The Fair Use Doctrine For Uses Of Protected Artworks In The Metaverse. Is It Here To Stay?  

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The metaverse, a term coined in science fiction and popularized by Neal Stephenson’s 1992 novel “Snow Crash,” has evolved from its literary conception into a technological reality with significant commercial potential. For the past few years, this persistent virtual world, which provides a shared space for interaction and content experience, has captured the attention of various industries, including the fashion industry.  

Renowned brands in the fashion industry saw in the metaverse an unprecedented business opportunity. The ability to create and sell exclusive fashion items for virtual environments, collaborate with virtual designers, organize virtual fashion events and experiences, and customize products for digital avatars are just some of the applications that the metaverse offers to the fashion industry.   

In fact, it is possible to recall the “baby boom” of companies that started applying almost impulsively to register their trademarks for downloadable virtual goods, software (class 9), commercial services related to virtual goods (class 35), entertainment services (class 41), NFTs and online virtual goods (class 42) and/or financial services related to digital tokens (class 36).   

Notable examples of fashion and luxury brands that have ventured into the metaverse include:  

GUCCI™, a pioneer in the metaverse, creates virtual experiences on platforms such as Roblox and offers users the ability to purchase exclusive digital fashion items; PRADA™, in collaboration with Adidas Originals™, launched a collection of NFTs designed by digital artist Zach Lieberman; LOUIS VUITTON™ developed “The Louis Game” gaming experience that allowed users to navigate the history of the house and its products interactively; NIKE™, created the gaming and sports experience design space in Roblox called “Nikeland” where branded products can be purchased for in-game avatars; DIOR™ and GIVECHY™ have created virtual experiences focused on “beauty”; ZARA™, created its digital clothing collection “AZ Collection” in Zepeto.  

However, as we have already seen, the incursion of fashion brands in the metaverse has not been exempt from legal challenges, whose outcome and future in our legal system, as of today, is completely uncertain.

We refer to the first judicial pronouncement related to copyright infringement in the metaverse.  

Let us put ourselves in the background. May 2022. Punto Fa, S.A., the Spanish multinational company founded by Isak Andic, i.e. MANGO™, lands on New York’s Fifth Avenue.   

On the occasion of the opening of its flagship store in Manhattan and to match RALPH LAUREN™ (former occupant of the store), the company created an NFT collection with works by artists Joan MiróAntoni Tàpies and Miquel Barceló (previously acquired). In particular, the NFT collection consisted of the works Oiseau volant vers le soleil and Tète et Oiseau by Joan Miró, Ulls i Creu and Esgrafiats by Antoni Tàpies, and Dilatation by Miquel Barceló. The five works were exhibited in the establishment itself, where screens were set up to reproduce the virtual works. A virtual event was also held on Opensea, considered the largest “marketplace” platform for NFTs. Additionally, the reinterpretation of the works incorporated in different garments was exhibited in Decentraland, the virtual reality platform divided by parcels. To be exact, at coordinates 16.78 in the Museum District of the aforementioned platform.   

The NFT collection did not become blockchain assets and were never traded, but were only available to users through display.  

For this purpose, MANGO™ did not request authorization from the authors of the visual works or their successors in title. Neither to the Visual Entidad de Gestión de Artistas Plásticos (VEGAP). 

Consequently, on July 29, 2022, VEGAP filed an ordinary lawsuit against MANGO™ (the defendant) in a declaratory action for infringement of economic rights (reproduction, transformation and public communication) and moral rights (integrity and disclosure) of the artists Joan Miró, Antoni Tàpies and Miquel Barceló, as well as an action for damages in the amount of 1.37 million euros.  

In addition, VEGAP requested the adoption of unprecedented precautionary measures. These measures were partially granted, and the deposit of the NFT’s subject of the proceeding before the Court was agreed.  

For more than a year and a half the intrigue resided in seeing how the 9th Commercial Court of Barcelona would interpret the scope of MANGO™’s rights over the artists’ works when faced with the conversion of a work of art into an NFT. Does MANGO™, as the holder of the support of the works, have or not an absolute right of enjoyment and exploitation over the works in any way, in any scenario, including the metaverse?  

Apparently, for the time being, the answer seems to be affirmative.   

In the Judgment of February 11, 2024, the Court focused the controversy on determining whether the right of public exhibition held by the owner of a work of fine art can cover the uses derived from the creation of a new work of digital art that incorporates and transforms the pre-existing work into an NFT, without the need for authorization from the owner of the pre-existing work (VEGAP). Or whether, on the contrary, such uses required authorization from VEGAP and, consequently, the moral and economic rights of the authors of the works used to co-create new digital works of art were infringed.  

Regarding this controversy, the Commercial Court 9 of Barcelona considered that the existence of metaverses introduces new forms of use of intellectual property rights that are not specifically contemplated in the current Intellectual Property Law (LPI). However, copyright infringements within the metaverse, whether they are works created virtually or imported from the real world, are subject to the current legal framework. This would mean that the rights and procedural tools available to copyright owners are the same in the metaverse as in other digital environments such as the Internet or video games.  

However, even though the legal basis on the Spanish legislation (LPI) has been established, the Court decided to apply the doctrine of fair use and fair use.  

For this purpose, reference is made to American jurisprudence, such as the judgment handed down by the 2nd U.S. Circuit Court of Appeals in the litigation between The Andy Warhol Foundation and Lynn Goldsmith in June 2023, regarding the copyright infringement of the photograph of the singer Prince Rogers Nelson – captured by the photographer and plaintiff Lynn Goldsmith – as a consequence of the disclosure of the work Prince Series by Andy Warhol, consisting of the silkscreen printing of said photograph in different colours.  

Taking as a reference the American judgment cited above, the Court considers that the use of MANGO™, in addition to not being commercial, is “transformative” of the artists’ works, in that it adds something new, with an ulterior purpose or of a different nature, and does not replace the original use of the work. In this case, the purpose is to create a special work on the occasion of a decisive event for the international expansion of MANGO™.  

In short, the Judgment dismissed VEGAP’s actions on the grounds that MANGO™ made a fair, legitimate and harmless use of the works, without causing any damage to the authors of said works or their successors in title. Quite the contrary, the Court understands that the uses made have enhanced the value and made known to a wider audience (both American and universal, through the metaverse) works that, although transformed, most likely would not have had a diffusion such as the one they had as a result of this inaugural event.  

Thus, we see how an analysis that begins by establishing a legal basis on national legislation evolves towards an application of a doctrine specific to the United States, even citing American rulings, although this doctrine has no equivalent in our legal system.   

Whether this ruling will set a precedent or not remains to be seen. For the time being, VEGAP has announced in a recent press release that it “immediately” filed an appeal against the ruling of Commercial Court 9 before the Provincial Court of Barcelona.  

We will see if the implementation of flexible licensing systems and the recognition of fair use doctrines are the right way to provide the necessary framework for the protection of creativity and technological evolution to coexist harmoniously.  

Article by María García.