V1 CryptoPunks copyright drama escalates: after recently selling V1 Punks, Larva Labs may send DMCA notice alleging V1 Punks infringe. Is copyright lawsuit against V1 Punks owners next?

  • Just a week ago, we reported about the mess unfolding with the sudden revival from the dead of V1 Punks or V1 CryptoPunks. [Click here to catch up.]
  • Well, yesterday, the drama got a lot messier. Larva Labs apparently is contemplating sending a DMCA notice to OpenSea alleging the V1 CryptoPunks infringes Larva Labs’ copyright.
  • But just a few days ago Larva Labs itself had been selling–dumping in fact–some V1 CryptoPunks on OpenSea to raise money to buy Version 2 (V2) CryptoPunks. Does that mean Larva Labs was inducing other people to infringe its copyright? Maybe. And why would Larva Labs be selling V1 CryptoPunks after saying they are “not official” and they “don’t like them”?
  • To understand the mounting mystery over V1 CryptoPunks and Larva Labs’ series of responses, we need to briefly review how V1 CryptoPunks resurfaced after 5 years of being dead. The chronology is so complicated I have added numbers for ease of reference.
  • 1. History of V1 CryptoPunks glitch in 2017: The V1 Punks NFTs are, in fact, the first or original version of the now legendary CryptoPunks by Larva Labs. However, due to a technical glitch in the smart contract in the first rollout in 2017, the defective smart contract for V1 was abandoned.
  • To fix the technical glitch, “[n]ot long after the bug was found a newer version of the Punks contract (Version 2, V2) was released and Punks were airdropped to this new contract,” according to a website created by some V1 owners. OK, that’s great, Larva Labs fixed the technical glitch back in 2017. So what’s the problem?
  • 2. Well, in January 2022, some five years later, some owners of V1 Punks have revived them from the dead, wrapped them in ERC 721 smart contracts (even V2 are not), and started selling V1 Punks on OpenSea. [Click here.] This revival is what started the legal drama between Larva Labs and V1 CryptoPunks owners.
  • 3. On Jan. 25, 2022, Larva Labs tweeted its first response to V1 Punks:
  • OK, great, Larva Labs doesn’t like V1 Punks. But what does it mean: “we’ve got 1,000 of them … so draw your own conclusions. Any proceeds will be used to purchase real CryptoPunks.”
  • 4. Larva Labs apparently started selling V1 CryptoPunks (that it had been holding) on OpenSea–basically dumping them to raise money to buy V2 CryptoPunks. Say what??
  • But why would Larva Labs sell V1 CryptoPunks now if it doesn’t like them and considers them to be infringing their copyrights?
  • Great question. We will have to ask Larva Labs. The sale is baffling.
  • 5. Anyway, this week, basically overnight, the floor price for V1 Punks escalated from 6 ETH to over 25 ETH at one point.
  • 6. Yesterday, Larva Labs co-founder Matt Watkinson reportedly stated on Discord that it made a mistake in handling V1 Punks. It “originally didn’t go after the v1 project for copyright infringement.” But after receiving complaints from V2 owners, Larva Labs will go after V1 for copyright infringement. Oh boy.
  • 7. Apparently, Larva Labs is contemplating sending OpenSea a DMCA notice alleging that V1 infringes Larva’s copyright.
  • 8. Meanwhile, the V1 Punks page on OpenSea has already changed its name from V1 CryptoPunks to V1 Punks.

So what happens next?

  • 1. To start the ball rolling, Larva Labs would have to send a DMCA notice to OpenSea alleging that V1 Punks infringe its copyright.
  • 2. V1 Punks owners can then file a counter notice under the DMCA with OpenSea. The counter notice must allege: “A statement under penalty of perjury that the subscriber has a good faith belief that the material was removed or disabled as a result of mistake or misidentification of the material to be removed or disabled.”
  • 3. OpenSea must promptly notify Larva Labs of the counter notice of V1 Punks owners.
  • 4. OpenSea must also restore the V1 Punks within 10 to 14 business days after receiving the V1 counter notice unless Larva Labs “has filed an action seeking a court order” to restrain the V1 Punk owners from copyright infringement. The court’s order then will determine if V1 Punks are restored or removed from OpenSea, pending the resolution of a copyright lawsuit.

Under the DMCA, things can escalate quickly. If Larva Labs files a DMCA notice, within just 2 weeks or so, we could see a lawsuit by Larva Labs against V1 CryptoPunks owners. If that happens, there’s likely to be some backlash against Larva Labs. It’s too bad things look like they are headed to a copyright lawsuit, especially when reasonable alternatives (e.g., a buy back or exchange program by Larva Labs) might have been easier and less adversarial.