What the NFT? NFTs, Copyright, Moral Rights, and other Legal Implications

Transcript

okay we're online so hello and welcome everyone i'm peter robinson and this is the ethereum engineering group meetup so today we've got daniel and annabelle um from hb ellsworth very close close close anyway and they are going to tell us all about the legal implications of nfts and look i thank you very much for coming on today and you know you know it's going to be on youtube but then um and i'll say ahead of time that these um very brave lawyers have said look nothing is certain this is just you know this is just an opinion piece and at the

end of the day don't sue us if you know this tell us if there's something if you think there's something that's not quite correct but you know and so look thank you very much so i've you know please introduce yourselves um and so that everyone knows exactly who you are yeah i think you've um preempted our first slide and you have to shut the share screen button which is the big disclaimer that says look you know this isn't legal advice you know don't align it look we want to try and keep today fairly conversational and and relaxed and so the flip side of that is don't hold anything against us um that we'd prefer to be able to sort of

talk off the cuff a little bit um and rather than um be sort of super rigid but the flip side may be that we occasionally slip on a few things so if that is the case i apologize especially if you're watching this after the fact on youtube yeah um so uh who we are um and why we're here talking to you uh actually we'll hang on yes let's first i'm gonna dive in and just do a quick acknowledgement of country so dan and i would like to acknowledge that this presentation is being delivered on the traditional lands of the ghana people so we just like to pay our respect to ghana elders past and present and recognize the ongoing connection that the ghana people have to water's kin and community so um

who we are and why we're speaking to you today so we are from h.w expert lawyers hwl is a national australian law firm we have offices in every state and territory um we are not necessarily tech focused but we are sort of a broad commercial firm and we have people who are experts in you know tax and insurance and real estate and things like that um but because we are quite a large firm we've got the opportunity to specialize and we've got a very good team in the in the tech and ip space um so we're coming to you from the adelaide office in south australia today and the our adelaide office here was uh last week some rankings came out and said that we were the top single top

firm in adelaide for tech media and telecommunications law so that's why we're here and i personally i've been working with the firm for about 12 years um and before i was working here studied law and computer science so that's my background and interest in the area uh notwithstanding that so obviously you know i i do know a bit of the tech and and have you know coded bits and pieces along the way uh you know up front i've dabbled a tiny bit with some solidity stuff but nothing sort of you know deployed into production so only the tiniest little bits so so i'm not here as a tech expert but i do have a bit of an understanding i'm also the the chair of the south australian

committee for the intellectual property society um so so heavily invested in that space um annabelle has joined our team in the last year as recently graduated from the university of adelaide um annabelle uh is interested in this area as well as someone who's uh you know obviously she's part of our ib team and interested in ibm tech but specifically um the background in the arts yeah and so this this intersection of nfts of tekken arts is an interesting space for the two of us to talk about uh she perhaps as well has a finger on the pulse of some of the you know zeitgeisty pop culture bits that are perhaps passing me by a little bit um so yeah we're we're

here as you know the legal experts but not necessarily the tech experts um you know if we get bits along the way uh peter might chime in i'm sure but um uh hopefully we're pretty representative of the team what we're going to speak about today are a handful of different issues uh associated with um nfts were sort of gonna would have a bit of a primer but we assume you know most of the stuff um and most of the tech and then it's it's about the interaction of the law and i think probably the the most substantive one that we're gonna talk about are the bits related to copyright and issues that sort of interrelate with that like royalties um you know assuming that you have that

understanding of the tech uh understanding sort of how the copyright system works is then potentially illustrative into how the how mfts fit alongside that so we've given you a little overview of the legal issues and we've done our introduction um we just would have sort of wanted to give you a broad roadmap so we're doing as dan mentioned a little bit of an nft refresher just in case there happens to be anyone in the room who's not quite as up to scratch as they'd like to be and then as dan mentioned deep diving into those legal issues with the focus on copyright moral rights and royalties and then we're hoping at the end if anyone has any questions we'll be able to wrap up and sort of do a quick q a so what is an nft

so this may make you laugh um but until very recently as damaged and i only joined the firm in september and before that i had no idea what an nft was um and i understand that most of you here today should have a very good idea but just in case anyone doesn't and nft is a cryptographic tool that acts as a certificate of authenticity for scarce goods so the acronym stands for non-fungible token and the non-fungible component reflects the fact that nfts cannot be transferred on a like-for-like basis so the specific details of the nft for example it's creation dates creator the assets linked to it and consumer demand to determine its worth and this is in

contrast of course with fungible items like money or other cryptocurrencies such as bitcoin we know that if a and b both had a bitcoin and swap them they would each still have a bitcoin of the same way and then that token component refers to the myriad of assets that can underlie an nft um but broadly however we like to think of nfts being defined into two distinct categories and that's digital certificates that are linked to entirely digital assets and then uh digital certificates that are linked to physical assets so i think dan's going to go through some of the more technical aspects now yeah um so so obviously we're using you know the underlying blockchain technology that

have so these things live on your decentralized immutable ledgers and i expect i don't need to to explain that stuff to you um you know we'll create them using smart contracts often on the ethereum chain and potentially on some subsequent ones that have come along after that that have similar mechanisms um you know using those public uh chains makes it you know gives at with the immutable records gives you you know a clear record of ownership it's irrefutable you know um that all the stuff that's built into the blockchain with the hashing and stuff to make sure that the records can't change that stuff that you guys all know um i think the bit where we sort of straddling into the tech a bit more is perhaps to talk about the specific smart

contract standards that are the ones that get used for this that obviously this isn't the only way to do it but the sort of canonical standard um you know original nft you're usually talking about an erc721 or an extension of that on the erc at 1155 template um and again now this is starting to creep out of the legal bit but you know the erc 721 template has um has a bunch of methods a bunch of functions on it pulling out you know a handful of key ones it's a pretty simple mechanism really that it's uh you know a smart contract that's going to maintain a ledger of ownership of token ids so you know a function that you give it a token id and it'll tell you who's the owner and a function to

transfer ownership from one wallet to another and a function that takes a token id and gives you back a uri a link to where you can find out more information about what that token represents and at that link you should find something that implements the json um schema that basically sets out three key properties a name for the token a description of it and uh and then another link that links off to the actual underlying image itself so um you know obviously there's a lot of uh there's a lot of tech and sophistication in the way that the blockchain works and the way that smart contracts on top of the blockchain work but this smart contract in itself is

relatively relatively i say as someone who's not writing these things themselves but straightforward enough that it is not doing it an exceptionally sophisticated thing it is keeping track of the ledger of ownership and and being able to you know interrogate the ownership and then interrogate the details of the tokens and so i guess if you need a little bit of help climbing out of that technical rabbit hole like i sometimes do um i think a useful analogy for nfts is to think about them in the way that we think about fine art and i'm sure you've seen references this to this before um so i am making an educated guess that we have all seen and know at least one of these paintings and now i'm going to say something potentially sacrilegious here um but i personally don't think that the art

contained in any of these incredibly famous works is particularly impressive skill wise um for example i create that pollock painting almost every day at work trying to get my pens and highlighters to go um however what i think is irrespective of their visual appeal and and my own thoughts um it's not necessarily the actual art that's contained within these works which has made them so valuable and so well known rather it's the history and the grandeur which surrounds these works which is where the value lies um and so despite their existing plethora of fakes versions shared online and copies printed onto various bits of merchandise we know there to be one true version of each of these works which now happen to

hang in some of the most famous museums in the world and so mapping this onto nfts by purchasing an nft you're sort of buying into this history and this grand jaw or essentially affording yourself with i guess the bragging rights to an original or limited version of something that you're able to verify through a digital record and as well that's perhaps akin to having that original signed by the artist rather than those copies or fakes that um exist later on why are nfts a big deal i'm going to take you through a couple now and then i think dan will end up with one first and foremost i think we couldn't go past the fact that they are a really exciting investment opportunity for

people i mean we all know the people nft that make millions of dollars and i think for people who are sort of interested in dipping their toes into the crypto world um popular culture we're seeing lots of references to these nfts and i think it's helpful because they're visual and they're sort of connected to things that are permeating through the mainstream um but then also being someone with a background in the arts um it was devastating for me to see and continue to see the impact that the pandemic has had on the industry and i think one of the really exciting things about nfts and what they can do for creatives particularly independent creatives is a new revenue stream which allows these

creators to maintain their relationship with their audience so for example for those in the music industry who you know are often unable to tour due to covert um they're able to reconcile that gap left by touring and offer perks like audio visual art which is attached to an album and thus really keep their fan base engaged and i think in addition to this um royalties although they're not necessarily hard bait into smart contracts there at least seems to be some convention amongst the nft community um of coding a resale royalty right from anywhere from about 2.5 to 10 into them and i mean dan and i are going to touch on this more later on but in australia at least a royalty mechanism

of this kind um for visual artists already does exist under law um nonetheless i think it's excellent that the nft community are recognising that artists should be able to benefit from their work more than once and then in terms of marketing i'm sure i am not alone in having been overwhelmed completely by the volume of advertising that seemed to erupt really when the pandemic kind of got into its guts in march of 2020 um and i think nfts in this sense provide a bit more room for brands to get creative in their ad campaigns and i think it's certainly seen ads explore more interesting ad campaigns um and whether this is simply because they wanted to jump on the nft height train or not i think that is a cool um

thing that nfts are facilitating and then you also probably remember that back before when i was describing nfts i i used some quotations around the term scarce when i was discovering them and i think in many aspects um the level of scarcity that is offered by an nft is entirely artificial so an nft attached to a digital artwork does very little to present prevent sorry that work from being infinitely replicated and this is something that dan particularly is going to touch on more later on um however i do think at least it's a cool thing about nfts is that creators again at least in theory can set the level of scarcity that they attach to

their creations and i think this has seen nfts you know in some respects go from that fine art example that i used before um and sort of that's generally the way that nfts are held out um and see creators and brands sort of i guess implant implants sorry a level of utility and functionality into nft so for example we've seen festivals and events like coachella mint nfts that can be used as lifetime tickets and they have a real world effect and then finally um i i think another aspect of nfts that definitely deserve some attention is their accessibility we know that again using my fine art example that they can be really exclusive and lucrative markets to tap into um but through nft marketplaces

particularly like open c um anyone in theory can create an nfc so while at a technical level um the minting of an nft does involve deploying a smart contract to the blockchain most of that process can actually be streamlined to an nft marketplace and and that means that everyday people can have access to the nft world and even if you're someone that's not interested in minting nfts um if you're interested in purchasing and engaging from an investment perspective um or a creative expect perspective sorry um usually getting your hands on an nft is very similar to online shopping which i i think now most of the population is quite adept at um again with nft marketplaces avoiding

that need for consumers to trade directly onto the blockchain yeah and so so there's all this stuff that what people are sort of interested in what's going on right now and then there's sort of this this broader thing of what does this actually represent for the future so you know maybe that you've not necessarily sold on the idea that sort of buying and selling pictures of monkeys with different hats on is is necessarily that you know a seismic shift but is is this the sort of gateway into using this technology for uh broader applications and you know the the buzzword at the moment seems to be web 3 which is hard to get anyone to give a consistent sort of definition on and i suspect that this group is kind of already um

you know familiar with this kind of concept but the idea that um you know we can take some of this decentralized stuff and sort of recalibrate a bit how the the balance of power works with sort of big centralized operators on the internet um you know and then whether we can use tokens that sort of attach not necessarily just to digital you know artworks and these sorts of things but to physical assets to sort of you know track provenance and and and track ownership um uh you know i know that in a recent presentation you had sort of everledger come along and talk about how they've done that with diamonds and now various other things and i suspect when they started doing that with diamonds it wasn't really you know nfts wasn't really sort of the flavor of the month they were just using

the blockchain to track something they were all sort of converging on the same thing there's even you know suggestion that um you know the other buzzword of the month at the moment is the metaverses and and and facebook now met her taking uh trying to take a lead in that space but various sort of um organizations kind of looking to have control over those kinds of spaces and we did say recently facebook sort of quietly announcing that they suspect the the royalty you'd pay on digital transactions inside their metaverse to be something like 50 and so you know there's ideas well why should we why would you invest in sort of phys digital items that just exist in facebook's metaverse when you it could exist that you invest in nfts that

represent items that exist you know across different universe platforms or something so there's the broader sort of big sky ideas about why these could end up being a big deal um like time will tell which of those actually shake out into anything particularly useful so we've done a quick nft refresher now let's dive into the guts of the presentation which is the legal issues with nft under australian law so an aspect of nfts but certainly raising hairs for lawyers is its decentralized nature and the effects of this are twofold so first as we've mentioned the value of nfts derives from the perception of the buyer and that's invariably influenced by the broader

market so although some nfts are linked to physical assets that do hold some inherent value the vast majority are linked to intangible assets whose value is driven only by their popularity and so if you're using nfts as an investment opportunity they're an incredibly risky risky asset class to invest in and your nft could reverse a million dollars one day and then zero the next without any real explanation as to why and second there's very little uh nft law or specific mft law i should say in australia so our federal parliament's bit of a mouthful um select committee on australia as a technology and financial

center has recently released their final report into cryptocurrency and digital assets so this certainly suggests that nft legislation could be a direction that we're heading in and we've also recently had a federal parliamentarian announce at our national blockchain week that they would be interested in um initiating a digital services bill um with the view that i guess genuinely helping successful nft trading occur yeah i think that's right the the the people that are pushing for this at the moment in in parliament are the ones who are trying to be ahead of the game and and are genuinely interested in this stuff and so quite often you know the the the promise of regulation feels like a almost a

threat that you know it's gonna they're gonna come in and regulate us out of existence i think the people that are putting things on the table at the moment are the ones who see potential in this area and so what they're trying to do is more put sensible frameworks in place so that good operators can you know get on with it with certainty and also have some confidence that you know the bad eggs are going to be weeded out and make you know uh have a bit of a first mover advantage from doing this now whether obviously we've got a for those of you outside australia might not be aware we've got a federal election coming up in a couple of weeks so um you know whether this stuff comes into fruition remains to be seen but it is on the agenda yeah absolutely but and

exactly as dan said until this time where fans entered specific legislation and this is similarly the case for case law and while we are certainly starting to see a range of nft lawsuits filed um there is at least to our knowledge very little case law there's only one uk case currently which um of which its judgment could be potentially persuasive to australian courts um so in australia decisions of the uk are persuasive but not um binding for judges to follow um so yes that hasn't occurred yet and so in the absence of any case law um or any specific legislation we're reliant as lawyers on interpreting the general legal frameworks and how these could

potentially apply to nfts and so this is a really important point that i wanted to bring up simply because there's no specific nft legislation that doesn't mean that nfts are immune from the law so in fact there are a number of frameworks that can apply so for example the ip regimes that dan and i will be touching on later on in this presentation and then also the concept of misleading and deceptive conduct which is regulated by the australian consumer law so under the acl we have a sort of a general provision under section 18 and that is that a person must not in trade or commerce engage in conduct that is misleading or likely to mislead or

deceive and then also under section 29 we have a more comprehensive list of examples of false or misleading representations so for example under subsection a making a false or misleading representation that goods are not of a particular standard quality value grade composition the list goes on yeah one of the ones on that list is uh making a false representation that goods have a specific sort of endorsement or sponsorship or affiliation which you know if you're minting what you're saying is the nft for this thing you know you want to be able to actually stand behind those claims yeah absolutely so although there are only a couple of examples i think you can see how these sort of broad provisions could potentially be useful to someone who's

met with nft foul play however there are still a couple of sticky points um and and those are in relation to the boundless scope of the internet and the anonymity of the blockchain so how do you determine what laws of which jurisdiction jurisdiction apply when and where and and if you were able to work that out how do you enforce these against the person or the entity that you have an issue with um when that person or entity could simply abandon their digital wallet and run yeah and the the other part as well the courts are used to being able to issue remedies uh that involves sort of you know winding back transactions to say no we think that that was you know that that shouldn't have happened so this should

be reversed and uh in the world of immutable blockchain transactions that's very difficult to do so it's it there's a prime preliminary step of you know where in the world is this person can we find this person can we pin it on them and then secondarily how do we actually then practically implement that and so as intellectual property lawyers we hear about nfts and they you know the pitch is at a broad level hey you know you've got these digital artworks or taking that at least that this example of applying nfts to digital art you've got these digital artworks that at the moment they could be replicated over and over again infinitely

but what we want to do is actually introduce some sort of control and scarcity to the system by saying there's only one person the token holder who is the you know canonical owner of this thing and so they have some exclusive rights around it now as an ip lawyer i hear that and i think gee that sounds an awful lot like you know copyright and other ip rights right that we've got systems that have developed over hundreds of years of law to say notwithstanding that you know a novel or a painting or a photograph or a movie could be replicated infinitely that we as a society have you know given through the law the ability for one person to say that they own and control that so how does that you know old-school system fit with

the nft stuff so i think before we to dive into that we're going to go back one step and talk about what vip system looks like absolutely so intellectual property as you can see on the screen is a bundle of rights relating to intangible creation so they can be creations of the mind for example inventions discoveries books literary works creative and artistic works or brands or physical embodiments of those creations so we've got models machines computer programs circuits etc so the rights are protected by legislation or common law um or equity and they give the creator of the ip the exclusive right and i want you to remember these two next buzzwords that

i've highlighted in orange to exploit their creations or protect their creations from unauthorized use and just just quickly because uh for this audience so comment when we talk about common law and equity what we're talking about are things that instead of parliament making the law over time courts will attempt to decide decisions consistently with and so they rely on president and so over time we've got bodies of law that have been built up by saying well no courts will recognize these rights and we'll work we'll act to protect them and that's exactly what we're referring to so in australia we have kind of two broad types of ip so we've got registered and unregistered rights so we've got patents which protect

inventions design which protect um physical appearance products we've got trademarks that act as badges of origins for brands and then we've got what we'll be talking about today we've got copyright um so that is an unregistered right we also i just mentioned that below have got confidential information as well so looking at those trade secrets and areas so um two distinct areas some have to be applied for and some arise automatically so copyright in australia is governed by the copyright act shock and copyright protects the original expression of an idea or information but it doesn't protect the idea itself so um that's why you know for example in romance movies

the idea of boy meets girl is not a novel concept um and you see that replicated time and time again but it's the expression of those distinct movies and sort of how they're set out and written that separates them and so um the copyright there steps in to protect that expression of the boy meets girl idea rather than that idea of boy meets girl itself um so as i sort of alluded to copyright can apply to a range of categories of original work so we've got literary works and um as as tech people that are mostly online today i'll let you know that software sort of falls under um a literary work for the purpose of the copyright act um and as well we've got dramatic works artistic and musical work sound recordings films broadcasts and

photographs so protection of copyright is automatic and it's automatic upon the creation of an eligible work so to be an eligible work it must be an original work it must be in a material form so reduce to writing or record it and it also must have some connecting factor with australia now i guess some of the good things about copyright you could say if you're developing copyright um or sorry copyrightable work is that it's not necessary to register your work to invite copyright protection now i'm loosely aware of in the us for example i think if you if you want to sue for copyright you might have to register but at least in australia um that is not necessary and then also copyright lasts

for quite a while so um usually for the life of an author plus 70 years and just to just before we leave that's like quickly that the connecting factor with australia that's obviously to get protection under the australian copyright act but then our act will recognize through a series of international treaties uh copyright that's from overseas and and vice versa that our rights will be respected so if you don't have that connecting factor with australia but do you have an original work in a material form you probably have copyright protection under your local act instead yes so um the exclusive rights that are conferred by copyright are to copy publish broadcast license communicate perform sell and import and again

importantly unless and until the owner of that copyright explicitly assigns these rights to someone else in writing or permit someone else to do something within the scope of these exclusive rights so for example through a license so let's click on that slide for a second so okay so that's our sort of broad landscape of what copyright looks like and what it protects so let's say you want to in that sorry you want to mint an nft that would involve reproducing that work and communicating it sorry mint and nft that relates to an artwork that would involve reproducing that artwork and communicating it to the public at the very least so um so you to do that you need to either per

this slide be the owner of copyrighted network or have a license to do that from the copyright owner now as annabelle sort of mentioned there's no register for copyright and the copyright automatically arises to the author and can be assigned in writing but so that does create some difficulties in making sure that you're actually the one with permission to do that thing um because you have to chase uh yeah pull through the chain of title to see right who did the author assign their rights to who do they so that you know you can see that you've got a chain of title flying back to the author and this could be difficult sometimes so we've seen an example very recently where um the from late march is the tweet on the left with a project calling itself the

tmntnft uh purporting to have rights to meet nfts from the 1987 teenage mutant ninja turtles cowabunga they uh and then on the right is a post from their discord uh within the last couple of weeks uh saying yeah paramount's lawyers have been in touch and maybe we don't actually have the rights we thought we did so this chain of title stuff can be difficult um just you know this isn't unique to nfts where this comes up um very frequently that we've dealt with is um in creating a motion picture if you want to make a film you

want to make sure that you have proper chain of title to the script and all the stuff that flows into it before you start shooting and waste a whole bunch money filming a movie that you can't release because you actually didn't have the rights to make it um you can also turn on some interesting questions um we've seen this one where tarantino was going to meet some nfts uh of pictures of uh from his handwritten script from pop fiction and um miramax has filed a lawsuit against him saying well hang on a sec know you assigned writes in that script to us as part of making that film with our studio um this is going to hinge

on you know what rights he either licensed or assigned to them at the time and so it's going to involve looking at the contract for for that sale or license from the 90s well before anything like this was contemplated and trying to work out what the parties intended at that time it's quite an interesting exercise so we uh see where that one shakes out so um as we've said though right so so let's say you've got a properly minted nft you haven't hit these issues you've got something you had permission to create it now someone comes along and buys that what do they get when they buy it do they get ownership of the copyright that comes along with it we think we generally know

that you know under the australian copyright act and presumably under corresponding ones internationally the there are very sort of strict requirements for assignment of copyright and it needs to be in writing outside of this space one of the scenarios and mistakes we see a lot is people commissioning a contractor to do to do something and paying them to do it and assuming that that means they own the work that the contractor creates that's very much not the case just because it pays for something doesn't mean you own it it needs to be in writing and specifically contemplating the assignment of copyright so for an nft to do that i think would need something that sits alongside it like some

something beyond just the you know the digital smart contract that there's some sort of terms that accompany it that convey the copyright then so then okay what have you got well then you know it's also not potentially uh from a legal perspective not an awful lot that if you're not getting copyright maybe you are getting some limited implied license to you know sort of deal with it in the ways that an nft is typically dealt with but it doesn't give you the right to start doing things like you know printing t-shirts or you know making movies based off of the character in the thing that you've created

um so we've seen that play out um one example that was quite prominent a few months ago was the uh the spice dow who got together 2.6 million euros to um to buy an nft that was for this artwork book of um you know a digitized scan of this artwork book for a june um production that never made it off the ground and they stated we're gonna buy it we're gonna make it publish our public and then we're gonna make a cartoon series out of it and sell that to a streaming service and sort of had this complete misconception about like what it was they were requiring that that you know what they're requiring looks more as an analogy like if i walk down

to the bookshop and buy a copy of harry potter i don't get the rights to make a film based off of that just because i bought a copy of the book okay someone is pointing out in the chat that they bought the um that they bought that they actually bought the physical book for 2.6 million dollars not an nft of the book um in any event that's even closer to my harry potter uh analogy um actually i'm sorry i've just noticed we had a few um uh a few questions yeah so look david has also raised the question how would this apply so sorry this was obviously what we discussed a few minutes ago how to supply degenerative nfts which generated were minted and not prior it's

actually really interesting that i because yes so as i understand what we're talking about are things like uh you have a series of you know a thousand different sort of cats that you're minting and they get generated by a procedure that you know assigns a different hat and whiskers and ears to each different hat cat to come up with the thousand different combinations say and i think what you've actually got there is a real question about whether those are artistic works that the copyright would attach to copyright um at least in australia flows from authorship by a person and things that are generated by

computer programs typically don't attract copyright protection that it protects the sort of intellectual endeavor of a human author as opposed to some procedurally generated thing so in the context of an nft series which is consists of a whole bunch of generated things there would be a live question as to how robust any copyright that attaches to that is i suspect what you probably get back to is that you say well there's still copyright in the hand-drawn artwork of all the different hats and they're still copyrighting the different you know things and so the program that puts them together maybe it doesn't create a new artistic work but it's still to reproduce that you still have to reproduce all the artistic

works that form part of it so there is some copyright but it is a very interesting area this this sort of computer generated artwork type stuff that is just a whole separate bundle outside of today yeah and um given an nft has to be published to sell it does that mean that copyright goes for 70 years or is it the creator's life plus 70 years look the things that talk about publication plus 70 years are typically for categories of works um that inherently have a publication thing in here but it it's things like um there is copyright in in broadcasts goes from 70 years from the broadcast for things that are more in the nature

of artistic works like a painting or a photograph or a digital artistic work i think it's probably going to go from it's probably still going to be author plus 70 years because the copyright arises from the creation of the artwork as opposed from the publication of the broadcast um two more questions that have uh uh taken further the nft could also be generated by an algorithm and not from component images yeah and so that's going back to the previous question yeah but yeah that um the the more that it is completely procedurally generated and doesn't have any human sort of touch in there the more that the less it looks like something that's

protected by copyright um this is this is a live question that is is not just in this space you know if you know if if i write an ai computer program that generates artworks and then i give it to annabelle to run and she runs it and it produces an artwork who should be entitled to ownership of that is it me who sort of trained it and do all the right things to make the artwork is it is it annabelle who drove it and maybe gave it a few parameters to sort of steer it in the right direction um because generally the answer though is probably neither of us but there's a live question of should the law change to reflect either or both of us actually having some rights to exclusively

control that output um and there is just as a further sidebar there there's a thing at the moment um the the similar question arising in the patent space which is further away from what we're talking about today but where someone's trained an intelligence thing uh it has it has come up with a patentable invention um they have applied for patents for that invention in number of countries around the world as a test case and have put forward um and basically in in most countries it is passing the sort uh the questions about is this the kind of thing that is sufficiently inventive to be patented but it is running up at issues of can ai be named as the

inventor or does it need to be a human person and australia has so far had two court cases on that like one with one judge at the first level and an appeal with three judges and i think from memory uh the first judge has said yeah that's okay there's nothing in the australian act that says it has to be a natural person that invents it and the federal full federal reporter said no hang on a second we don't agree with that we think it does need to miss and and there's similar things with disagreeing with judgments going on in different countries around the world so this is a really interesting area it's not called what we're talking about today but fascinating and so i've got sidetracked myself um and oh i've i've i've scrolled the slides trying to scroll the questions um yeah so so horatio's questioned about

the procedurally generated art by someone like brian you know i you know it raises real questions there's quite like there's probably you know there's big questions of fact and degree as well is it the kind of thing where you just press the go button and the ai does all the stuff or how are you uh actually meaningfully having input into the artwork because then you really get into some fine grained questions where if you're using some of the you know more sophisticated tools in photoshop these days to create an artistic work that that you know can do sort of ai sky replacement and things like this where's that line between i've had enough involvement versus i've not so yeah very interesting space so look our last bit that we had um mentioned

was about how look you don't miss you don't just by buying an nfc you don't get copyright ownership and you don't necessarily get a license to do anything sophisticated with it but um we do see some nft projects that are taking it upon themselves to say well no we will explicitly grant you rights so board hd club with the you know the series of board apes is is one of the most prominent ones that i've sort of alluded to with monkeys wearing hats um but they have a thing in the license terms from yuga labs who runs that project that grant expressly grant an unlimited worldwide license to use copy display to purchase art for the purpose of creating derivative artworks for commercial use so um you know and they specifically say that you can sell t-shirts with it on

you know you can you can go off and make your own things and so we've seen people now latching onto this that there's a music project involving timberland with a wrapping one of the the one one of the bases now wrapping in the token hole to do anything and look there's we could question the artistic merit of the song that's come out at the end of that but it's you know that they have deliberately taken this approach to open the field for people to do things with what they're doing so it's an interesting one but it's not the default position um as we've said as well the copyright owner is the one who retains uh well copyright owner will retain ownership

notwithstanding that minted at nft and so that gives them the right to continue to reproduce um to continue to reproduce things uh so like in this example um yoga labs uh doesn't necessarily say that this is an exclusive license so there's potentially nothing preventing yoga labs also making their own t-shirts with that ape on it but then going a step further if i've got the right to continue to reproduce i could just continue to maintain more nfts i'm not infringing my own copyright by making another nft the same image so one example we had of that recently and look i didn't think i'd be putting a cartoon from but on the slide anytime soon but here we are

uh matt fury i i hope that's how it's pronounced um uh had uh minted he was he created pepe the frog who's had a long slog yeah you know checking history but he's been trying to steer pepe back to a more you know uh pure and kosher existence anyway he minted that token on the right and sold it to at auction to houston for about what it works out to about half a million bucks um and then weeks later gave away 46 tokens for an identical artwork now from a copyright law perspective i have no issue with that right that he's whose copyright has he infringed no one it's

his copyright he can't infringe it it's his own thing he can do that there may be issues from a consumer law perspective right that um if you've held out that this is going to be the one token the you know the one nft for this thing or the exclusive this you know thing and then go on against that weeks later that's potentially misleading or deceptive conduct and false misleading representations and various other things and you know that's the australian sort of terminology there'll be corresponding laws in other countries for similar concepts my understanding is that in this scenario uh matt had actually um been quite public about before he sold that first nft about his intention to mint

furthering ft's based on that not necessarily that they were going to be given away free but still that so that you know maybe he hasn't actually engaged in this leadership economy but obviously houston is very concerned that the value of his once uh super exclusive half a million dollar front but nft has now tanked as a result of that so just giving you know it's the kind of scenario that feels a bit like try and silly but when people got half a million bucks on the line suddenly it feels important so now that we've had a bit of a chat about copyright um we wanted to talk about moral rights and these are rights which accompany copyright and are also found under the copyright act in australia so as you see on the screen moral rights and again i've importantly

heightened a couple of terms there for you are personal non-economic rights belonging to the creators of materials protected by copyright so if you take nothing away from what i talk about in relation to moral rights what i want you to remember is that they cannot be transferred lived assigned sold or otherwise disposed of so they always remain with the original creator of work so even if you have validly transferred um the copyright something that doesn't remove your moral rights so even though you're no longer the owner of the copyright those moral rights stay with you as the creator of the work however as you'll see on the screen you can consent um to the infringement of

your moral rights however importantly this has to be in writing and you're informed and genuine informed consent has to be given to do this what are the moral rights well they're broadly the right of attribution um so to be credited for your work so for example if it's placed on a website um the right against false attribution of authorship so the right not to have someone else credited to um for your work um and then also the right of integrity and and i think importantly um the right of integrity brings up this uh term called derogatory treatment um so i guess the right integrity reflects the right to not have your work um treated derogatory now

under the copyright act um derogatory treatment is given an interesting definition that i think is potentially tricky for the world of nfts so you'll see on the screen i've got the copyright act and i've got section 195 ak under subsection a derogatory treatment and i'll just note as well that this definition flows through the whole of the copyright act um includes anything that results in the material distortion destruction mutilation or material alteration of the work that is prejudicial or sorry prejudicial to the author's other or reputation then similarly in subject subsection b we have derogatory treatment including

the exhibition in public of the work that is prejudicial because of the manner or place in which the exhibition occurs and then we have this really broad subsection subsection c um which she defines derogatory treatment um as anything that anything else in relation to the work that is prejudicial to the author's honor and reputation while the infringement of moral rights is not an offense um it can lead to the awarding of some remedies so including an injunction which um you know is an order for infringing parties to sort of stop doing what they're doing so to stop dishonoring your work a declaration of the wrongs committed as damages so a monetary award um removal or reversal of any derogatory treatment

or a public apology and so oh sorry dan did you want to buy i was just going to say a couple of things so that these remedies exist i think um and are available are really crucial when you're engaging in the space of nfts so while again i think it would be remiss of me not to acknowledge that enforcing these remedies are likely to be difficult um the possibility remains that um you having valuably obtained copyright from the original creator of an artwork um that you purchased you could be put in a situation where upon minting some nfts on the basis of this artwork that you've purchased put in a situation where the original creator claims that you've infringed their moral

rights by way of derogatory treatment through minting that nft yeah i mean that's a real live question i suppose if you had an artist who was vehemently opposed to nfts and uh and you somehow validly on the right side thing and mint in nft understanding their objection that could maybe be something that is prejudicial to their oral reputation i don't know that we've seen that specific claim yet as well i think there's probably scope for attribution claims that um it seems like that we see you know i've heard stories about nft projects where sort of artists get commissioned to do work sort of not really realizing what it's for and then having their work sold as nfts for significantly higher amounts than they

were paid and feeling agreed now the nft sorry the moral rights don't really address that i didn't get paid what i should have got paid issue but they do at least go through the the issue of you know you you've exploited my artwork and not giving me any credit for it that if that's how you want to do things you need to make sure that you've got their permission to do those acts contrary to their mris does in public include the engineer that is a good question right so this is for the purpose of um purpose of derogatory drinking directory treatment yes look i uh i would have thought generally yes i suspect that you if you the internet is a big place these days i

would have possibly that you could do something you know in a discord or uh or a you know a private messaging channel that is technically you know the internet but is not maybe you could argue is not public it's uh but but certainly minting something onto a public blockchain is i would've thought it's probably going to be in public awesome so then related to moral rights we have got our royalties so you remember me making quite a sales pitch for nfts at the start of this presentation relating the royalties and i'd still certainly maintain my position that it's great to see a recognition of the effort that artists put into their work and that that should be rewarded more than once nonetheless dan

i think that you have something to say from a technical perspective well yeah when you know at first looking into nfts and and this picture of royalties to artists as a sort of someone who's yet to delve into the technical details and certainly when i speak to people who aren't inclined to delve into the details i think that there's a perception that right so you've got a smart contract that you know runs this thing so the computer program ensures that it's in the smart contract ensures that artists have paid their royalties but that you know the standards that we've got these erc 721 as i understand it doesn't actually implement royalties at all that if you're just that's not to say that you couldn't make a smart contract that works that way but that for most

you know nfts that are just doing the boring default thing that the smart contract itself doesn't actually provide for a mechanism for royalty payment and so what you're relying on uh and where these royalties are coming in are at the marketplace level that you're sort of you know launching something on say open c and setting a a trailing royalty that says every time there's a subsequent transaction on this i'm going to get seven percent that you're relying on uh oversea as the marketplace provider to actually pass that through but if it's a true you know erc721 token sitting on the chain that hasn't been you know customized to

to do something unusual you could transact with that directly on chain and avoid paying that royalty so you know that you guys would probably as a technical audience probably understand that uh better than i do and maybe we're aware of that and don't think that that's controversial but i do think it doesn't quite line up with what uh ordinary people have in their head as an understanding when they're told that this has this royalty system that it's it's not as strictly enforceable as people might think yeah absolutely and i mean also as i mentioned as well earlier um we have in australia the resale royalty right for visual artists app um so under the scheme that the act um sets up which has sort of been imposed uh

since about 2010 um visual artists and other right holders are entitled to five percent of the sale price of eligible artworks resold commercially for a thousand dollars or more so obviously this is not going to apply to nfts sold for less than a thousand dollars however where we are at least of the opinion that the act does apply to nfts and and this is because eligible works under the act um are defined to include things such as digital and multimedia artworks um with the resale of an artwork occurring commercially if the ownership of the artwork is transferred from one person to another for monetary consideration which we understand happens in the nft realm um the transfer is not the first transfer

of ownership of the artwork and the transfer involves an art market professional now this is defined as a few things under the act and so alongside auctioneers it also interestingly includes people otherwise involved in the business of dealing artworks now i think you could very well argue that that includes traders and purchasers and sellers on the nft marketplace so another thing about the app is that it also allows for reciprocal resale rights to be established with countries that also have an operating resale royalty scheme so under these arrangements australian artists will receive royalties when their eligible works are resold in reciprocating countries and vice versa

artists from reciprocating countries will receive royalty payments for their eligible artworks resold in australia so i think in jurisdictions that don't have schemes such as this um embedding royalties into nft and smart contracts or or at least in the t's and cs on nft marketplaces certainly has its place i'm just unsure that if in australia at least we're doing anything really other than simply reinventing the wheels yeah it's it's interesting because uh the pitch with nft is sort of like hey guess what artists you traditionally you sell your at work once and then that's a that's all you ever see and other people make the profit when it gets resold for higher and higher amounts and so we're doing something about that

the physical art world never did but that's not true there is a scheme for this in the physical art world as well um that that i think what people are pitching is something that's completely new in their field is not necessarily quite so there is also a question as to whether if you set a royalty rate of two and a half percent on open c and then uh were selling artworks for more than a thousand dollars whether you might actually be in breach of the uh royalty of rights act now um there's a few bits a couple of issues coming up that i want to just quickly get through i appreciate we've been going for a while now there's a couple of things that basically i'm not i'm not going to spend a lot of time because they're not

exactly legal issues they are more things that if we were presenting to an audience who were less familiar with the tech i think they would perhaps not fully have appreciated previously um so one of those uh is smart contracts i'm you guys know how smart contracts work i'm not going to uh i'm not going to come in and re-explain that but i just feel like we've mentioned them that many times today that i feel like i have to get in the point of saying that we don't think that smart contracts are actually contract that it is a bit of a misnomer that's not to say they're not useful and don't have a role that that just in terms of this you know hundreds of years of law about what a contract means and

that this is this does not align with that um i i think we won't dwell on that but i think i have to i can't mention my contract so many times and not say that although that has prompted commenting to chat so maybe yeah so vitalik's saying as much yeah so um that's right i mean we've started to see people in the legal industry talk about ideas of trying to make things that are you know a hybrid of a smart contract and a traditional legal contract and then they're having to come up with these weird names like legal smart contracts and things and it's all very it's it's early days for that stuff um another thing that uh i wanted to discuss as well it's more of a practical issue that i think people generally don't appreciate at least ordinary um you know

non-technical people don't appreciate is how you go about linking the asset to the chain and onto the token and so i i think there's a sort of you know the the layman understanding of nfts people who you know are interested but not super technical would say yeah there's a thing on the blockchain and the blockchain says i own this thing but as we saw earlier the erc721 all that's stored on chain is a record that you own a token that has an identifier that has metadata at a url and then at that url there's metadata that includes another url to an artwork so there are two hops there of uh of things that are not stored on

chain that are super important to what you're buying you know they define the artwork that you're getting or the you know the the asset that's coming along for the ride they are potentially vulnerable to change you know uh domain names can expire um you know people can change things at a server we saw over uh sort of christmas new year's um moxie uh marlon spikes post where he had rigged up a token to point to a url that would return a different image depending on the uh ip address who was requesting that image so that it would show up with different pictures on different marketplaces and a

different picture again when it landed in wallet i think just as a neat little illustration of how sort of loose this stuff is um there are obviously uh you know anytime i sort of make this complaint to someone technical they usually tell me like yeah but we've got you know what we'll do is we'll put you know a hash say like maybe it's prohibitively uh expensive in terms of gas and stuff to put the whole image on the blockchain but we can put in a hash of the image and so you'll know that if there's a difference yeah that might work but if you're just doing the bog standard erc721 that's not a feature of peter suggested when i was talking to him about this well maybe the interplanetary file system that uses hashes as part of urls so you could put in the token metadata

the urls involve a hash and so you've snuck a hash into the existing sort of schema um that sort of works but it still feels to me a little bit like you're building on a bit of a house of cards there that you know you're relying then on ipfs to sort of stay running and continue to function in the same way that it always has um i see that this is prompting the chat oh there's we're still back on the smart contract question yes um good i'm glad that no one's furiously in disagreement with that point um so that yeah so so i think um as i said this is not necessarily a legal issue but is one that i think when we're

explaining how nft's work to people especially people are pretty good bullish on their nfts i want to make sure that they understand this point um this is also what we're talking about there primarily is digital assets i think then again there's a there's another step where once you if you're starting to try to apply this stuff to physical assets you can sort of go all right i've got an immutable record that shows you know i can trace this thing through the chain this asset but how do i know that this asset in the real world correlates with that thing on the chain i know um again every ledger presented recently and i know that they've got some techniques with their diamonds that they you know have uh uh like a you know effectively like a fingerprinted characteristic so that you can be pretty confident that this diamond is the same

one as that one on the chain but it's an interesting uh space and challenge as far as i'm concerned yeah so that's right so david's saying that look solving the issue of storing the image data on chain is something that we might end up solving with improvements you know that when i assume i'm not look i don't understand the technology but realistically you know if gas fees weren't as high maybe we could actually just fix this problem right now it's just a gas cost too much um i might be talking about that's all fine i i get that this is a fixable issue especially for digital classes of assets i just think that uh a lot of ordinary um you know folks who

might be attempted to get in on the nft train think that it's a fixed issue as opposed to a fixable one that you know the the blockchain has solved that issue for us full stop whereas i think that it's there's still some scope to improve you um anyway let's move on so i can get back to stuff that looks a bit more like legal issues um privacy um look again if this was an online if this was a non-technical audience we would start to explain a bit more about the pseudonymity of blockchains and how you can trace the public ledger through you know you will all be across that i suppose i wanted to point out that uh in australia privacy law the key one is the privacy act and the apps that's the australian privacy principles that are in that act

and they talk about they regulate how you deal with personal information and personal information um is defined as information or opinion about an identified individual or an individual who's reasonably identifiable now uh that reasonably identifiable depends on the context and if you know information about someone that might make it easier for you to identify them then then an ordinary member of the public can identify them you know some unique combination characteristics it can be a bit of a gray area but in the context of the blockchain it is usually a pretty straight up and down one that if you know their wallet id then they are absolutely reasonably identifiable um and so then that brings in privacy uh obligations that are just

that that's more of a blockchain thing than an nft specific thing and again at that sort of blockchain level um you know if you know wallet addresses then you know an awful lot we're starting to see you know governments trying to keep a bit of a tally on where the wallet addresses sit um a few years ago we had amendments to the anti-money laundering and counter-terrorism counter-terrorism financing act that had previously dealt with things like where you front up to a bank with large amount of cash now it added some things in the last few years about um know your customer requirements for exchanges so that they at least have a view of wallet exchanges on the edge where you're converting fiat into crypto and back

that does segues into another issue of uh in the nft space and money laundering itself um look money laundering has traditionally been an issue in the art world pre pre-nfts that uh you know they're an unusual class of assets whose you know value is very subjective so there's scope to you know pay large amounts for art and use that as a mechanism to sort of cycle money around separately the crypto world with its sort of pseudonymity has also been a bit of a target for money laundering type stuff so nfts to put those two things together is a real sort of hunting pot for this kind of thing you know the traditional laws uh

continue to apply that you know you're not suddenly absolved from that but um it is definitely an issue in this space uh nft it does at least have the advantage compared to the old school artwork of dragging the transaction logs out into the open but um yeah it's not necessarily uh it it's still a it's still a problem issue that sort of also segues us to a broader category of kind of just generally dishonest practices that there does seem to be a you know a bit of an attraction in this space for sort of scams and you know there's a few factors there's you know that that uh it is quite technical and so there's a lot of people involved who don't fully

technically understand what they're doing the pseudonymity you know these kinds of things can lead to people feeling emboldened to try out sort of scams oh and of course the immutable nature of the blockchain right that because if you can get away with the scam you can't you know reverse the credit card transaction like you can in a traditional environment it is if you can if you can get the scan then it's locked in it's on the ledger it's yours so you've seen all sorts of categories of things like rug pools where you start a project and then sort of abandon it and pump and dumps where you you try and sort of artificially that the initial founders you know try and get the stock up and then sell out and leave everyone else for it to create a um you know fishing we're seeing so we saw uh within the

last couple of weeks the board apes um [Music] instagram account had been hacked and that um you know that's obviously nothing to do with the security of the ledger or the smart contract or anything just this bit at the fringe but if you hack their thing you advertise a new drop you get people to come on um to a website and give you their wallet credentials and then i guess what you lost your apes uh you know it's a real issue um the point here with this is uh in from the legal perspective that the law continues to apply um as annabelle said at the start it's there's a challenges in enforcing that law but all of these things are the kind of things that are already um you know contrary to laws there are you know on the commercial

side there are the things that we've talked about like misleading receptive conduct on the criminal side there's you know there's uh two categories there's you know sort of broad like fraud offenses and then there are also sort of a misuse of computers and your password and these sort of hacking type offenses we're not criminal lawyers so i'm not going to go in those any significant detail but it's it's not so much that we've got a void of laws deal to deal with this stuff it's it's pinning it on people you know getting the enforcement issue it's getting the authorities interested and then making sure that they actually have the means and ability to pin it on the right people the picture on the left there is a frosty that was in january an nfg project uh that made off with 1.1

million dollars in a run pool so they launched it made all these promises took the money and then ran um we've seen uh very recently two 20 year olds from new york charged with uh uh conspiracy to commit wire fraud and conspiracy to commit money laundering um and the the attorney general's office there saying the the same rules apply to investment in an nft as to intro the same will apply to an investment in an nft or an investment in real estate development you can't solicit funds for a business opportunity abandon that business and abscond with the money your investors provided you so this isn't a lawless wild west it's the the authorities are taking a

bit of time to catch up but it's just because you can potentially practically get away with a few of these things doesn't mean that it is legal appropriate or anything like that so i am going to give dan a very well deserved chance to take a drink of water and have a bit of a break and round out our presentation discussing energy marketplaces and this sort of gatekeeping role we think they found themselves in one point um that i would make clear to people who are not so i guess caught up with the nft world is that nft marketplaces are certainly not uniform spaces and they do differ in their terms of services so different obligations may apply to you depending on the marketplace that you choose to for example upload your nft2 to be

solved so um whether that allows them to re uh use and reproduce your work for the purposes of advertising your nft um however i think today what we really wanted to draw home to you um is again this awkward situation that nft marketplaces are finding themselves in and and i think this is uh you know given the uh ledger's role as a canonical immutable record of energy creation and ownership no party can later amend or correct that record and if someone were to mint an nft of a copyright image and they didn't own that no amount of letters from dan or legal pressure could remove that nft from the ledger and so if a user is hacked or defrauded and loses their token

no one really has the authority under law to reverse that transaction but nft marketplaces also can't really sit by idly while knockoff nfts circulate and fraud to sell their tokens and stolen wares and so one mechanism that marketplaces are using to resolve this issue is to de-list and block the sale of the offending nfts from their website however this is usually a really poor remedy as the underlying energy still continues to exist and it can still continue to be traded just not by that energy marketplace yeah it could still be owned by the fraudster yeah absolutely and it you know it also rarely addresses the underlying issue

that the fraudster has still stolen and committed that act um but the remedy also offends kind of a core tenant of nfts in the nfc world and that is that nfts are decentralized and unregulated space so i think the takeaways that um we have from nfps and what the research that we've done is they have certainly caused a splash and they're arguably now part of the mainstream in popular culture as with a lot of areas of tech unfortunately lawmakers at least in australia are still on the back foot and without any legal background it can be really challenging especially for consumers to comprehend how nfts can intersect with sort of our general laws

but nfts haven't really added a new ip framework however they do intersect with them in really exciting and interesting ways and i'm sure i can speak for them when i'm really interested to see where we head yeah um so yeah that's right and and i hope that today's thing you know has given you a bit of a taste of the kind of things that we're seeing and the way that these things kind of intersect i don't you know you may still have different questions and queries and we're having to have a chat now but just if we planted the seed about well hey you know copyright still exists and a few of those concepts about how copyrights transfer and how licensing works and stuff that that might be useful um so we have the chat has lit up with someone

yeah peter says uh recovering solo and crypto and slash nfts is a long game you know get them taken into custody take their private key yeah that um it but it's it's very different than uh than the way things work in other ways i mean one one analogy that is a really quite a boring one but is the way that the land registration system works right that we have a central register where um you know the the owner of that piece of land can you know is recorded and you can see on the register and one of the tenants of the uh the torrent system of land registration is that the register is canonical what the register says goes

but and so that looks like that but there's a whole bunch of protections that are built into that framework there are um you know there is the ability for potentially for certain things to be rescinded if a court orders or if the registrar agenda also deems and and also there's a they've got this concept at least in south australia here of a there's a fund basically for um that some of the transaction fees you pay go into a bucket and in the event that there's an issue with the with the register that like robs someone of their property they can be compensated from that fund so there's all sorts of like things where we've seen these in the past and and and dealt and come up with systems and ways to to take the harsh edges of some of that immutability but

it's hard to see how to do that in a system that is is you know decentralized and programmatically so thing without introducing a new gatekeeper or a new authority i think it's very interesting space um look so uh yeah we're happy to take any uh um we should also put up the slides from peter about upcoming things peter's welcome to jump back on as well he wants to yeah coming up yeah yeah what why don't i do i don't know i don't know play with the tech and get my video to work yeah sure should we stop yeah no no it's all good um so um yeah i'll i'll talk about the what's

coming up and then we'll go to any open questions which i'm sure there are heaps um but yeah flip to the next slide please yep uh did it go we're trying yeah there we go here we are there we are cool thank you um all right so in two weeks time but at 5 00 p.m brisbane um we're going to have mikhail talking about the ethereum merge and so he's going to talk about essentially the move to proof of stake for ethereum um as well we're going to have ben edgington on that call as well and ready to ask handle any questions about proof of stake and all the questions that i know people have got around the whole merge

and how is it going to happen and what does it all mean moving along from there myself and some others are getting together and we're going to talk about creating cross-chain applications so applications that can bridge multiple blockchains and we're going to talk about how you can get involved then another one ethereum two related is checkpointsync and adrian and paul that should be actually adrian and paul are going to talk about checkpoint sync and that's the synchronization process used by the beacon chain which is the the proof of stake chain for ethereum two and then we've got a whole heap of other talks coming up as well

so you might as well unshare your slides and then make it easier for us all to see each other yes are there any questions or if we tied you all out oh well whilst we're waiting for people to think about questions can i say that that was a very polished very well um put together talk it was very slick and the handover between the two of you that would have taken a lot of work i know so thank you for putting so much effort in that's awesome all right i know i'm going to cast to michael because michael here you know he's he is an intellectual property

lawyer so he should be he should have tricky questions [Laughter] what's your favorite color a question i can answer thank you no look i'll leave it to the others uh the intended audience yeah but um yeah i i think um i think there's a lot of open issues with um nfts and i think not i know there is a proposal to have a version of like the erc 721 with the baked in royalties and i think that that would be a massive step forward but it things like that have got to get traction um yeah okay what about you sandra do you have a

question for us no i don't i just um like everyone else it was a really lovely presentation thank you and really enjoyed the way you um put it together it was engaging and i think really logically put together and i was really interested to find that there were already some nft lawsuits out there you know like didn't even cross my mind and then you've gone through several aspects i found that really interesting yeah i mean wherever the money is also it's following yes i'm sure and you mentioned there was one in the uk what's going on there see so that's

that's a pretty recent one we've seen in the last little bit uh that there was it i think it's at a sort of preliminary stage where they're trying to well someone's had a a token misappropriated i think and so they've tried to get a judge to find that they were property you know those were property and assets and so therefore you know get injunctions on to serve yeah so i think it was important important for the uk i guess that it recognized nfts as property but i don't really think that the issues that we've come across dan um like really intersect with that um not necessarily yeah

there's an interesting development as to how they sort of recognize it um yeah it's it's at this stage it's sort of at this preliminary stage where we sort of haven't got a final judgment we've got this interlocutory judgment that says okay we're willing to recognize there's enough of a case that we're willing to give court orders that um you know open c should freeze the asset and you know various things to try and get um more information about who's behind the issue and stuff like that so it's it's early days in that one um but it certainly uh wasn't you know a full-blown conclusion that they would say this looks like property that we want to get involved with at a you know at a legal level so um yeah an interesting one

in australia we're usually the last people to get anything whether that be the latest netflix special or whatever so it's nice at least to have some sort persuasive case law that we could potentially see developing and having some effect in australia it's not always true well this is certainly a global thing and the idea that there's a question about whether it's property or not yeah seems to me really crazy because you know you've purchased this good you know and it's not like you're purchasing the right to watch a movie once you're you know you're purchasing the right to this um forever but anyway i'm not yeah but i mean there's a question of like is it a good what have you purchased peter

like it's an interesting question because like you know to some extent what you've purchased is that you'll record it in a ledger somewhere what's the you know property that at lore in australia you know we sort of broadly have you know this may be sweeping over simplification but we've got three you know sort of kinds of property we've got real property that's you know land and the stuff that's built on it and then we've got sort of other sorts of tangible property like you know cars or the clothes i'm wearing or whatever and then we've got things that create intangible property and that is typically you know intellectual property or maybe things like securities and shares and things like that that but they are

created by you know by specific laws they are not things that just sort of exist because we decide i paid something and so i must have something like it's it's it's not saying that everything you're saying peter is sensible it just doesn't actually line up with the legal realities yeah i understand and i mean it's almost like yeah yeah because you could imagine if there was some other ledger or i don't know it's like a guest book or something i bet i guess it's not quite but it's still because it's showing ownership but but again ownership of what yeah yeah of what exactly let's say even if you had

something where you could directly show its ownership of this image on this website say and you know it was using ipfs so you can't modify it it's still that's only an inference you know there's nothing in the block in that actual contract the smart contract that is um that actually says that it's only the inference that we have it's like the social rules around using the contract that imply that um as opposed to um yeah that you know like as we sort of talked about the traditional ip systems where if you want to say oh you know i own this trademark you can see the register says that

but you know the the trademarks act sets up a system whereby it recognizes that as property that proprietary rights exist in as opposed to i mean the other speak earlier you know i said where the money is the the issues will follow the other one that we sort of haven't dredged up here is you know how crypto generally and nft specifically are handled for the purpose of tax and you know the the ato is more than happy to you know skip past any questions of whether he's a property because it wants its hands on on the revenue so um we're we have tax lawyers in our firm annabel and i are definitely not tax lawyers but um that's one space where you know the the law might generally be conservative but the tax office will try

and say that anything it can get to the hands on is is is taxable michael's on the issue of yeah the copyright issue when you have it pointing to a url that has a picture of the artwork on it you know that's a reproduction of the artwork you need to make sure you've got the right structure someone has to have the right to actually reproduce it online and if we're now talking about layer 2 network solving the issue of storing the data or image on the chain whether that's actually in some way a reproduction of the original artwork which is an exclusive right of the copyright owner so as soon as we start doing that then we are looking at potential breaches of copyright having to make sure that the person who puts it up there actually has the right to do that in the first place

and and the decentralized nature of all of this meaning that there is no one to sort of make sure that that person has the rights exactly i was just going to uh mention that that one that i found interesting was the concept of someone spending 500 000 um to purchase something for just for other free tokens to be given away yeah because i think it would be pretty you know someone's not going to spend that amount of money whether or not it was alluded to the fact that more will be produced um how does one actually go about to say well the um the pretext on on which that person bought it was they would have understood

that the others wouldn't have gone for no money um so to me that must be there's a bit of a gray area to actually say well you this is absolutely fine and it could have been done because i still believe there must have been some some belief there by the by the purchaser that that would not be the case yeah and so so yeah i mean that and so now we're getting into yeah those questions are getting into not the copyright thing but the sort of misleading conduct type thing and so it's he's gonna be reliant on having an understanding of uh like all of the facts involved right like um you know there's cases uh uh you know pre-dating the internet but about

whether you know in australia if you've got a big you know an advert for something that has a big you know writing at the top that makes it seem like something is free and then in the fine print you know talks about has something about actually it's going to cost x y and z or whatever you know that whether that fine print is good enough to get you out of the impression conveyed by the thing and you know generally the answer that is know that you can't sort of say the you know say the misleading part loud and the not misleading part quiet kind of thing you know it's taking those laws that are not about tech at all but applying them in this context of what was the impression that they created you know did they try and did they mislead them

interestingly the the the australian law obviously that case won't be decided under australian law but the australian law um doesn't talk about you know intention to mislead or anything like that it talks about uh whether you have mislead and even talks about whether you're likely to mislead or deceive so you don't so that one's far from an open shut thing but um yeah i don't know as well whether you know it could turn on facts like whether it was advertised on the marketplace and or or wherever the auction was happening and that didn't mention it but he'd mentioned it elsewhere and is that good enough and all that like it's really going to come down to the facts of is this do they convey a misleading impression um because i mean very

clearly at least it seems like the guy who bought it got a misleading impression uh but that is that's not necessarily determinative but it could also be their paradigm you know the the their world view when they went in like the people who bought the june book you know yeah they went in with a completely incorrect interpretation of the situation and that was their own i don't know yeah yeah but anyway i think there is scope though for the idea though that you know that this that misapprehension was sort of foolish but this this misapprehension of the way that nfts usually work is that there's one owner for one token and that's how

it goes is something that could be relevant i'm i don't know if the topic but i'm sure we can find cases that uh you know misleading deceptive conduct cases in the traditional you know boring pre-internet world where the the misleading contact has arisen because someone's done something that are out of the commercial norms that you know you go to sell a car and you don't sort of some part of it that is you know it's just because that's the way it's always done and everyone knows that's the way it's always done and if you want to kind of depart from that law at that norm it would be misleading to sort of go and do something else unless you actually sort of draw that to their attention like

there's it yeah it's an interesting space and and yeah that there would be two because there are probably some sensible norms that are if they've ever evolved in the nft space if you want to do something other than those norms you probably would need to be quite explicit about what you're doing to avoid this sort of being misleading by omission by you know by inference by silence well thank you so thank you everyone for joining and um thank you daniel and annabelle that was an awesome talk it'll be up on youtube in about 24 hours i'll send you the link when it's up there so thank you again have a great

day beautiful thank you thank you bye bye bye excellent thank you thank you