GC Bishwarup Chakrabarti says that NFTs have seen their popularity soar of late, which could reignite a centuries-old debate that artists should profit from the resale of their works

For corporate lawyers there’s nothing like an explosion of blockchain news to leave you with that uneasy and all-consuming fear of missing out. Add to that a heady mix of tech jargon, and you are left scratching your head for endless hours. .

Non-fungible tokens (NFTs) have become the rage these days, a rage attributed in no small part to Twitter’s founder and CEO, Jack Dorsey, who auctioned his first ever tweet as an NFT. It was originally uploaded on 21 March 2006, and simply read: “Just setting up my twttr.”

In spite of Dorsey’s fierce loyalty to Bitcoins, the tweet was bought for about USD2.9 million using the Ethereum cryptocurrency. The world woke up to start speaking of NFTs, cryptocurrencies and blockchain in the same breath. And the uninitiated started slinking away in a corner trying their best to catch up with what had hit them.

First things first – are NFTs, cryptocurrencies and blockchain synonymous? Not quite. On the contrary, the fact that NFTs and cryptocurrencies are mentioned in the same breath defeats the very distinction they seek to achieve. While both NFTs and cryptocurrencies are based on blockchain, there lies a basic difference, centreing around the concept of fungibility. Fungibility refers to the inherent capability of a commodity to be substituted.

In other words, fungibility is the property of a good or a commodity with individual units that are indistinguishable from each other, and essentially interchangeable. Some examples of fungible commodities are precious metals, currencies, shares and bonds, where each unit of such commodity is treated as equivalent to the same amount of the commodity, irrespective of its form. Gold, whether in the form of coins, bars or ingots is the same as gold, in any other form.

Cryptocurrencies, based on blockchain, are usually considered to be fungible assets, where one cryptocurrency coin is supposed to be the equivalent of another of the same type. NFTs, while being based on the same blockchain technology, are the exact opposite. They are unique and non-interchangeable, and hence “non-fungible”.

NFTs are units of data stored on a digital ledger based on blockchain, which certifies a digital asset to be unique and therefore not interchangeable. They can be used to represent anything ranging from photos, videos and audio to all types of digital files.

However, access to any copy of the original file is not just restricted to the buyer of the NFT. While copies of these digital files are available publicly, NFTs are tracked on blockchains to provide the owner with a proof of ownership that is separate from copyright. In fact, nothing sums this up better than the headline of an article in the Los Angeles Times, which read: “This picture of Emily Ratajkowski is free to look at. But its NFT sold for USD140,000.”

Given this primer, let’s explore the unique case of Emily Ratajkowski, an American model and actress. In an effort to reclaim ownership over an Instagram photo of herself, which the artist Richard Prince appropriated for his “New Portraits” series, Emily Ratajkowski came up with an ingenious new way to reclaim her ownership of the photograph by creating an NFT titled, “Buying myself back: A model for redistribution”, and auctioned it at Christie’s. The image attached to the NFT is a digital composite depicting the model photographed in her New York apartment standing in front of the Richard Prince “Instagram painting” of herself.

Ratajkowski chronicled her struggle to buy back this particular image in a hugely popular article in a September 2020 issue of the New York magazine, The Cut. She wrote that, sometime in 2014, she was shocked to discover a nude photo of herself, that she had posted on Instagram, hanging in the Gagosian art gallery, as a part of Richard Prince’s “New Portraits” show, in which the artist would take other people’s Instagram photos and print them on large pieces of canvas, reselling them for USD90,000 each.

While the particular photo was sold to an employee of the gallery itself, Ratajkowski was eventually able to purchase a second “painting” of herself featuring a photo from her first Sports Illustrated swimsuit issue editorial. Ratajkowski claimed to have been paid USD150 for the actual photo shoot, while she and her boyfriend at the time ultimately ended up paying USD81,000 for the copy. In a twist of fortunes, when they later broke up, she had to pay her ex-boyfriend USD10,000 for a smaller “study” of the artwork Prince’s studio had given to her.

If all of this sounds confusing from an ownership standpoint, add to it the likely multiple layers of copyright infringement to be considered, as owners and creators of the various images included in the NFT. One might reasonably argue degrees of ownership of the main image lying with its original photographer, Prince, Sports Illustrated, and last but not the least, with Ratajkowski, being the muse.

What’s interesting is not just the story, but what came out of it. What Ratajkowski displayed was an interesting iteration of what 19th century French artists did to champion the cause of the starving artist who had suffered from war, and were desperate to remedy a socially difficult situation. An intent to continue to enjoy or profit from their works of art, in spite of their sale.

Droit de suite (right to follow) was a right granted to artists or their heirs, in some jurisdictions, to receive a fee on the resale of their works of art. While originally meant to apply to original works of art by painters, this has, in later times, expanded to include other works. It has found mention in the Berne Convention, an EU directive, and French law, among others, and while it lacks legal force in the absence of national legislation implementing it in most nations, it remains one of the most misunderstood and controversial rights in the intellectual property universe.

One of the primary drawbacks the right suffers from is its stark contrast to what is better known as the exhaustion doctrine, or the first sale doctrine, which limits the rights of the owner to control the resale of products embodying IP in some form or the other.

The first sale doctrine constitutes one of very few limits that the modern IP regime recognises. It posits that once a product has been sold under the authorisation of the IP owner, its resale, rental, lending and any other commercial use cannot be restricted by the owner. Given the prevalence of this doctrine and the fact that many facets of IP law are based on it aggravates the misjudged nature of the right. Often characterised as a pecuniary right, and more often than not described as a hybrid of the moral right (droit moral) and the author’s right (droit d’auteur), what needs to be paid varies.

In certain jurisdictions, a flat fee is paid on a public resale, while in others the artist is entitled to receive a fee only if the resale price is higher, or if there has been an increase in the value of the work of art. The differing techniques, percentages and triggers all combine to complicate what is already a misunderstood and controversial right. That said, the economic philosophy behind what started in the 19th century, and what transpired during the Ratajkowski episode, is uncanny and manages to put on display the nuances of a fundamental pecuniary right.

Ratajkowski’s chronicled effort could very well have become the chant for starved French artists in the 19th century. The fact that it came about a couple of centuries later, through the avatar of a blockchain-based technological product, could be poetic justice for a much-maligned right. In carving its presence on the universal Ethereum blockchain ledger, the NFT facilitates Ratajkowski’s message in a way that breaks new ground for art history and a forgotten French right.

BISHWARUP CHAKRABARTI is the general counsel at Eros Digital.