NFTs
Moonbirds Copyright Controversy Exposes Flaws in Crypto’s IP Obsession
It’s no secret: when NFTs emerged as a coherent asset class in 2021, its value proposition was mainly unbridled speculation. Since then, NFT projects have spent countless millions trying to guide their brands towards more serious and sustainable futures; most chose to go all-in on the ephemeral and provocative concept of intellectual property, or IP.
It has never been resolved, however, what exactly IP means in such a context, nor to what extent NFT projects can grant IP rights to their holders. These unanswered questions resurfaced this week when Yuga Labs – the multibillionaire company behind Bored Monkey Yacht Club–announced which planned to grant exclusive commercial rights to holders of Moonbirdsone Ethereum NFT collection you purchased in February.
There was just one hitch with the plan: in 2022, the original creators of Moonbirds archived the collection under Creative Commons 0 (CC0), an extremely firm legal tool that waived any copyright claims on the Moonbirds NFT art and released the pixelated owl characters into the public domain.
Moonbirds’ official statement on the matter, published on Monday, appeared to be an attempt to sidestep this reality. “If you did stuff during the CC0 era, cool,” the company he wrote. “But from now on, you’ll need to own a Moonbird to keep doing this.”
Twitter users reacted immediately. Several, including copyright attorney Alfred Steiner, argued that the company’s position was legally invalid – the Moonbirds were now in the public domain and nothing could put that toothpaste back in the tube.
It didn’t take long for Yuga to appear to adjust his position. Within hours of the initial announcement, the company’s co-founder and CEO, Greg “Garga” Solano, he wrote that commercial rights related to the Moonbirds would only be attached to new 3D versions of the Moonbirds artwork, which would be given exclusively to current NFT holders.
These commercial rights, Solano said, would be similar to those enjoyed by Bored Ape Yacht Club NFT holders. For years, Yuga has allowed BAYC holders to create and sell Bored Ape-themed ventures, such as burger restaurants It is canned water companies. The implication was that Moonbirds-themed chocolate bars and stuffed animals could be coming – but only current NFT holders would be allowed to create them.
So what is the truth? Can anyone comment freely on the Moonbirds’ copyright until the end of time? Or does Yuga have the power to control who creates Moonbirds-themed products?
According to Brian Frye, a law professor at the University of Kentucky who specializes in NFTs and intellectual property, both statements can be true at the same time – a fact that exposes important questions about how intellectual property is currently understood and discussed within crypto.
For Frye, it all comes down to the crucial difference between copyright and trademark. When Yuga says that Bored Ape or Moonbirds NFT holders have special commercial rights, the company is suggesting that they originate from the copyright of an individual NFT.
Copyright protects the content of a work, such as the plot of a book or the unique features of a painting. Yuga would therefore maintain that each individual Bored Ape or Moonbird has its own copyright, which the holder can exercise for his or her own benefit.
But Frye – and other jurists, including Alfred Steiner– I don’t believe that commercial experiments like a Bored Ape snack bar really depend on copyright. Instead, Frye claims, they are leveraging the widespread Bored Ape brand, which falls under trademark law. Simply put: people line up for a Bored Ape burger because it’s affiliated with the Bored Ape Yacht Club brand, not because it represents Bored Ape. #6184 specifically.
This distinction is a double-edged sword. In the case of the Moonbirds controversy, this means that Yuga will likely he can police officer who commercially leverages the Moonbirds brand. But it also means that the whole notion of individualized, copyright-based commercial rights controlled by NFT holders is somewhat fanciful.
In practice, Yuga is just saying that it will selectively choose no to sue current NFT holders for trademark infringement. But little would protect those holders if the company changed its mind.
The original Moonbirds archived under CC0, however, will remain in the public domain. But this CC0 distinction does not confer any rights to the Moonbirds trademark. Any member of the public who attempts to open a Moonbirds ice cream parlor in the near future will likely have a cool ridein case they receive a stern call from Yuga’s lawyers.
Decrypt contacted Yuga Labs several times about this story but never received a response.
For Frye, the Moonbirds episode reveals how IP has become a buzzword — and supposed value-add — for NFT brands, despite the lack of legal clarity surrounding the topic.
“There is a certain subset of [Yuga’s] customers who are really fixated on the idea that IP is important,” said Frye Decrypt. “They don’t even know what it means, but it’s a talisman: ‘IP! I want to own the IP, whatever it is.’”
In fact, in the hours following Yuga’s Moonbirds announcement this week, the collection increased by nearly 30% in floor price – or the cost of the cheapest listed NFT on a marketplace – according to NFT minimum price.
But this short-term victory could be Pyrrhic. Since the crypto winter of 2022 caused NFT prices to crater, Yuga has struggled to find a way back to the cultural dominance it once enjoyed. It once cost nearly $430,000 to join BAYC at the project’s peak in April 2022; now enough $42,000.
Last week, while advertising Although Yuga had just experienced a wave of layoffs, CEO Greg Solano said the company had “lost its way.”
Being more aggressive in policing the Moonbirds trademark – which it seems this week’s announcement really boils down to – could temporarily increase holders’ perception of Yuga’s value. Maybe it already happened. But in the long run, Frye says, this kind of self-imposed limitation on who can engage with the Moonbirds brand could backfire in crypto — where legal is everything.
“The only thing they have going for them is some form of goodwill with their customers,” Frye said. “And now to come back and say, ‘We’re going to try to recover intellectual property rights that are largely illusory anyway,’ seems like an incredible ‘L’ for them.”
Edited by Andrew Hayward