You spent $3.5m on what?! Spice DAO, Dune, NFTs and copyright

5 minute read  11.03.2022 Caroline Foley

Cryptocurrency-backed consortium Spice DAO purchased a rare copy of an adaptation of 'Dune' under the apparent misconception that by owning the physical book, the group would also own the underlying intellectual property rights in the book. This highlights some important misconceptions around buying NFTs.

Key takeouts

  • When it comes to buying things through the internet – particularly NFTs and other things intangible – the ‘buyer beware’ admonition is as pressing as ever.
  • One of the most common misconceptions around buying NFTs is that the buyer also acquires the underlying intellectual property in that NFT.
  • While it depends on what the purchase agreement says, the default position is that the underlying intellectual property rights will remain with the creator.

The cryptocurrency market is off to a volatile start in 2022. Amongst the Twitter memes that attempt to make light of the downturn in the market, news about cryptocurrency-backed consortium Spice DAO's purchase of a rare book has gained traction.

Late last year, Spice DAO paid 2.6 million Euro (around $3.5 AUD) at auction for a rare book, director Alejandro Jodorowsky's adaptation of 'Dune'. The book is one of 20 limited copies that contains the script and storyboard for Jodorowsky's adaptation of Frank Herbert's science fiction classic.

Spice DAO announced on Twitter that it had won the auction for the book and would be producing an original animated series inspired by the book, to be sold to streaming services.

It seems that, in making the purchase, the group was guided by the misconception that by owning the physical book, the group would also somehow own the underlying rights in the book. Unfortunately for Spice DAO and Jodorowsky fans eagerly awaiting the adaptation to be made into a film or series, this is simply not the case.

When thinking about ownership of a book, it is important to separate the physical asset and the intangible (intellectual) property rights in the book. While DAO may own the physical book, it does not own the intellectual property rights (principally copyright) comprised in the book. This means that the DAO does not have the right to use the script, storyboard or other elements within the book to create a TV series. The exclusive right to do so is maintained by the copyright owner.

More specifically, under Australian copyright law, the copyright owner of a script or storyboard has the exclusive right to:

  • reproduce the work;
  • communicate that work to the public (i.e. make it available online);
  • perform the work in public; and
  • make adaptations of the work (e.g. turning a script or treatment into a film).

To produce a TV series, or any other kind of derivative work of Dune, Spice DAO would need to obtain a licence from the copyright owner of the original text (presumably Frank Herbert's estate). Spice DAO would also need a licence from Jodorowsky, on the assumption Spice DAO uses the storyboard and other elements within the book it purchased. Dealing with Jodorowsky's work without permission may infringe both the copyright in the adaptation and in Herbert’s original work.

In Australia, the term of protection of copyright in a script, storyboard or treatment of a film will expire 70 years after the creator's death. Accordingly, the term of copyright in the original work will not expire until 2056 (as Frank Herbert, the author of the original text, died in 1986). Alejandro Jodorowsky's adaptation of Dune would be treated as its own copyright work, with its own term of protection. Jodorowsky is still alive, therefore, the earliest date copyright may expire is 2092.

According to news reports, Spice DAO spent months trying to negotiate with the copyright owners to secure rights to Jodorowsky's adaptation, but were unable to reach an agreement. Despite this, it seems Spice DAO is pushing ahead with the project, taking steps to engage a screenwriter and director. It remains to be seen how Spice DAO will produce this series without infringing relevant copyright.
It is estimated that Spice DAO paid 100 times the predicted selling price of the adaptation and that the funds paid to secure the book were, in part, raised by issuing and selling a token, SPICE.

There is some irony in Spice DAO's predicament, given that the group's misunderstanding is one of the most common misconceptions around buying NFTs. That is, if you buy an NFT, you also acquire the underlying intellectual property in that NFT and can do whatever you like with it, including restricting others from copying it or reproducing it.

What an NFT purchaser is entitled to

As discussed in our earlier blog post, an NFT is a unique digital certificate of ownership that is recorded on a blockchain network. Whether someone buys, for example, an NFT of a digital print, or a physical painting from an art gallery, that person will generally acquire the same type of rights (although the exact rights acquired will always depend on what your purchase agreement says). The default position is that the purchaser will receive a certificate of authentication of ownership (whether that be a physical certificate from the gallery or a digital token (the NFT)), and some other limited rights (for example, the right to hang the painting on their wall at home). The ownership of the token, or the physical canvas, of itself, does not award the purchaser the right to create copies of the artwork, make adaptations of the art, or prohibit others from doing so. In addition, the creator of the work retains certain ‘moral rights’, which also limit what the purchaser can do with the artwork. For example, scrawling obscenities over a painting – even one hung in the purchaser’s own home – may well infringe the author’s moral right against derogatory treatment of their work.

There has been speculation from Twitter users that Spice DAO intend to issue NFTs for each page of the rare book. Under Australian law, minting individual pages of the book could amount to copyright infringement, as this is likely to be considered a reproduction of, and a communication to the public of, a ‘substantial part’ of the work.

When it comes to buying things through the internet – particularly NFTs and other things intangible – the ‘buyer beware’ admonition is as pressing as ever.