Artist Krista Kim made headlines last month when she sold what has been billed as the world’s first NFT house. Venturing into the budding world of non-fungible tokens (“NFTs”) “while exploring meditative design during quarantine,” Architectural Digest revealed that Kim’s “Mars House” – which ultimately sold for upwards of $500,000 – is “comprised entirely of light, [with] the visual effects of her crypto-home meant to omit a zen, healing atmosphere.” The buzzy online-only real estate is also complete with “a musical accompaniment” as a result of a collaboration with Smashing Pumpkins musician Jeff Schroeder. 

In exchange for 288 Ether ($514,558), the anonymous buyer of the Mars House – who is known exclusively by the SuperRare handle @artoninternet – made a splash into “the lucrative NFT market,” according to AD’s Sophia Herring. Beyond that, though, in acquiring the NFT and the 3D files associated with the digital design, the buyer essentially acquired the blueprint for “the home and all of the furniture in it,” the latter of which “can be built in real life by glass-furniture makers in Italy, as well as through MicroLED screen” technology. Speaking about the ground-breaking new art piece, Toronto-based Kim said that it “represents the next generation of NFTs,” and is “a sign of things to come, as we enter an AR (augmented reality) interfaced future, with the launch of Apple AR glasses and AR contact lenses.”

That attention-garnering Mars House – which has spawned seemingly countless headlines, as the various novel uses of this relatively novel technology dominate everything from our social media feeds to a record-breaking $69.3 million digital art auction at Christie’s – is not coming without threats of an impending legal battle, though. On the heels of the sale of the house, a copyright squabble has erupted, behind the scenes, with a collaborator calling foul against Kim. As Dezeen first reported this week, freelance 3D-modeller Mateo Sanz Pedemonte has threatened legal action against Kim on the basis that he created the visualizations for the Mars House, and thus, maintains rights in Kim’s “fraudulent” digital design.

Working “primarily on architectural projects, rendering high-detail views, perspectives, and floor plans,” Buenos Aires-based Pedemonte says that he is a “co-author” of the house, having “created the project with my own hands, combined with [Kim’s] direction.” With that in mind, Pedemonte asserted on LinkedIn last week that he was planning to “escalate [the matter] in the following days,” but did not elaborate on what such escalation would look like and nothing has followed (yet).

While freelancers traditionally maintain rights in their creations (since they are not employees, a work for hire-type assignment does not automatically apply), Kim has since pushed back against Pedemonte’s ownership allegations, telling TFL that the freelance 3D-modeller “signed away any intellectual property rights in the project to Krista Kim Studio” by way of an agreement in April 2020. In addition to both parties agreeing to keep any proprietary information shared in furtherance of their collaboration confidential, Kim says that the legally-binding agreement dictates that Pedemonte “does not have rights [in] the project, and [that] no license [exists] now or in the future” in connection with his contributions to the Mars House.

“Mateo provided freelancer rendering service and was properly compensated for his service,” Kim asserts – noting that she is the exclusive holder of the copyright for Mars House artwork, and in the process, seemingly putting one of the first potential legal squabbles to center on the authorship/ownership of the artwork underlying an NFT to bed before it even really began.

Chances are, it will not be the last instance that raises legal questions about NFTs. As Frankfurt Kurnit Klein & Selz PC attorney Jeremy Goldman stated recently, there is a laundry list of legal questions looming when it comes to NFTs. Some of them: “How can NFT platforms, issuers and IP owners limit their liability? What rights and remedies does a creator have if their work is tokenized without their permission?How can platforms, issuers, and intellectual property owners enforce their rights and remedies against NFT owners in violation of license terms and contractual restrictions? Does a licensee of an existing work need to go back to the licensor to acquire additional or different rights to create an NFT in connection with the work, or does the existing license cover the use? How does the first sale doctrine operate in the world of NFTs?, [and] what are implications of the unauthorized tokenization of trademarked goods and services?,” among many others.

Terms of the Sale

Looking beyond the 3D files and technical support (courtesy of Ms. Kim) that comes with the purchase of the Mars House, the terms of the sale of the entirely-digital creation are interesting in that they shed light on a commonly misunderstood element of NFTs: what is actually acquired when someone buys an NFT – and maybe more importantly, what is not. At a high level, when someone buys an NFT, they are getting a digital certificate that authenticates a claim of ownership to an asset – such as the Mars House – and allows it to be transferred or sold. What they are not getting is all of the rights that the creator of that NFT maintains, such as any copyright rights in the underlying work of art, such as the exclusive right to reproduce, prepare derivative works of, perform, display, and distribute the copyright-protected work. 

This is not a novel proposition. As Latham & Watkins partner Ghaith Mahmood recently explained, “As a general rule, the purchase of a piece of art does not transfer all copyright in such work to the buyer. For example, when someone buys a painting at an art gallery for their home, they are acquiring the physical painting itself, which they can display, but not the underlying rights to reproduce, make derivative works of, or distribute copies of such painting.” Unless otherwise specified in the terms of an individual sale, the same principle applies to digital-exclusive artworks, as well. 

And it applies to the Mars House, the sale of which was subject to a number of conditions, as set out by Kim on the NFT marketplace platform SuperRare. For instance, “The collector agrees to own one copy of Mars House NFT on a single Metaverse platform,” and that “collector is required to register Mars House NFT ownership with Krista Kim Studio Inc.” More than that, the buyer agreed as a condition of the sale that “if/when Mars House is resold, the collector is required to delete all Mars House NFT 3D file(s) from his/her Metaverse, and provide verification of deletion to Krista Kim Studio Inc. before new 3D files are transferred to the new owner by the artist.” And of course, “Krista Kim Studio Inc. retains ownership of Mars House NFT copyright. All rights reserved.”