we're still seeing it with ai where ai became kind of a hot buzzword was maybe a little over applied to anything and everything and then has started to retreat just a little bit back into those better sets of use cases and we'll probably see that with with nfts as well in the blockchain in general currently you know you can't go anywhere on the internet without saying hey let's you know reading hey let's put this on a blockchain is that a good idea probably not in every use case but i think we will find firmer ground and you know map our use cases correctly to the technology very cool uh sonya i know you think a lot about policy and and you're you're involved with a lot of folks that do just share with the room where are we headed as far as thinking about this as a country as you know even more broadly yeah i mean i i totally agree with you i mean i think that the market will eventually kind of correct itself and the kind of excitement and uh you know the idea that everyone needs to create an nft and everything um will probably subside um uh but but i think ultimately um you know i i'm i'm really drawn to these kinds of questions um as someone who loves art right and uh you know my love of art doesn't come from the fact that art can now be you know and serves as a commodity and so i think that um you know there was an article that came out recently from the new york times where you talked about how in recent auctions the idea of pricing is really driven by speculation and hype i think that was like the title actually of the article and there was a section in the article that talked about how you know there is a danger in us commodifying and focusing so much on these kinds of market-driven creations because i do think that on some level it really raises the question of what the function of art is and i think if you speak to artists or you speak to collectors or investors they're very different views on what the function of art is and i think that you know that's the world that we're confronted with is the increasing commodification of art has really changed the the stakes in answering that question well given where we started i think that's a beautiful way to end this session uh we're gonna go to break so if you have questions you know you can try to find us uh as we go i wanna thank each and every one of you this was fascinating for me and i hope it was for all of you uh i i believe we are close to the conclusion of the day but i hope everyone gets to stay for uh to see the museum and more so we'll take a quick break and we'll return thank you you
2022-08-24