Visual Entidad de Gestión de Artistas Plásticos (VEGAP) files a lawsuit against the company PUNTA FA S.A. for infringement of intellectual property rights. The relevant facts are as follows: PUNTA NA S.A. is the owner of several works of art and, for the opening of a Mango shop on Fifth Avenue in New York, it temporarily transferred to the defendant (PUNTA FA S.A.) the said works of art to be exhibited during the opening, where the works would be exhibited together with new digital works that the defendant had commissioned certain crypto-artists to create new works based on those original works, fusing art, fashion and Mediterranean culture.  In order to do so, the defendant did not seek authorisation from the authors of those three works of art, nor from their successors in title, nor from VEGAP. The assignor and the assignee belong to the MANGO Group.

The digital files were never converted into blockchain assets and were never commercialised, as they could not be purchased, downloaded or reproduced, but were only available to the public – through viewing. During the opening of the shop, the original works were exhibited alongside the digital works, and it took place simultaneously in all three dimensions: physical (in the physical shop on Fifth Avenue), digital (on the Opensea platform) and virtual (in the Decentreland metaverse). All three events were synchronised. The “real” or physical inauguration of the Decentreland metaverse and the visualisation of the works on the Opensea platform had a short temporal duration.

VEGAP asks for a declaration of infringement of the moral rights (of integrity and disclosure) and economic rights (of reproduction, transformation and public communication) recognised in favour of authors in articles 14 and 17 of the Spanish Intellectual Property Law (IPL). The judgment does not examine the moral right to the integrity of the work or the economic right to its reproduction, as they are mutually exclusive, since if there is reproduction there cannot be transformation and vice versa. And if there is transformation, there cannot be an attack on the integrity of the work either. In the case examined by the judgment, the defendant is accused of having created a “new work derived from pre-existing works”. The works have been altered by crypto-artists hired by the defendant to create new works of art, different from the pre-existing ones, giving them an originality, different from that of the pre-existing works, an assumption that fits within the rule of article 21 IPL, so that if there is transformation, there cannot be reproduction.

Given VEGAP’s claims, the Court understands that the question to be resolved is whether the defendant’s use of the works was a legitimate use, which does not require authorisation, or whether, on the contrary, the defendant infringed the intellectual property rights of the authors of the original paintings by transforming them and displaying them publicly (in the physical, virtual and digital world) without the authors’ authorisation. In short, the judgment focuses the problem in the trial on resolving the existing conflict between, on the one hand, the right of disclosure, public communication and transformation of the work held by the holder of the intellectual property rights (the authors of the works) and, on the other hand, the right of public exhibition held by the owner of the physical medium of the work. In its ruling, the Court considers that the problem must be resolved by analysing the uses that the defendant has made both in the physical world and in the digital and virtual world (in the metaverse).

When examining, firstly, the moral right to disclosure of the work, in view of the content of article 4 IPL, the judgment concludes that the right to disclosure had been exhausted at the time when the authors had disclosed their work even before the defendant had acquired it. Regarding the economic right to public communication, which is what the defendant did, both of the original work and the work created from it (article 20 IPL), it must be taken into account that when a work of art is transmitted to a third party, the right of public communication of the holder of the intellectual property right is limited by the right conferred on the owner of the medium of the work, in the terms of article 56. 2 IPL (the owner of the original of a work of visual art or a photographic work shall have the right of public exhibition of the work, even if it has not been disclosed, unless the author has expressly excluded this right in the act of disposal of the original).

Regarding the economic right to modify the work, which is in fact the most problematic issue in this case (since according to art. 21 IPL the author’s authorisation is required in order to modify the work), the judgment approaches the solution from the perspective of the harmless use of the right and the fair use of the works. The starting point is the rule contained in articles 31 et seq. IPL (under the heading “limits”), because they establish the perimeter of the rights of the author of the work characterised, for some, by their “typicality” (they are those provided for in the law, no more and no less), without the judges being able to appreciate other limits and, for others, by the possibility of incorporating into our legal system a sort of general clause that allows the judge to adjust the system of limits (Anglo-Saxon system, citing as examples, criticism, commentaries, teaching, etc.). The Court, accepting the latter thesis, proposes to examine whether the use made by the defendant fits within this general clause of fair use, relying on the doctrine of the Spanish Supreme Court of 3 April 2012 and the North American experience, which, in order to decide whether a use is harmless or fair by the defendant, proceeds to examine the four factors that must be assessed in order to decide on the legitimate use of a protected work without authorisation from the author: Purpose and character of the use of the work; nature of the protected work; amount and substantiality of the portion used in relation to the protected work; and effect of the use on the potential market or value of the protected work.

The judgment considers that in the present case the defendant’s use of the works must be regarded as fair use, in that the exhibition of the works was not for any commercial purpose, as the original works and the digital files created by the crypto-artists were made available to the public merely for the purposes of exhibition in the physical shop and display on the Opensea platform and in the Decentreland metaverse, without any commercial purpose, and therefore the digital files were not converted into NFTs, as they were not minted on the blockchain, and could not be transmitted, downloaded or reproduced. The digital files have at no time been commercialised and the defendant has not obtained any revenue or economic benefit from the public exhibition of the digital files, quite the contrary, as it bore without any compensation the costs derived from the very creation of the digital works and their public exhibition. Nor, continues the reasoning in the sentence, did they have an advertising purpose, “as there is no evidence that the exhibition of those five works of art increased sales in the shop that was opened”. Having ruled out the commercial use, the advertising use and the profit motive, it must be examined whether the pre-existing works and the digital files created from them essentially shared the same purpose. The answer has to be in the negative, as the purpose of the original works was the expression of their authors’ creativity (including a commercial use, in order to sell their works, as they did, as they sold them to Punta Na, S.A.), whereas the purpose of the digital files created from the pre-existing works was the expression of their authors’ creativity. ), whereas the defendant’s purpose was to “fulfil the dream” of the owner of the Mango Group, to inaugurate a shop in New York and to do so, for purely sentimental reasons, he decided to do something special on the occasion of that event, and therefore accepted the idea proposed by his team to capture and merge his three great passions (fashion, art and Mediterranean culture) in digital works of art that would be created on the basis of those five plastic works.

As for the assessment of the nature of the work protected by copyright, the judgment appreciates the legitimacy of the use made by the defendant, since whether it has used creative works (works of fine art) to create new works (digital works of art), the fact is that at all times reference and recognition was made to the authorship of the original works and the spirit of those works of fine art was respected. This not only does not harm their authors (or rightful claimants) but also benefits them greatly, due to the recognition and prominence that the five works of art had in such an innovative and widely disseminated event.

With regard to the quantity and substantiality of the part used in relation to the copyrighted work as a whole, in the case in question there is a total or complete use of the work, which, prima facie, should lead to a negative assessment of the legitimacy of the use of the work. However, the decision considers that in the case of a modification of the pre-existing work, to which new elements are added, giving it an originality different from that of the pre-existing work, it considers that this factor must be assessed considering that the use of the work, even if it is in its entirety, is legitimate, as it is precisely a modification, not a mere reproduction or deformation or minor alteration without any substantial nature of its own.

Finally, as regards the effect of the use on the potential market or the value of the protected work, the assessment of this factor supports the previous conclusions on the fair use of the works by the defendant, since, on the one hand, the original works were already acquired by Punta Na, S.A., which already paid a price for them, and on the other hand, the new digital works have never been commercialised, as they have not been exhibited and will not be exhibited for sale, so that no interference (if any) can occur in the present or future market of the pre-existing works, especially taking into account the short duration of the three events.

The judgment concludes that there was a legitimate use of the works protected by intellectual property based on the innocuous or fair nature of the use made by the holder of the economic rights of the works.

 

It would be appropriate to highlight the four factors that are taken into consideration for that use to be considered fair use. In our opinion, the one that is questionable is the defendant’s use of the works. The court considers that it was not a commercial use, as the works were simply exhibited but could not be purchased. Despite the fact that these digital files could not be acquired, we consider that it is unquestionable that the opening of a physical shop at the same time as its opening in two virtual spaces, decorated in an artistic space together with works made by crypto-artists, is nothing more than a commercial strategy to gain visibility in its physical and online shop and increase its sales and brand reputation.

Judgment of the commercial court N 9 Barcelona of 11 January 2024.