CryptoPhunks: CryptoPunks parody or copycat?

On July 13th of this year, CryptoPunks parody project CryptoPhunks posted a tweet announcing they had received a takedown notice under the Digital Millennium Copyright ACT. Almost immediately, people on Twitter took sides. Some called CryptoPhunks “unoriginal thieves,” “shameless copy paste artists,” “low effort,” and “asking for trouble.” Others rallied behind them, defending the vague concepts of “art” and “parody” that originally inspired the project, and accusing Larva Labs of trying to apply web2 regulations to the brave new world of web3 . One user commented:

But is it? Or is this just an opportunity for the crypto community to spearhead meaningful regulations in NFTs and web3?

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Just about anyone even slightly aware of NFTs knows about CryptoPunks, the computer-generated collectables that are selling at a minimum of 45 ETH ($138,053.25) at the time of this publication. 10,000 of these randomized avatar faces exist, and their popularity among collectors mixed with the scarcity factor (there is only 1 of each) has catapulted their value during this particularly exciting time in the NFT market.

And just as with any other industry boom, where there is profit, there are people trying to drop in on the same wave.

CryptoPhunks are CryptoPunks that have been “hand-flipped,” but are otherwise minimally altered. They are aesthetically identical to the Punks in every way except that 1. they face left instead of right, and 2. they have a 1-pixel-thick color border denoting the rarity of each set. Larva Labs claimed under the DMCA that multiple images had been copied onto the NFT trading platform OpenSea without their permission, and demanded that they be taken down.

But CryptoPhunks are not the only Punk spinoff to catch the eye of new collectors. Crown Punks, AltPunks, LowResPunks, and MidiPinks are just a few variations on the same theme. However, Phunks are one of the few to have been hit with a potential lawsuit, which echoes the ways in which corporate entities could use copyright laws as a way to take down little guys that they saw as a threat to business.

While the original question around the controversy was “what’s the big deal about another wannabe Punk in the market,” the conversation quickly shifted to whether or not a slightly-altered version of an original artwork could be minted and sold as a separate NFT, and whether or not one could apply established copyright laws to the web3 world.

NFTs represent a piece of art and give the buyer assurance that what they own is a unique, original work, which is important in a landscape like the internet where images can be reproduced and altered ad infinitum. But what about the mutations, mash-ups, and information saturation that make up so much of the digital world? Should we consider them to have their own artistic merit, and should we be rethinking how copyright law is interpreted, particularly in this new world of digital provenance?

The decentralized nature of NFTs and the blockchain networks that house them certainly aims to fight big government and kleptocracy, but we are still in the developing stages of both decentralization and public governance. Lack of oversight is not the answer, because we know that humans are inclined to benefit themselves even at the expense of others (see Hobbes’ Leviathan). But couldn’t adding lawyers and brokers to the ecosystem topple the democratic utopia that blockchain technology is attempting to create?

Part of the issue is that buying an NFT does not mean said buyer owns the copyright. That remains with the creator, unless of course it is bundled, which is not currently the norm (but it might be! See Alibaba’s new marketplace). Though the owner of a Punk can share their NFT with anyone and even use that image as, say, a profile pic (read: half of the NFT enthusiasts on Twitter), they cannot legally sell merchandise that has the artwork on it. 

It’s the same concept in traditional art: Just because you bought an original Basquiat doesn’t mean you can then sell a copy of the image to Hallmark to put on a get-well-soon card. The value of the work lies, not in how much money one could make if they commercialized the image, but in how much someone is willing to pay for it at auction.

But the other part of the issue is that there are currently no specific laws or regulations to stop people from selling near-copies or even straight up plagiarized works as NFTs to unsuspecting collectors in the marketplace, which is a huge threat to the marketplace considering how trading copyrighted work, even unknowingly, can result in huge fines.

According to the CryptoPhunks website, “Phunks poked fun at those who were applying the ‘old-school’ rules of art into this new frontier of NFTs.” 

Perhaps they were referring to “whales” from the art world of old who could buy lots of art and become powerful enough to manipulate the value of a specific piece or pieces. Perhaps they were referring to the way digital artworks were becoming assets; the rich were getting richer; etc. etc. Or, perhaps, they were referring to copyright, censorship, or anything else that got in the way of artistic expression (and profit).

Though their intentions might not have been entirely obvious, what is clear is that the creators of Phunks were as interested in getting their punks into the hands of new collectors as they were in pushing boundaries. According to their manifesto:

When the Phunks were delisted, OpenSea’s Head of Product Nate Chastain tweeted: “We’ve always been permissive at OpenSea towards homages/derivatives, but where things get especially tricky is when the item in question is 1 pixel different, a flipped image, one color off, etc.” So then, how different does the homage or parody have to be to be considered an original piece of art?

According to Brian McQuillen, a lawyer who specializes in intellectual property law, “it’s not a black and white answer as to when a parody is ‘fair use’ – a defense to copyright infringement under the law. A parody allows you to escape copyright laws because you are commenting on the original art.” If Larva Labs was to take the Phunks to court, they would look at a variety of factors, including “whether or not you are trying to make money off of it, how transformative the new work is, and whether or not it is clear that there is social commentary going on.”

CryptoPunks had not only become mainstream, but they had also turned into a sort of status symbol for the lucky ones who got in early and the ultra wealthy who have millions to spend on a less-than-impressive pixel artwork, and neither of these things vibe with the true spirit of “punk.” The whole idea of “flipping” the punks related to how they wanted to “flip off” the establishment and “punk” the Punks. But when the Phunks got delisted, the creators of Phunks began to market themselves as “Punks that Larva Labs does not want you to own,” which complicated their claims of being a different product altogether.

In fact, their very first tweet reads: “What the flip is a CryptoPhunk? A Punk looks into the mirror…” which seems to be less of a social commentary and more of an explanation as to why the Punks (notice the capital P in the tweet) are facing the “wrong” way. But even if the Phunks did not intend to sell NFTs by faking people out, they were clearly piggybacking off of the popular iconography of the OG Punks, just as all of the other spin-offs were. This produced a separate potential legal issue. 

Trademark law protects a company’s name and branding. For example, as Mr. McQuillen told me, if someone made a soda with branding that was similar to the Coca-Cola trademark and consumers were not sure if it was Coke or not, Coca-Cola would go after them. Not only was there intentional deception, but Coca-Cola could lose money and suffer damage to their reputation due to this act of trademark infringement. 

The Phunks were making money, but it was unclear if buyers mistook them for Punks, or if they felt the Phunks had artistic merit all their own. In this case, we would ask, what is the source of the work? Are they making it seem like they are the same people? Did they have a disclaimer on their website that clarified that they were different from Punks? Was the choice to name the project “Phunks” an attempt to confuse buyers or was it also part of the parody? Does Larva Labs even have a protected trademark?’

At this point, all we can be sure of is, even with all of these spinoffs, the OG Punks continue to increase in popularity and value. We also know that when conceptual artist Ryder Ripps sold a high-definition copy of a CryptoPunk as his own in late June, he was also hit with a cease and desist notice from Larva Labs. Hours later, Ripps submitted a counterclaim to Foundation, the site where the piece was minted, stating that his work fell under “fair use,” and on July 1st he minted the takedown notice and letter as NFTs.

His piece has since been relisted on Foundation, and Phunks can be purchased on Rarible for as little as 0.05 ETH.