Blockchain Copyright Services: Seductive, but Unwise

Kodak is joining the list of companies offering blockchain-related services for photographers. While I applaud the idea of photographers getting paid, I’m not a fan of these services. Mostly, the financials are not, in the long run, good for photographers.
Not by a long shot.

I know exactly what many people are going to say: without much effort, photographers will get paid for uses they didn’t get paid for before. Thing is, that may not be true at all; and, even when it is true, the amounts will be less than they could get if they pursued these infringements, and they are infringements. Most of all, photographers will be giving up way too much for the convenience these services are selling.

Let’s back up a bit and look at the process and the financials…

First, a photographer makes a photograph and registers the copyright in it using one of these services (any of ‘em–let’s call our hypothetical company “Block,” just for ease). Block submits the registration to the USCO and, hopefully, doesn’t make any significant error on the registration application (this is the first problem, in my book, because registrations are not just “fill in the blank” easy and if it gets screwed up… ouch). Anyway, Block also assigns the work its unique ID via blockchain. It also incorporates all sorts of things that sound fabulously whizbangy and techno-impressive, like connected thumbnails of the deposit copy and the registration.

The big selling point is that the services will patrol the interwebs looking for your image and, if the image is used, will pursue payment if previously unlicensed. These uses are billed for, through Block, who then collects on these “post-use licenses” in part because the blockchain ID will “authenticate the image.
In theory.

The reality is not so fabulous.

First, what the hell does “authenticate” even mean here and what good does it do? I mean, seriously, is an infringer going to bend over and pay just because you have blockchain proof it is your registered-copyright photo and, thus, that they infringed? Nope. No more than infringers do now when confronted with existing forms of evidence (evidence, by the way, that has been used by courts long before blockchain came into being[1]). Infringers, and these are infringements we’re talking about, will refuse to pay just as they do now.

Maybe there’s one exception: infringers might pay more often, but only if the amounts demanded are tiny. This is the business theory, at least, for these companies: they will collect something for more of the infringements and that those amounts will add up. While this is great for those companies, who will make lots in volume, this is short-term thinking at best for individual creative pros (who will not make it up in volume and who lose more…keep reading).

Let’s say that Block bills a whopping $50 per blog use infringement (again, they are calling it a “post-use license” to sell it to the infringers, because it sounds nicer than calling them infringers). If you are a pro, I think you should NEVER sell a license for $50. Ever. Even for a personal blog use. It lowers the value of your work. I don’t care if it’s used on some tiny not-for-profit or personal blog, if you are a pro, a license to display your art is worth more than $50. But still, let’s stick with that amount (which, I suspect, may even be high for these services) because, at that number, Block (etc.) will get a bunch of these “sales.”

The individual artist, however, will have to collect on 15 of these $50 “licenses” to earn the minimum statutory damages owed, under the law, for a single infringement ($750)[2]. Worse yet: I’ve heard that some of these “services” charge 45-55% of the fees collected (a ridiculously high percentage, by the way), so now you’re looking at double that 15, just to get the minimum the law says you must get for a single infringement of a photograph whose copyright was registered before the infringement. And remember, the first thing you did here was register the copyright with the US Copyright Office so, um, yeah.

In other words, you’ve done the (allegedly) hard part–registering the copyright–so why in the hell are you giving away all the financial benefits of doing that?!?

But it gets even worse on the financial side. Let’s say you, through Block, have granted a bunch of these $50 licenses for online use. In fact, let’s say Block even billed and collected $500 for a “post-use license” for use on a small business commercial blog (extremely unlikely, but still). Now, that same photograph gets used by MegaCorp on its website and, in the negotiations, MegaCorp says it will pay $2500 to settle–five times the largest amount you ever got for a license for that photograph. You know that the license is worth more like $10,000 so you refuse (assuming you can–the agreement with the service may have you waive the right of refusal) and the case goes to court. Not only is it very possible that the court will not award you more than $2500, because, in part, of your low price history, it is unlikely that you will collect attorneys’ fees since you refused what appears to be, in that context, a reasonable offer, pre-suit[3]. You have, in essence, set your value at almost nothing because Block licensed your work (post-use!) for almost nothing, over and over. Even if you have licenses that you have issued that are more valuable, you will have to fight it out in court because your own evidence shows you will accept less. Ugh.

Now, as if the financials could be balanced by the services provided, let’s look at the blockchain proof these services are touting: short answer is you don’t need it. Really, it is of no added benefit to you, although it might make Block’s work easier. Sure, if you are asking for essentially a micro-payment and can wave the evidence of registration, etc., at the infringer, you might get paid quickly. However, in fact, in some ways by doing this, Block (and thus you) is doing the work of the defendant and that removes a tactical tool for later (litigation) use.

For example, assuming you registered the copyright shortly after creation of the work, you don’t need to prove that the work is validly registered. Under the law, if you registered the copyright to the photograph before or within 5 years of its first publication, then the legal burden is on the defendant to prove that the work is NOT properly registered, not on you to prove that it is[4]. It’s expensive to get deposit copies and the defendant should bear those costs since it bears the burden of breaking the registration. So, actually, you aren’t making it easier for them to pay you, you are taking away some of the tools your attorney can use to pursue them.

Oh, and about “your attorney,” if you use one of these services you likely agree to use their attorneys for any litigation resulting from a use they found. Their attorneys are contract attorneys who are getting paid very, very little to handle your case. I know because I have been approached by and refused to work with some of these companies as the rates offered were unreasonable.

Finally, and not for nothing, at least Kodak is using its own cryptocurrency for payment. This fad is not a good thing, as Warren Buffet has noted, and I agree. There is way too much uncertainty in the values, including the very likely possibility of total loss. Get paid in real currency, if for no other reason then you know that it isn’t financing North Korea or human trafficking or other crimes[5].

Look, I totally understand that creative pros want the business side of their lives to be easier. Technology can help with that. It’s easier than ever to register your copyrights yourself and to track your works for infringements, again by yourself. If you don’t want to do the work of pursuing the cases, you can hire someone in-house to handle a lot of it, like a studio manager or even a (paid) intern. You’ll still end up way ahead of what you would get with these services. There are also lawyers like me who will help you, even for many of the small cases, and (usually) for a lower percentage than these services charge.

In my opinion, if you are a creative professional, you owe it to yourself to treat your business like a business, and that means making decisions not on the basis of “how easy is it?” but rather “what will benefit my business the most?” When it comes to infringements, that means not giving away the farm for seductively easy now.
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[1] Like, for example, you can (and should) make copies of the deposit copies yourself and keep them in your own files with the registration. The metadata in these files will authenticate them.

[2] For a timely registered work, statutory damages must be between $750 and $30,000 for non-willful infringement, and up to $150,000 for willful. 17 USC §504.

[3] Courts have wide discretion in the award of attorneys’ fees under 17 USC §505 and, these days, are less likely to award them if a plaintiff has refused an objectively reasonable settlement offer.

[4] 17 USC §410(c): In any judicial proceedings the certificate of a registration made before or within five years after first publication of the work shall constitute prima facie evidence of the validity of the copyright and of the facts stated in the certificate.

[5] See, e.g., http://www.businessinsider.com/why-bitcoin-and-other-cryptocurrencies-will-inevitably-become-tools-of-the-rich-powerful-and-criminal-2013-12; http://www.springfieldnewssun.com/business/crime-and-cryptocurrency-how-local-criminals-use-bitcoin-illegally/ispfn3mqvwWcsPRI1AKC0L/; and, https://www.inc.com/will-yakowicz/startups-law-enforcement-agencies-catch-criminals-who-use-cryptocurrency.html

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