Technologies for digital art are rapidly changing, creating new legal issues. While some of the interest in NFT projects has waned, they haven’t gone away and there are new tools for generating art with AI, such as DALL-E 2, which allow artist or creators to create complete images with only a text prompt.  Past technological changes, such as radio, recording, software, and file sharing have been challenging for courts and lawyers. More recent developments, such as NFTs and AI generated art will likely bring new challenges.

Art Created By AI

A fundamental assumption of copyright law is that the creator or author of a work is the default owner of its copyright. AI generated software poses some problems for this assumption. First, most AI generated images are essentially constructed by analyzing already existing images. That is, AI generated art is built from other art. Even though it might be difficult to know the sources used by AI when looking at the output, some image licensing companies, such as Getty Images have recently banned the uploading or sale of AI generated art. 

Additionally, some AI developers are claiming that the AI software or algorithm itself is the artist.  While this isn’t quite Skynet, so far, courts have only recognized humans to be legal authors. A corporation might own a copyright by assignment or by a work for hire arrangement, but an author has to be a human. But, a creative inventor named Stephan Thaler has been trying to claim that an algorithm should be the author of some copyrighted works and filed an application to register the copyright on behalf of the software. The Copyright Office rejected the application on the grounds that non-human authorship is not recognized under the law. A similar issue arose a few years ago when the animal rights organization, PETA claimed that a monkey named Naruto should be the author of a photographic work, and that claim was similarly rejected. While the issue may be an interesting one to consider, for now, neither monkeys nor software can be an author under copyright law. 

New Works Built From Old Works

Even before AI-assisted mining of images, artists have been reusing art that inspires them for as long as there have been artists. Many digital art projects reuse at least parts of other copyrighted works. Is that allowed? Depending on how it is used, it may be allowed under the “fair use” doctrine. Fair use is an important, but frequently misunderstood part of copyright law. It contains enough grey areas that even experts might disagree about what is allowed. 

The four factors used to determine if reuse is fair use are: 

1. the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes; 
2. the nature of the copyrighted work; 
3. the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and 
4. the effect of the use upon the potential market for or value of the copyrighted work. 

Courts often analyze these factors as a part of a broader question of whether or not the use of the copyrighted work is “transformative” when comparing the new and old works. Here, “transformative” usually means that the work conveys a different “meaning or message” from its source material.  We should get further guidance about fair use for art this next year when the Supreme Court decides Andy Warhol Foundation v. Goldsmith, a case involving Andy Warhol’s use of a photograph of Prince. Even though the case is not expressly about digital artworks, the Court will likely give additional guidance about when the reuse of art will be transformative enough to be protected as fair use. So long as digital artists are using and reusing older works, fair use will continue to be an issue.

Selling and Licensing Digital Art

Selling physical art objects like paintings or sculptures isn’t affected too much by copyright laws. That is because, under the First Sale doctrine, if you purchase a copy of a copyrighted work, you can sell or give away that copy without asking for permission from the copyright owner. But, courts have only applied the first-sale doctrine for copyright law to physical goods, and so far have rejected the first sale doctrine when applied to digital goods, such as music files or download codes for movies.  This is due to the fact that digital files are copied or recreated when transferred, and even if the original is deleted, the new copy is not the same copy. At the time of this post, digital art sellers and buyers can’t rely on the first sale doctrine. 

But even with digital art that is designed to be sold and resold, it appears that there are frequent licensing problems. A recent survey of NFT projects showed that many are still very unclear about what, if anything, is being licensed and most licenses conveyed no intellectual property whatsoever. In order for NFTs to maintain value and for the owner to be certain of how it can be used, clear licensing terms are essential. This might include drafting license terms that expressly allow for transfer or sublicensing or using the NFT as proof of copyright ownership. Careful drafting of terms could resolve most of these problems.

Conclusion

Changes in technology will continue to require rethinking ownership of digital art. Carefully planning how your projects are designed, licensed, and protected is especially important when the technology is changing faster than the law.

1. DALL-E 2 https://openai.com/dall-e-2/ 
2.  The Verge, “Getty Images bans AI-generated content over fears of legal challenges” https://www.theverge.com/2022/9/21/23364696/getty-images-ai-ban-generated-artwork-illustration-copyright 
3.  Naruto v. Slater, 888 F. 3d 418 (9th Cir. 2018).
4. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 579 (1994); Google LLC v. Oracle Am., Inc., 141 S. Ct. 1183, 1202 (2021)
5. Capitol Records LLC v ReDigi Inc, 910 F.3d 649, 657 (2d Cir. 2018)
6. Redbox Automated Retail LLC v Buena Vista Home Entertainment Inc, 399 Fed. Supp. 3d 1018, 1032-33 (C.D. Cal. 2019)
7.  A Survey of NFT Licenses: Facts & Fictions. https://www.galaxy.com/research/insights/a-survey-of-nft-licenses-facts-and-fictions/