NFTs – one-of-a-kind tokens associated with a certain digital asset — have garnered a lot of attention recently, although they’ve been there since approximately 2014. In 2021, the once-peripheral movement will enter the mainstream, as NFTs will be convertible to money.
As of 2021, the worldwide entertainment sector is expected to be worth more than $99.7 billion.
Although the art world is primarily responsible for some of the most expensive NFTs ever sold, the NFT industry is still in its infancy, leaving plenty of room for household entertainment companies such as Warner Bros., Disney, Marvel, and DC to make a mark in what many have dubbed Entertainment 3.0.
Production businesses and entertainment studios have begun to embrace discussions on strategically introducing NFTs into their IP ecosystem by utilizing billions of dollars worth of intellectual property. Even more important, though, are the conversations around that property rights and their licensing.
What is the buyer getting in return for minting an NFT? What happens to the buyer’s NFT once they purchase it? Can they do anything they want with it – for their benefit or others? If so, is there a limit or prohibition on commercial use?
Rights granted to copyright owners (or NFT creators/issuers) under the United States Copyright Law include the following:
The right to use the work in any way;
The right to do derivative works from that work;
The right to reproduce and disseminate the work;
To be able to carry out this task;
the right to exhibit one’s work in public; and
The right to carry out the job publicly through digital audio transmission is granted with sound recordings.
Exclusive rights include copyright and trademark protection, four of which have already been discovered by the NFT community.
in the Nike/StockX litigation, the right to reproduce the work.’
in the case of SpiceDAO, the right ‘to do derivative works
an ongoing dispute between Miramax and Quentin Tarantino about the ‘distribution of copies of the work.’
Hermès and Mason Rothschild are now suing each other for the right to “publicly exhibit the work.”
Lawsuits and legal issues surrounding NFTs
SpiceDAO a collective made headlines for making one of the most childish mistakes in the NFT space. The collective spent a big $3 million on Alejandro Jodorowsky’s copy of an unpublished manuscript of the film Dune. They mistakenly believed that the ownership of the collective also granted them the film’s copyrights.
Upon the acquisition, the DAO took to social media notifying users of its then-intent to produce an “original animated series” inspired by the original book. Which then will hopefully be sold to a streaming service for which it would require copyrights.
Miramax v. Quentin Tarantino
In November 2021, award-winning director Quentin Tarantino informed that he would be selling seven NFTs related to the 1994 cult classic film Pulp Fiction. According to Tarantino, each NFT would include uncut first handwritten scripts from the film with exclusive custom commentary by the director. Also, a unique work of art that was inspired by the film would be available to the public.
Miramax, the film’s distributor whetted a federal lawsuit in California against Tarantino. The lawsuit is arguing a myriad of issues, but as it relates to NFTs the main issue will be copyright and trademark infringement. They said that Tarantino doesn’t have the legal rights to create and sell the NFTs without embezzling Miramax’s goodwill, as well as creating a likelihood of consumer confusion, where consumers could believe that Miramax either formed or endorsed the sale of those NFTs.
The case is presently in litigation.
Hermès v. Mason Rothschild/MetaBirkins
In January, French luxury fashion house Hermès filed an objection against California artist Mason Rothschild. In December 2021, Rothschild reported his “MetaBirkins” NFT project. The virtual art depicted Hermès’ Birkin bags and trademarks. The fashion house disputes Rothschild’s misappropriation of Hermès’ Birkin trademark, while also benefiting from Hermès’ goodwill on over 100 digital collectibles.
This case is presently in litigation.
Nike vs. StockX
Nike rubbed a lawsuit against online sneaker resale giant StockX for selling its “Vault” NFTs without consent.
The objection alleges that StockX deliberately and knowingly used Nike’s trademarks without consent to market and subsequently mint the NFTs, arguing that this project is “likely to cause consumer confusion,” as Nike never authorized nor participated in the project.
The case is currently in litigation.
The NFT license
In the majority of cases, NFT creators have particularly restricted all commercial use of NFT artwork. This restricts buyers from commercializing their NFT.
However, we have noticed a few instances in where NFT projects such as CryptoKitties, CryptoPunks, and Meebits — have adopted the NFT License. The NFT license provides buyers with a limited license to use, copy, or display their NFT art “for the objective of commercializing their own merchandise.”
However, with the NFT License in the majority of cases, is some annual gross revenue cap, such as CryptoKitties’ $100,000/year gross revenue cap.
Let’s take a peek at some of the ofter NFT projects that give users an NFT license to their NFTs.
Bored Ape Yacht Club (BAYC)
Yuga Labs, the creators behind the BAYC collection, authorizes its holders to completely commercialize their individual Bored Ape. According to the terms&condition “owning the underlying Bored Ape, the Art, completely,” Additionally, Bored Ape buyers receive“an absolute, worldwide license to make derivative works based upon the underlying art” with no cap on the revenue.
However, it’s worth mentioning that the copyright doesn’t immediately grant to the new owner of the BAYC NFT. Instead, a written assignment is needed to perfect the copyright transfer. This is because there is no assignment provision in the underlying smart contract.
Based on feedback from the community, monetizing a Bored Ape’s commercial use rights is too difficult. Because a buyer is eventually competing with BAYC itself which holds the sole, legal rights to use their logos and other non-token specific IP.
World of Women (WoW)
Taking BAYC’s strategy a step further, the World of Women (WoW) NFT project assigns all of the rights, title, and interest to the intellectual property underlying the art to the consumers of the NFTs.
However, it’s confined to non-commercial use. In its terms and conditions, the project speaks directly to trademark considerations, informing consumers that they are allowed to use the terms “World of Women,” “WOW,” or “WoW” when utilizing the underlying art for non-commercial purposes.
Identical to ‘royalties’ that are often made to a business or an individual for the ongoing use of their assets, the NFT space also needs a conversation about how royalties are set and distributed.
NFT royalties give a creator a percentage of the sale price every time the owner/creator’s NFT work is sold on an NFT marketplace. These payments are perpetual and executed via a “smart contract” or code that handles the distribution automatically.
Although, NFT royalties differ from classic royalty payments in that these are automatic payouts made to the NFT owner/creator on secondary sales, without the need for mediators. While not every NFT yields royalties, they need to be documented in the terms of the smart contract, otherwise, the owner/creator has no claim whatsoever.
ZINU’s ‘Royalty-Free’ license
Something fresh to the NFT industry is the idea of ‘decentralized IP.’ let’s refer to ZINU for better understanding. ZINU recently presented its 3D, fully-animated “original zombie” NFT.
ZINU claims to be one of the industry’s first true cases of decentralized intellectual property in the form of a ‘royalty-free ’ NFT license. ZINU gifts every NFT holder a royalty-free NFT license to their specific ZINU character. After that, they can then use their separately minted Zinu for both personal and commercial ambitions, without owing any royalty fees.
The company has frequently said to its community that members of its Zombie Mob Secret Society (ZMSS) NFT collection will be able to leverage their own private ownership of their piece of the Zinu brand, as it creates toys, collectibles, merchandise, and countless other options across many different verticals.
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NFTHI does not recommend any kind of Investment in NFTs or NFT trading. All the strategies are merely educational references.
Conduct thorough research before you start with NFT trading.