Venable LLP
Given the recent rise in the popularity and profitability of non-fungible tokens (NFTs), celebrities have entered the market not only by purchasing NFTs, but also by minting their own. However, because NFTs often involve the intersection of multiple layers of intellectual property rights, celebrity NFT projects present a variety of potential pitfalls. In particular, these NFT projects often implicate trademark, copyright, and name, image, and likeness (NIL) rights.
The emergence of NFTs has expanded the licensing landscape for athletes and celebrities alike. An NFT is a non-interchangeable unit of data stored on a blockchain that can be sold and traded. Typically, NFTs are associated with digital files such as photographs, videos, and audio. An NFT of Cristiano Ronaldo, a world-famous Portuguese soccer player, sold for $289,920 on the NFT platform Sorare. This broke the record for the highest-priced soccer card ever sold, physically or digitally. While the owner of an NFT possesses the right to use and own the NFT, the intellectual property rights within the work remain with the respective property rights owners. Because NFTs can concurrently incorporate several types of intellectual property, like copyrights, trademarks, and NIL, it is important to determine ownership of each before minting an NFT.
Therefore, companies seeking to join the proverbial gold rush to monetize NFTs in new ways must ensure that their new ventures comply with intellectual property law. This article presents several ways issues can arise for those seeking to monetize NFTs, particularly those involving celebrities.
In January 2022, rapper Lil Yachty filed a trademark infringement suit against Opulous and Dito Music for "maliciously" using his name, trademark, 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 would be offered for sale. Essentially, the complaint alleges that Opulous failed to obtain licenses to trademarks, copyrights, and NIL rights featured on its NFT platform. The advertisements included a photo of the rapper and his name, and indicated his music would be for sale as part of the NFT drops. While Lil Yachty concedes that he spoke with the company about a potential collaboration, the rapper says that ultimately, no agreements were reached, and use of his name and image is unauthorized. Currently, the case is 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 celebrity NFT projects. For example, the NBA has partnered with Dapper Labs to create "TopShot," a marketplace that digitizes licensed clips from the NBA and turns them into a limited number of NFTs advertised as "Moments." Such licensing agreements require that companies like Dapper Labs enter dual agreements with the NBA and the National Basketball Players Association (NBPA). However, some popular players have leverage. Media reports on the so-called carve-out process indicate, for example, that Michael Jordan is among several players who have set limits with the National Basketball Retired Players Association (NBRPA) on the use of their likeness, and those players typically bargain for a larger percentage of sales for any product using their NIL.
The entertainment company Miramax filed a copyright infringement suit against screenwriter Quentin Tarantino, based on his announcement of plans to auction off seven exclusive scenes from the 1994 cult classic Pulp Fiction as NFTs. According to the complaint, Tarantino granted Miramax all present and future rights in and to the film while preserving a limited set of reserved rights to himself in an Original Copyrights Agreement. Miramax takes the position that Tarantino’s limited reserved rights do not give him the ability to unilaterally produce, market, and sell the Pulp Fiction NFTs, because they infringe on Miramax’s broader exclusive rights in the film. In response, lawyers for Tarantino argue that Miramax incorrectly assumes that an assignment of copyrights in a motion picture includes the underlying screenplay for the motion picture. On July 15, 2022, Tarantino’s motion for judgment on the pleadings, which if successful would dismiss the claims against Tarantino, was taken for consideration by the court without oral argument.
While the NCAA permits student athletes to profit from their NIL through opportunities like marketing partnerships and media appearances, individual schools may have their own policies that prohibit student athletes from using school trademarks without licensing approval. For example, in December 2021 Michigan running back Blake Corum launched an NFT collection, but was not allowed to use any of the university’s trademarks. Because Corum did not receive licensing permission, Corum is not pictured in the NFT wearing an official Michigan uniform. Instead, his helmet and jersey were fashioned to appear more generic.
The popularity of NFTs has increased the attention of both celebrities and businesses that want to market their connection to such digital assets. With this technological innovation, celebrities and athletes alike have a new opportunity to capitalize on their name and image and would like to exercise the freedom through creative means like NFTs. Nevertheless, while the playing field may change, the rules remain the same. Anyone entering the business of NFTs must continue to consider what intellectual property rights are necessary to make a potential project possible.
*The authors would like to thank Summer Associate Oluwatobiloba Kalejaiye for her assistance in writing this alert.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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