Author - Freddie Besant, September 2021

In an incredibly short period of time a varied, complex and in some cases valuable ecosystem of ‘Non-fungible tokens’, or more simply ‘NFTs’, has emerged. The attention NFTs has attracted so far mostly relates, as this article will explore, to the artistic and collectable use of NFTs. This is largely attributable to the eye-watering sums being paid for punks, penguins and rocks. As with cryptocurrencies there seems to be a commonplace binary reaction: either to dismiss out of hand as a soon-to-pop bubble or fervently support as the future of finance / art / gaming / gambling.  The truth is probably somewhere in-between: however it is reasonable to assume that as a technology and an asset NFTs may well be around for some time. Indeed, increasingly they are being considered by established brands and those with valuable IP catalogues as a means to create something new out of the old.  It becomes interesting when you look beneath the artwork on the face of any NFT and examine the position from an Intellectual Property perspective.

But first, what exactly is an NFT? There are of course more detailed and technical explanations available elsewhere; however, in essence, an NFT is a unique token hosted on a blockchain (most commonly on the Ethereum network but also on a host of other smart-contract ‘Layer 1’ platforms). Some NFTs are single editions (i.e. only one exists); others are part of a limited edition of a series (e.g. 1 of 10,000).  Each NFT can be in-built with an endless variety of characteristics as a part of its ‘smart contract’, including its reference to an artwork but also to more practical concerns such as royalties payments in primary and secondary sales.

The ‘non-fungible’ part is an economic term that can be best explained by analogy: if I were to lend you a £10 note I would be perfectly happy to accept repayment by way of any other £10 note.  However, if I were to drop my child at nursery I would absolutely not accept any other child at the end of the day. So, the £10 note is fungible and my child is non-fungible. Alternatively consider that the Mona Lisa is non-fungible but the postcards sold in the gift shop at Le Louvre are fungible. It is this distinction that gives some insight into why people might value certain art-centric NFTs as they do: any major work of art will derive its value partially on its aesthetic appeal but mostly from its provenance (i.e. the identity of its creator) and its scarcity (i.e. there is only one ‘Sunflowers’ and only around 900 paintings by Van Gogh).  A Van Gogh forgery may well have the aesthetic value, but it will not have the provenance.  Similarly each NFT is completely unique and, by virtue of the decentralised blockchain network it exists upon, it is possible to prove beyond any doubt the scarcity and provenance of each NFT.

The obvious and most often commented legal observation regarding NFTs is that the purchase and sale of any NFT artwork, absent any agreement in writing to the contrary, does not entail the assignment of the underlying work. So, all things being equal, a purchaser of an NFT does not then own the copyright in the artwork, which is retained by the author. What then is a purchaser buying? The answer is the unique token built on whichever particular blockchain within which a copy of an artwork is hosted.

This brave new world is not without its questions.  For example, what are the terms of the licence to use such artwork that is granted to any purchaser.  This is akin to the world of physical art:  the purchase of a painting as a chattel does not necessarily confer the right to exploit the copyright in that painting by merchandising.  One would assume there would be some limited right to copy the artwork – the most common use of an NFT image is to then use this as an avatar on social media – but what else? Recently Alexis Ohanian, the founder of Reddit, sported a pin displaying the CryptoPunk he owned whilst attending the Met Gala. The IP in CryptoPunks is retained by LarvaLabs, but presumably the licence Ohanian holds extends far enough to create this pin. What would happen however if he then sought to sell similar pins (or mugs, mouse mats, you name it) commercially?

Another important factor is the requirement for a licence of the underlying copyright in order to create an NFT:  of course, it is not open to anyone to exploit someone else’s intellectual property in the form of an NFT, and in the event of a successful drop, could damages be payable on an ‘account of profits’ basis – which risks being somewhat punitive?  And what if an individual’s likeness were used in the creation of an NFT:  there may be no issues as to copyright, but would a ‘false endorsement’ claim arise?

There are no clear answers to these questions and ultimately it would be of no surprise if the courts were eventually asked to determine at least some of them. What is clear is that these issues should be considered closely by anyone contemplating a launch of any NFT series, especially where valuable IP and brand image rights are to be incorporated.

 

-Freddie Besant

 

Author - Peter Coles, April 2021

The BBC’s on-line news service reported recently how, following the refinement of new digital techniques, product placements may soon be added to classic films; indeed, it suggested that no filmed footage was immune from this, and that the music industry, badly affected by both declining CD sales and Covid restrictions on live performing, might embrace the chance to gain revenue from product placement.

Older readers might also remember the clever 2005 commercial issued by Volkswagen for its then new Golf GTI; this featured not only a re-mix by Mint Royale of Gene Kelly’s recorded performance of “Singing in the Rain”, but also a remastering of the dance sequence, using masks and digital techniques to impose Gene Kelly's face on the actual “breakdancing” performer.

Aside from the obvious copyright clearances that would be needed to re-sequence or change audio tracks and video footage, there are other, perhaps more difficult, areas of clearance. The Guardian reported in 2005 on the production team’s need to persuade Gene Kelly's widow that the commercial would be faithful to the famous scene from the 1952 film of Kelly dancing along a rainy street.

The BBC’s article reported that, for instance, older musical groups could make new money by agreeing to the digital addition of branded items to their old music videos; or even the later replacement of one branded product appearing in a video with a more recent version of the item. Or new design clothing could be added without the group actually having to wear it or to re-film the video.

It reported on one singer who had agreed with a brewery company that it could add the brewer’s bottles and logos in the singer’s music videos.

Perhaps producers of these “commercials” should be a little cautious: many artists restrict the use or association of their names and likenesses in their film contracts in certain product areas, such as tobacco, firearms and alcohol. Producers would need also to tread carefully to avoid a potential claim for false endorsement or - in certain territories - infringement of image rights.

And let’s not forget our old friend “moral rights”. Film directors (and performers) have, inter alia, an integrity right – that is the right to object to the derogatory treatment of their work or performance. Would John Landis or Michael Jackson’s Estate be happy with the digital introduction of product placement into their 1983 “Thriller” music video? Indeed, would they be happy for it to be re-sequenced to advertise a new car?

-Peter Coles
April 2021

Author - Oliver Fetiveau, April 21, 2021
News of the breakaway Super League has rocked the world of football. It has already claimed its first casualty, with Jose Mourinho destined, ironically given the empty trophy cabinet, to leave Spurs a hero apparently

Dated - Aug 28, 2019
The rule of thumb that the Royals don’t sue is not a matter of strict legal advice (Prince Charles has seen to that)

Dated : Aug 28, 2019
Two high-profile celebrity libel cases have recently ended with a substantial financial settlement in the Claimant’s favour: undisclosed, following a ruling on meaning and liability

Dated : Aug 28, 2019

This weekend, at the Oscars, The Academy will celebrate 50 years of 007 on screen – from Dr No (1962) to Skyfall (2012). Sadly, as generations of government lawyers will attest, Britain’s “most famous spy” has left a considerable number of tricky lawsuits in his wake. He may have a licence to kill, but Bond also has a duty of care: and his approach to it is frequently negligent. M Law takes a look at some of his worst moments.