With the recent increase in popularity and profitability of non-fungible tokens (NFTs), celebrities have entered the market not only by buying NFTs but also by minting their own. However, as NFTs often involve the overlap of multiple layers of IP rights, prominent NFT projects present a variety of potential pitfalls. In particular, these NFT projects often include trademark, copyright and name, image and likeness rights (NIL).
The advent of NFTs has expanded the licensing landscape for athletes and celebrities alike. An NFT is a non-exchangeable unit of data stored on a blockchain that can be sold and traded. Typically, NFTs are associated with digital files such as photos, videos, and audio. An NFT of Cristiano Ronaldo, a world famous Portuguese soccer player, has been sold on the Sorare NFT platform for $289,920. This broke the record for the most expensive football ticket ever sold, physical or digital.
While the owner of an NFT has the right to use and own the NFT, the IP rights within the work remain with the respective proprietary rights owners. Because NFTs can simultaneously contain multiple types of intellectual property, such as copyright, trademark, and NIL, it is important to determine ownership of each before minting an NFT.
As such, companies looking to join the proverbial gold rush to monetize NFTs in new ways must ensure their new ventures comply with intellectual property law. This article highlights several ways that problems can arise for those looking to monetize NFTs, particularly those involving celebrities.
In January 2022, rapper Lil Yachty filed a trademark infringement lawsuit against Opulous and Dito Music for “maliciously” using his name, brand, and image to successfully raise over $6.5 million in venture capital funds. According to the complaint, Opulous launched a press and advertising campaign that falsely linked Lil Yachty to the company’s NFT platform and said the rapper’s copyrighted works were up for sale. Essentially, the complaint alleged that Opulous failed to obtain licenses for trademarks, copyrights and NIL rights offered on its NFT platform. The ads included a photo of the rapper and his name, and indicated that his music would be for sale as part of the NFT drops. While Lil Yachty admitted to having spoken with the company about a possible collaboration, the rapper said that ultimately no agreements were reached and the use of his name and likeness is unauthorized. The case is currently awaiting a decision on a motion to dismiss for lack of personal jurisdiction.
On the other hand, some companies have successfully licensed NIL rights for prominent NFT projects. For example, the National Basketball Association has partnered with Dapper Labs to create “TopShot,” a marketplace that digitizes licensed clips from the NBA and converts them into a limited number of NFTs to be advertised as “Moments.” Such licensing agreements require companies like Dapper Labs to enter into dual agreements with the NBA and the National Basketball Players Association. However, some popular players have leverage. For example, media reports of the so-called “carve-out” process indicate that Michael Jordan is among several players who have set limits on the use of their likeness with the National Basketball Retired Players Association, and these players typically negotiate for a larger percentage of sales for each product with their NIL.
Entertainment company Miramax filed a copyright infringement lawsuit against screenwriter Quentin Tarantino based on his announcement that it would auction off seven exclusive scenes from the 1994 cult classic pulp fiction as NFT. According to the complaint, Tarantino granted Miramax all present and future rights in and to the film while retaining a limited number of reserved rights for himself in an original copyright agreement. Miramax took the position that Tarantino’s limited proprietary rights did not give him the ability to unilaterally produce, market, and sell pulp fiction NFTs for violating Miramax’s broader exclusive rights to the film. In response, Tarantino’s attorneys argued that Miramax erroneously assumed that a transfer of copyright in a film included the underlying screenplay for the film. On July 15, 2022, Tarantino’s motion for a ruling on the pleadings – which, if successful, would dismiss the claims against Tarantino – was accepted by the court without a hearing for consideration.
While the National Collegiate Athletic Association allows student-athletes to capitalize on their NIL through opportunities such as marketing partnerships and media appearances, individual schools may have their own policies that prohibit student-athletes from using school marks without licensing approval. For example, Michigan running back Blake Corum launched an NFT collection in December 2021, but was not allowed to use any of the university’s brands. Because Corum has not received licensing permission, Corum is not depicted in the NFT wearing an official Michigan uniform. Instead, his helmet and jersey were designed to appear more generic.
The popularity of NFTs has increased the attention of celebrities and companies looking to market their connection to such digital assets. With this technological innovation, both celebrities and athletes have a new way to capitalize on their name and image and want to exercise freedom through creative means like NFTs. Although the playing field can change, the rules remain the same. Anyone entering the NFTs business must continue to consider what IP rights are necessary to enable a potential project.
For additional information on this subject, please contact Justin E. Pierce, Calvin R. Nelson or William Lawrence at Venable LLP by phone (+202.344.4000) or email ([email protected], [email protected] or [email protected]). Venable LLP’s website can be accessed at www.venable.com.
Oluwatobiloba Kalejaiye, Summer Associate, helped create this article.