How is a derivative work defined wrt "low entropy" artwork

Question

CryptoPunks are a set of 10,000 Ethereum-based NFTs, each token corresponding to a unique 24 x 24 pixel cartoonish figure. They have been automatically generated from human generated components representing traits and types of characters. They are quite valuable, for example CryptoPunk 1886 sold for $1.06M in July last year. It had only 6 colours:

The creators, Larva Labs are somewhat litigious and have sued CryptoPhunks, who made versions that have been “hand-flipped” (ie. look the other way), as well as being a different size and having a border.

Suppose one was to take this idea a bit further, and generate many small images with vaguely face-like features. Because of the limited number of colours distinguishable to the human eye, and with only 576 pixels in a 24*24 image, many are going to be more similar to CryptoPunk 1886 than CryptoPhunks 1886. With a large enough set it is quite possible that an identical image could be produced (there are less than 10^10 combinations for a 24 x 24 8 bit RGB image).

If Larva Labs claimed these similar images were derivative works, and it was demonstrable that they were generated independently, would it be legally justifiable to claiming that they were derivative works?

Answer 1

There is no case law as yet

However, the most likely situation is that there is no copyright in the original works because they are computer-generated. There is certainly copyright in the code that created the art but the output of that code, the art itself, would probably not be subject to copyright.

Copyright only exists in art created by humans. The US Ninth Circuit has held that animals cannot create copyrighted works. Subsequently, the US Copyright office has rejected applications for registration (a prerequisite to a suit in the US) of computer-generated art because it “lacks the human authorship necessary to support a copyright claim.” While this position has not been tested in the courts, I don't think they are any more likely to grant copyright to a program than they were to a monkey.

What's going on?

The OP states that there is litigation: there isn't. What there is, is a DCMA takedown request from Larva Labs. If this is complied with that will be the end of the matter; if it isn't then there may be litigation.

However, before Larva Labs could sue CryptoPunks in the US they would first need to get a writ of mandamus to force the USCO to register it. If they try and fail then there will be a legally binding court decision that Larva Labs don't own the copyright in any of their computer-generated art. Which kills their business model and, presumably, them. This would be a very high-risk move.

They may choose to sue in a jurisdiction where registration is not a prerequisite, however, that court would still need to be satisfied that there was a copyright that could be breached. So that's just a different take on the same problem.

I have ignored the issue of NFTs as these are legally problematic in their own right and irrelevant to the main question. However, the NFT and the artwork are not the same thing.