Art Case Update - April 2023
Image: Via Mason Rothschild.
Guest Work Agency is your go-to source on art-related legal cases and law reform in Australia, as well as select cases internationally.
In this story, our Director and Founder, Alana Kushnir and Paralegal Mia Schaumann report on the release of the Australian Government’s National Cultural Policy, the jury findings on the NFT dispute between Hermès and the creator of ‘MetaBirkins’ NFTs, a class action suit filed against artificial intelligence image generating platforms, plus more.
Australia
The Australian Government launches five-year plan to revive the arts in Australia
The Australian Government has released its National Cultural Policy (NCP), ‘Revive: a place for every story, a story for every place’. The plan to revive the arts in Australia is structured around five interconnected pillars; First Nations First, A Place For Every Story, Centrality of the Artist, Strong Cultural Infrastructure and Engaging the Audience. The NCP seeks to bolster First Nations work in the creative sector, placing necessary emphasis on First Nations stories in the Australian arts and cultural landscape.
The first pillar, First Nations First, seeks to safeguard First Nations traditional knowledge and cultural expressions. In Australia over half of the merchandise sold featuring First Nations art and designs is inauthentic. Drawing upon the principles underlying Indigenous Cultural Intellectual Property Rights (ICIP), which refers to the rights embedded in Indigenous arts and cultural expressions, the NCP has committed to work ‘with First Nations peoples to establish stand-alone legislation to recognise and protect First Nations traditional knowledge and cultural expressions.’ Alongside the introduction of stand-alone legislation, the Australian Government will provide a response to the Productivity Commission’s report on Aboriginal and Torres Strait Islander Visual Arts and Crafts and conduct a review of the Indigenous Art Code to address the harm caused by ‘fake’ art, merchandise and souvenirs.
Under the third pillar, The Centrality of the Artist, the NCP is committed to improving the ‘circumstances for arts workers whether they are employees, contractors or business owners’. To meet this aim, the NCP proposes to include ‘digital content’ under the Public and Educational Lending Right Schemes and extend the current ‘Resale Royalty Scheme to provide royalty payments to visual artists, including First Nations artists, from the commercial sale of eligible works internationally.’ Beyond legislative intervention, further action points include promoting the new Self-Employment Assistance program to First Nations artists and the broader arts community as well as undertaking a study to assess the challenges and skill defecates in the culture and creative sectors.
The fourth pillar, Strong Cultural Infrastructure, which will ‘provid[e] support across the spectrum of institutions which sustain our arts, culture and heritage.’ To facilitate this aim, the Government will establish a Centre for Arts and Entertainment Workplaces which will ‘provide advice on issues of pay, safety and welfare in the arts and culture sector, refer matters to the relevant authorities and develop codes of conduct and resources for the sector.’
The NCP endeavours to go a long way in addressing the systemic issues faced by First Nations artists and the broader creative sector. Read the NCP here.
Proposed reforms to the Deductible Gift Recipient framework
The Australian Government has released its Exposure Draft Bill and Explanatory Memorandum for the proposed reforms to its current Deductible Gift Recipient (DGR) framework. DGR status allows an entity to claim tax deductible gifts and contributions made by the public, which facilitates philanthropy and provides support to the non-for-profit sector.
As the current DGR categories are administered by various government agencies, the reforms seek to transfer the administration of four unique DGR categories to the Commissioner of Taxation, simplifying the DGR process and creating consistency between the categories. Read the Exposure Draft Bill and Explanatory memorandum here.
Digital Assets Bill Consultation
On 30 March 2023 the Senate referred the Digital Assets (Market Regulation) Bill 2023 (Bill) to the Economics Legislation Committee for inquiry and report.
The Bill is a response to the recommendations contained in the Senate Select Committee on Australia’s Technology and Financial Centre Final Report (Final Report), which was released in 2021 and which calls for greater regulation of the use of cryptocurrency in Australia. The Bill aims to protect consumers through the regulation of the digital asset and stablecoin authorisation requirements.
It also addresses the need to regulate central bank digital currencies (CBDCs) in Australia, proposing a mandatory disclosure requirement to ASIC and the Reserve Bank of Australia for the management of foreign CBDCs.
The Committee will be receiving submissions until 19 May 2023 in anticipation of the release of its report in August 2023. Read more here.
Four Gweagal spears are to be permanently returned to the Traditional Owners
Four Aboriginal spears taken by Lieutenant James Cook’s crew in 1770 and subsequently given to Trinity College Cambridge are to be permanently returned to La Perouse Local Aboriginal community. Trinity College has agreed to return the national treasures pending approval from the English Charity Commission to transfer legal title of the spears. Read more here.
International
Court rules in favour of digital artist Kevin McCoy in an NFT dispute
The U.S. District Court, Southern District of New York has ruled in favour of digital artist Kevin McCoy and auction house Sotheby’s Inc. (Sotheby’s) in one of the first NFT cases to come before a court in the U.S. Often regarded as the first NFT artwork, McCoy’s digital work ‘Quantum,’ was originally minted in 2014 on the now obsolete Namecoin blockchain. It was reminted on the Ethereum blockchain in 2021 and subsequently sold via Sotheby’s ‘Natively Digital’ auction for $1.47 million in 2021.
Canadian company Free Holdings Inc (Free Holdings) alleged that as McCoy failed to renew his ownership to the work on NameCoin, the blockchain software that the work was minted on in 2014, the work was subsequently registered by Freeholdings entitling them to legal ownership of the Quantum NFT. The claims brought against McCoy and Sotheby’s included unjust enrichment, deceptive and unlawful trade practices, commercial disparagement and false or misleading representations.
Article III of The U.S. Constitution requires a plaintiff to prove that it ‘suffered an injury in fact’ involving, at minimum, ‘a proprietary interest in the claim’ and for there to be a causal connection ‘between the injury and the conduct complained of.’ In this case, Free Holdings claimed that it had a proprietary interest in the NameCoin blockchain record which allegedly ‘remains active and under [its] control.’ As Free Holdings did not provide any evidence to support its claim of ownership, nor any claim to the share of the sale facilitated by Sotheby’s, Justice James L. Cott found that there was ‘no basis to support an inference that an injury occurred,’ and as such dismissed the claims brought under Rule 12(b)(1) of the Federal Rules of Civil Procedure (FRCP).
The defendants also contended that the claims should be dismissed for the failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the FRCP. To defend an action under Rule 12(b)(6) a plaintiff has provide sufficient evidence ‘to state a claim to relief that is plausible on its face,’ beyond speculation. The court found that Free Holdings ‘nowhere alleges an interest in the NFT minted on Ethereum that McCoy and Sotheby’s sold’ and has failed to plead ‘any actual or imminent harm to its alleged proprietary interest’ in the Quantum NFT on Namecoin.
Justice Cott ultimately dismissed all of the alleged claims, finding that Freeholdings ‘demonstrated nothing more than an attempt to exploit open questions of ownership in the still-developing NFT field to lay claim to the profits of a legitimate artist and creator. It does not allege that it took any part in the creation of Quantum or the blockchains used to record it.’ Read more here and here.
Artists file a class action law suit against AI image generating platforms
A group of artists have filed a Class Action suit in the United States District Court of California against artificial intelligence (AI) Image Generating Platforms for allegedly violating the artists’ rights by allowing users to create derivative images using the artists’ works without obtaining their consent.
The plaintiffs representing the class, Sarah Andersen, Kelly McKernan, and Karla Ortiz (Artists) are all full-time artists, earning income from their creative practice. The Artists have alleged that Stability AI Ltd. and Stability AI Inc., Midjourney Inc. and DeviantArt Inc. (collectively the Image Generating Platforms) are in violation of the Copyright Act, the Digital Millennium Copyright Act (DMCA), statutory and common law rights of publicity and unfair competition. The plaintiffs are seeking injunctive relief and recovery of damages as a result of the aforementioned breaches.
The plaintiffs have alleged that the Image Generating Platforms have infringed on their copyright pursuant to 17 U.S.C. §§ 106 by incorporating their copyright protected works into their AI Image Products, and creating derivative works without licence to do so. The plaintiffs claim that when a purchaser wishes to have a work produced “in the style of” an artist, traditionally a commission must be paid, or a licence granted to use an artist’s original image. Contrary to this practice, the Image Generating Platforms allow users to input ‘an image, or image paired with a descriptive text caption’ (Training Images), often gathered through web scraping, to generate output images in the likeness of the artist’s style. By allowing their users to input artists names to generate works that ‘can pass as original works by that artist’, the plaintiffs contend that the platforms have been designed with the knowledge or reckless disregard that the services provided could be used to produce ‘fake’ works passed off as originals. As such the Image Generating Platforms have arguably profited from these allegedly infringing acts, having caused irreparable injury to the market for the plaintiff’s works.
On similar grounds, the plaintiffs have alleged that the Image Generating Platforms are in breach of section 1202(c) of the DMCA which, contending that the Image Generating Platforms knowingly and recklessly altered or removed the Copyright Management Information, which is information identifying owner and work, from the copyright-protected works without authority to do so.
Further, the plaintiffs contend that the Image Generating Platforms have allegedly ‘knowingly used [the] Plaintiffs’ names in [their] AI Image Products’ for purposes of ‘advertising, selling, and soliciting purchases’ without the Artist’s consent, in breach of the statutory right of publicity pursuant to California Civil Code § 3344. By doing so, Image Generating Platforms have arguably leveraged off the considerable time and effort that has gone into the plaintiffs developing distinct creative identities for their own commercial benefit. Based on similar reasoning, the plaintiffs also contend that the Image Generating Platforms are in violation of their common law right of publicity.
The plaintiffs have demanded a trial by jury, seeking an award of damages and permanent injunctive relief for the alleged violations.
In another matter, digital content site Getty Images has filed a separate complaint against Stability AI on the belief that ‘Stability AI has copied more that 12 million images from Getty Images’ collection, along with the associated captions and metadata, without permission from or compensation to Getty Images as part of its effort to build a competing business.’ The claims made include copyright infringement, trademark dilution and unfair competition.
Though both claims are yet to go to court, they highlight the potential legal repercussions faced by AI-assisted image generator platforms. Read the complaints here and here.
Jury rules in favour of luxury fashion house Hermès in NFT dispute
A jury in the US District Court of the Southern District of New York has ruled in favour of Hermès in their lawsuit against marketing-strategist and entrepreneur, Mason Rothschild (Rothschild), for his use of the BIRKIN trademark in the collection of NFTs titled ‘MetaBirkins.’
Hermès, the luxury fashion house known for its highly coveted Birkin bag, filed a suit against Rothschild in January 2022 for a number of claims including trademark infringement, trade mark dilution, and cybersquatting claims. You can read our past coverage of the case here.
Following the six-day trial, the jury unanimously found Rothschild liable for the aforementioned claims and thereby determined that the First Amendment does not bar the defendant's liability. The jury concluded that the ‘use of the Birkin mark was not just likely to confuse potential consumers but was intentionally designed to mislead potential consumers into believing that Hermès was associated with Mr. Rothschild’s MetaBirkins project.’ As such, the Court entered a final judgement in favour of Hermès, awarding the fashion house USD$133,000 in damages.
Subsequent to this ruling, Rothschild has continued to promote the MetaBirkins NFTs across multiple platforms including his website, Instagram, Twitter and Discord channels. Hermès has filed a notice for a permanent injunction to prevent further trade mark infringement and dilution pursuant to Federal Rule of Civil Procedure 65(d), 15 U.S.C. §§ 1116, 1117, 1118 and 1125. Hermès is seeking to prevent Rothschild from using the Birkin mark and any variations that would mislead the public into believing there is a connection between Hermès and Rothschild. Further, Hermès is requesting Rothschild transfer his domain names and social media accounts containing the Birkin mark to Hermès, as well as transfer any MetaBrikin NFTs in his possession and income received from the sale of NFTs.
Following the final judgment Rothschild filed a motion seeking a revised judgement on the basis that there was an error of law and that the Court’s instructions to the jury were prejudicial and erroneous. Rothschild has alternatively requested a new trial. The Court is yet to reach a determination on the motions filed by both Hermès and Rothchild. Read the Court entries here.
Resale Rights for Kiwi Artists
The New Zealand Government has introduced a Bill which will establish an Artist Resale Royalty Scheme, ensuring that a 5% royalty is paid to visual artists each time a work is sold on the secondary market. The definition of visual artwork in the Bill specifically includes ‘visual works of cultural expression of Māori and Pacific peoples,’ acknowledging New Zealand’s ‘vibrant and unique visual arts scene,’ says culture minister Carmel Sepuloni. Read more here.
Musée d’Orsay is ordered to restitute Impressionist paintings
Musée d’Orsay has been ordered by a French administrative court to restitute four paintings by eminent painters Pierre-Auguste Renoir, Paul Cézanne and Paul Gauguin back to the heirs of the painting’s legal owner. The works were stolen from the French art collector Ambroise Vollard during World War II and subsequently purchased by Musée d’Orsay. Read more here and here.
U.S. Court requested to determine whether an AI generated work is copyrightable
Steven Thaler, the computer scientist whose application for copyright protection of an artwork created by an artificial intelligence machine, DABUS, was denied by the U.S Copyright Office, has contested the findings. In an application which was initially rejected in 2018, Thaler put down ‘Creativity Machine’ as the author of the artwork titled ‘A Recent Entrance to Paradise’. Thaler has filed a motion for summary judgment in the U.S. District Court for the District of Washington on the grounds that U.S. copyright law does not restrict copyright to human-made works. Thaler has requested for the court to determine, as a matter of law, whether an AI Generated Work is copyrightable. Read more here.