With ETHDenver 2022 having just concluded, many of the conversations that took place throughout Denver involved the question of what it actually means for a current/prospective NFT holder to “own” an NFT.
Last year, NFT sales were valued at $25 billion worldwide, according to DappRadar, with the most expensive digital artwork selling for just $69 million at Christie’s.
Back in January, Chainalysis conducted a study revealing that of the 2.7 million NFTs in existence from between February and November 2021 – only 360,000 people owned them, bringing us to the topic of “ownership”.
As a community, individuals need to understand exactly what they are buying when they purchase an NFT, because the rights you are afforded depend entirely on what is in the underlying smart contract of that NFT.
In most instances, an individual is not buying the underlying rights to that intellectual property, as those rights remain with the issuer/original artist – which the industry comically witnessed with SpiceDAO and its accidental $3 million Dune purchase.
While NFTs continue to consume pop culture and entertainment, it’s also redefining the traditional pyramid of the entertainment industry across TV, film, and nonlinear programming. Without fully acknowledging the role intellectual property law plays in the world of NFTs, industry players could set a very dangerous precedent for other creators who truthfully believe they have the right to exploit other creators’ (or intellectual property) works, at the expense of the legitimate IP rights reserved by owners.
Recapping U.S. Copyright Law
In reality, the rights most NFTs on the market afford its future owners are governed by the smart contract as well as any other permissions that have been explicitly and/or expressly attached to that particular token by the issuer/seller.
Pursuant to the U.S. Copyright Act (18 USC 106), creators of original works are granted a number of “exclusive rights” that together, afford an owner the right to (1) reproduce, (2) prepare derivative works, (3) distribute, (4) publicly perform, (5) publicly display, and (6) digitally transmit that work for public performances.
The Right to Prepare Derivative Works
In the case of SpiceDAO, the issue in question revolved around whether or not the DAO had the “right to prepare derivative works” of the 1974 concept art adaptation of the Dune-related project that never took off, to which that answer was – no, they did not, because they never actually purchased the underlying rights to Frank Herbert’s original 1965 novel Dune.
Is There a Relationship Between What Consumers Buy and the Brands They are Loyal to?
With Nike’s ongoing lawsuit against online shoe retailer StockX, the issue of being able to distribute, publicly display, and digitally transmit shoes that utilize both Nike iterations of sneakers such as Nike Dunks and Air Jordans, as well as utilizing its famous “swoosh” trade dress.
In this case, the Detroit-based resale platform releasing sneakers that Nike believes will “likely cause consumer confusion” and “create a false association between those products and Nike.”
Simultaneously, French luxury designer Hermès is also bringing its lawsuit against MetaBirkins founder Mason Rothschild for infringing upon its historically established “Birkins” handbag brand.
Ultimately, these two lawsuits will have a high likelihood of setting the stage for what is acceptable in trademark infringement suits for NFT projects, specifically on whether consumers could actually believe that there is an association between what they’re purchasing and the brand they are loyal to.
Studios Acting to Protect Its Most Iconic Works
Back in November, iconic film studio Miramax sued iconic director and producer Quentin Tarantino after he announced at NFT.NYC 2021 his intention to auction off seven scenes from the 1994 classic Oscar-winning film Pulp Fiction as NFTs.
Specifically, Tarantino’s NFTs would include seven scanned digital copies of his handwritten original scripts with audio commentary. At the heart of the ongoing case is the element of “distribution” which points to Tarantino’s contract with Miramax.
According to the studio, Tarantino’s contract with it was terminated in 1993 and therefore would constitute breach of contract, copyright infringement, and a likelihood of confusion that Miramax was both involved in Tarantino’s offering, as well as sending a false message into the space that others would similarly have the legal rights to pursue similar endeavors.
In the 22-page complaint filed by Miramax’s legal counsel, the studio argues that “Tarantino’s conduct has forced Miramax to bring this lawsuit against a valued collaborator in order to enforce, preserve, and protect its contractual and intellectual property rights relating to one of Miramax’s most iconic and valuable film properties”.
The studio specifically references Tarantino’s claims “[did] not encompass any rights or media that were not known at the time of the original rights agreement,” which arguably positions the original contract as either flawed or enforceable through a strict scrutiny reading.
However, Tarantino’s lawyers argue that this right to “screenplay publication” falls within the confines of his agreement. The 1994 cult classic starred Samuel Jackson, John Travolta, Uma Thurman, Ving Rhames, Tim Roth and Bruce Willis.
What this lawsuit will demonstrate for the industry is both the importance of contract drafting and acknowledging new, emerging technologies when deciding what rights a studio, broadcaster, and/or otherwise distribution channel has with respect to the underlying work – as well as the wiggle room other creators like Tarantino may have who have a similar interest in exploiting the NFT space with their own endeavors.
It’s Time to Do Better…and Be Better
Whether we are on the legal battlefield or the building phase, it’s clear that Web3 is forcing our entertainment industry to evolve and be better, positioning leaders to leverage the power of blockchain technology and use it to help better preserve intellectual property, but also allow it to breathe new life into the world of creators and consumers.
Web3 is a chance for us all to start over and do things right, and that begins with leveling the playing field between big tech studios and creators.
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*All investment/financial opinions expressed by NFT Plazas are from the personal research and experience of our site moderators and are intended as educational material only. Individuals are required to fully research any product prior to making any kind of investment.
Andrew Rossow is a licensed attorney, law professor, journalist, and anti-bullying activist. He often speaks on and writes on the cross-section of law and technology, with an emphasis on Web3, NFTs, blockchain, and cryptocurrency.