Clifford Chance

Introduction

In March 2023, we echoed in this "Global IP Update" blog the first interim injunctions ruling from the Barcelona Commercial Courts in relation to the copyright infringement claim against the Spanish multinational fashion company Punto Fa, S.L. (owner of the "Mango" trademark), in which the Spanish collecting society for plastic artists, VEGAP, argued that Mango had infringed copyrights (moral and exploitation rights) held by the Spanish artists Joan Miró, Antoni Tàpies and Miquel Barceló (the "Authors"), by converting five paintings (plastic works) into non-fungible tokens (NFTs) without their consent, despite the fact that Mango had rightfully acquired ownership of such paintings years ago.

Since then, as this is the first case in Spain in which copyright and NFTs are at a crossroads, it has attracted a great deal of attention from copyright practitioners and aficionados, who have been patiently waiting to find out whether the Spanish courts would consider that the owner of a work of art's medium (in this case, the physical paintings) is allowed to unilaterally create a digital "twin" (i.e., an NFT) of an original plastic work –and, if so, on which legal basis– without the Authors' prior consent.

On 11 January 2024, Barcelona Commercial Court number 9 handed down its long-awaited judgment, which answers this question in the affirmative, but subject to certain conditions.

Background

In the case at hand, VEGAP claimed that the creation of NFTs of the above-mentioned five paintings and the fact that they were subsequently made available on social networks and the OpenSea and Decentraland public digital platforms entailed an infringement of the Authors' copyright, mainly as unauthorised acts of reproduction, the transformation of the works and making such works available to the public, which also encroached upon their moral rights of integrity and divulgation over the referred works.

Mango, in turn, sustained that as the rightful owner of the physical paintings, it was entitled to display them in public, and that the creation of digital works (i.e., NFTs) from the transformation of the original paintings and their subsequent publication would constitute an "innocuous use" of the Authors' copyright (i.e., an exploitation that caused them no damage). In this regard, Mango built its defence mainly on section 56(2) of the Spanish Copyright Act, according to which the owner of the original plastic work is entitled to publicly exhibit the work, unless the author has expressly excluded (reserved) that right when disclosing the work.

Therefore, in a nutshell, this case dealt with a very important question from a copyright perspective: whether ownership over the physical medium of an artwork includes the right to create an NFT (i.e., a digital duplicate) of said work and upload it to a public digital platforms, such as OpenSea.

Findings of the Commercial Court

In its recent judgment, Barcelona Commercial Court number 9 has ruled in favour of Mango, dismissing VEGAP's infringement claim in its entirety.

On the one hand, the Court has considered that making the NFTs available to the public on digital platforms does not entail an infringement of the Authors':

a) moral right of public disclosure over the paintings, insofar as such works had already been publicly disclosed decades ago and, therefore, such Authors' right had already been exhausted.

b) right of integrity, since the NFTs are not a deformation of the paintings, but a transformation thereof.

On the other hand, when it comes to analysing whether the Authors' exploitation rights had been infringed (rights of transformation and making available to the public), the Court also concludes that Mango did not commit acts of infringement.

Firstly, the judgment understands that the right of reproduction and the right of transformation are mutually exclusive. Since the NFTs are not a mere copy, in other words, the artists who created the NFTs did not copy (reproduce) the Author's paintings but instead transformed them to create new pieces of art (i.e. the NFTs), Mango did not infringe the right of reproduction.

With regard to the right of exploitation to make the works of art available to the public, the judgment establishes that Mango's right to publicly exhibit the paintings under section 56(2) of the Spanish Copyright Act allows it to perform such public exhibition of the works in the physical world (by exhibiting the five paintings at the opening of Mango's Fifth Avenue store in New York) but also in the digital environment (by publishing them on the OpenSea and Decentraland digital platforms).

Lastly, in order to examine whether the Author's right of transformation had been infringed by the creation of the NFTs, the Court decided to apply the "fair use" doctrine (relying on the Spanish Supreme Court's judgment dated 3 April 2012 – Google case), concluding that Mango's acts constituted a non-detrimental "innocuous use" after weighing the four following factors:

(i) the creation of the NFTs was of no commercial nor publicity interest and constituted a new "transformative" use that did not replace the original use of the paintings. Furthermore, Mango did not obtain any financial profit therefrom;

(ii) Mango made reference to and acknowledged at all times the authorship of the paintings;

(iii) although it had reproduced the paintings in their entirety in the NFTs, the fact that Mango added new elements that transformed such works and thus gave the NFTs a differentiated originality constitutes a legitimate use of the paintings; and

(iv) Mango's conduct benefitted the Authors' interests by giving them an important role in the event in which their paintings were exhibited, without compromising the original paintings' value.

All in all, the judgment declares that Mango made an "innocuous use" of the original paintings, considering that, far from going against the Author's interests, Mango's conduct actually benefited them. Therefore, after weighing both parties' interests, the Court decides the dispute in favour of Mango's right to transform and publicly exhibit the paintings (that is, whether physically or virtually) and therefore determines that Mango did not require the Authors' prior authorisation in order to create and publicly exhibit the NFTs.

Conclusion

The importance of the judgment of Barcelona Commercial Court number 9 dated 11 January 2024 is undeniable, as it is the first judicial decision in Spain that pronounces on whether the owner of certain works of art is legally allowed to create NFTs from them, without the prior consent of the copyright holders. However, the teachings of this judgment do not seem to apply to all cases. It instead calls for an assessment to be made on a case-by-case basis to determine whether the creation of the NFTs can be considered "fair use". Furthermore, some points of the judgment are very controversial, particularly the interpretation that the relevant NFTs were created without commercial purpose and even the application of the "fair use" doctrine, which, a priori, is alien to the Spanish copyright system.

Hence, we venture to predict that the Spanish saga on this matter is far from over (the 11 January 2024 judgment is not final and can be appealed). Copyright aficionados will be looking forward eagerly to the next episode.

To be continued.