Unique IP concerns when celebrities and athletes are involved in NFT projects – Commentary


Introduction
NIL challenges
Copyright challenges
Trademark challenges
Comment

Introduction

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 IP 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 IP rights within the work remain with the respective property rights owners. Because NFTs can concurrently incorporate several types of intellectual property, such as 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 monetise NFTs in new ways must ensure that their new ventures comply with IP law. This article presents several ways issues can arise for those seeking to monetise NFTs, particularly those involving celebrities.

NIL challenges

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 that the rapper’s copyrighted works would be offered for sale. Essentially, the alleged complaint that Opulous had failed to obtain licenses to trademarks, copyrights and NIL rights featured 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 conceded that he had spoken with the company about a potential collaboration, the rapper said that, ultimately, no agreements had been reached, and the use of his name and image was 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 National Basketball Association has partnered with Dapper Labs to create “TopShot”, a marketplace that digitises licensed clips from the NBA and turns them into a limited number of NFTs advertised as “Moments”. Such licensing agreements require that companies such as Dapper Labs enter dual agreements with the NBA and the National Basketball Players Association. 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 on the use of their likeness, and those players typically bargain for a larger percentage of sales for any product using their NIL.

Copyright challenges

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 took the position that Tarantino’s limited reserved rights did not give him the ability to unilaterally produce, market and sell the Pulp Fiction NFTs, because they infringed on Miramax’s broader exclusive rights in the film. In response, lawyers for Tarantino argued that Miramax had incorrectly assumed that an assignment of copyrights in a motion picture includes the underlying screenplay for the motion picture. On 15 July 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.

Trademark challenges

While the National Collegiate Athletic Association permits student athletes to profit from 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 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.

Comment

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 IP rights are necessary to make a potential project possible.

For further information on this topic please contact Justin E Pierce, Calvin R Nelson or William Lawrence at Venable LLP by telephone (+202 344 4000) or email ([email protected], [email protected] or [email protected]). The Venable LLP website can be accessed at www.venable.com.

Oluwatobiloba Kalejaiye, summer associate, assisted in the preparation of this article.

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