Moonbirds Copyright Controversy Exposes Flaws in Crypto’s IP Obsession

It’s not really a secret: When NFTs broke out as a cohesive asset class in 2021, their value proposition was mostly rampant speculation. Since then, NFT projects have been released countless millions trying to focus their brands on a more serious, sustainable future; most chose to go all-in on the short-lived, provocative concept of intellectual property, or IP.

However, it has never been resolved what exactly IP means in such a context, nor to what extent NFT projects can grant IP rights to their holders. Those unanswered questions resurfaced this week when Yuga Labs – the multi-billion dollars company behind Bored Ape Yacht Club—announced that it planned to grant exclusive commercial rights to holders of Moonbirds, an Ethereum NFT collection it had acquired in February.

There was just one problem with the plan: in 2022, the original creators of Moonbirds filed the collection under Creative Commons 0 (CC0), an extremely robust legal tool that waived all copyright claims on Moonbirds NFT artworks, and released the pixelated owl characters in the public domain.

Moonbirds’ official statement on the matter, posted on Monday, came across as an attempt to sidestep this reality. “If you made stuff during the CC0 era, cool,” the company said wrote. ‘But from now on you have to own a Moonbird to continue doing this.”

Twitter users immediately pushed back. Several people, including copyright attorney Alfred Steiner, argued that the company’s position was legally invalid: Moonbirds were now in the public domain and nothing could get that toothpaste back in the tube.

It didn’t take long before Yuga seemed to change his stance. Within hours of the initial announcement, company co-founder and CEO Greg “Garga” Solano said wrote that Moonbirds-related commercial rights 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 of Bored Ape Yacht Club NFT holders. For years, Yuga has given BAYC holders the ability to create and sell Bored Ape-themed projects, such as hamburger restaurants And canned water businesses. The implication was that Moonbirds-themed chocolate bars and stuffed animals might be around the corner, but only current NFT holders would be allowed to make them.

So what is the truth? Can anyone talk freely about Moonbirds copyright until the end of time? Or does Yuga have the power to determine who makes Moonbirds-themed goods?

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 highlights important issues with the way IP is currently understood and discussed in 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 implies that these come from an individual NFT’s copyright.

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 owns its own copyright, which a holder can exercise to his own benefit.

But Frye – and other legal scholars too Alfred Steiner– don’t believe that commercial experiments like a Bored Ape burger joint are actually copyrightable. Instead, Frye claims, they are using the generic Bored Ape brand, which is subject to trademark law. Simply put, people line up to eat a Bored Ape burger because it’s affiliated with the Bored Ape Yacht Club brand, not because it happens to have Bored Ape on it. #6184 specifically.

That distinction is a double-edged sword. In the case of the Moonbirds controversy, this means Yuga is likely can police who make commercial use of the Moonbirds brand. But it also means that the very idea of ​​individualized, copyright-based commercial rights controlled by NFT holders is somewhat fanciful.

In practice, Yuga just says that it will choose selectively not to sue current NFT holders for trademark infringement. But little would protect these holders if the company changed its mind.

The original Moonbirds, filed under CC0, meanwhile remain in the public domain. But that CC0 distinction does not grant any rights to the Moonbirds trademark. Any member of the public trying to open a Moonbirds ice cream parlor in the near future will likely have a… legal rideshould they receive a stern call from Yuga’s lawyers.

Declutter contacted Yuga Labs several times about this story but never received a response.

For Frye, the Moonbirds episode shows how much of a buzzword (and perceived value-add) IP has become for NFT brands, despite the lack of legal clarity surrounding the topic.

“There’s a certain subset of it [Yuga’s] customers who are really fixated on the idea that IP is important,” Frye said Declutter. “They don’t even know what it means, but it’s a talisman: ‘IP! I want to own the IP address, whatever that is.’”

In fact, in the hours following Yuga’s announcement about Moonbirds this week, the collection has increased by almost 30% in terms of floor price (or the cost of the cheapest NFT on a marketplace), according to NFT price floor.

But that short-term victory could be a Pyrrhic victory. Since the crypto winter of 2022 saw NFT prices plummet, Yuga has struggled to find a way back to the cultural dominance it once enjoyed. It once cost nearly $430,000 to join the BAYC at the project’s peak in April 2022; now it just takes $42,000.

Last week, while to announce that Yuga had just undergone a wave of layoffs, CEO Greg Solano said the company had “lost its way.”

A more aggressive approach to policing the Moonbirds trademark – which is what this week’s announcement apparently amounts to – could temporarily boost holders’ perception of Yuga’s value. Maybe that has already happened. But in the long run, Frye says, that kind of self-imposed restriction on who engages with the Moonbirds brand could backfire in crypto, where everything is cool.

“The only thing they have going for them is some kind of goodwill with their customers,” Frye said. “And now to come back and say, ‘We’re going to try to reclaim intellectual property rights that are largely illusory anyway,’ just seems like an incredible ‘L’ for them.”

Edited by Andrew Hayward