Given the recent rise in popularity and profitability of non-fungible tokens (NFTs), celebrities have entered the market by not only buying NFTs, but also minting their own. However, because NFTs often involve the intersection of multiple levels of IP rights, celebrity NFT projects present a variety of potential pitfalls. In particular, these NFT projects often involve trademark, copyright and name, likeness and likeness (NIL) rights.
The emergence of NFTs has expanded the licensing landscape for both athletes and celebrities. An NFT is a non-fungible unit of data stored on a blockchain that can be sold and traded. Typically, NFTs relate to digital files such as photos, videos and audio. An NFT of Cristiano Ronaldo, a world famous Portuguese soccer player, was sold for $289,920 on NFT platform Sorare. This broke the record for the most expensive football card ever sold, physically or digitally.
While the owner of an NFT has the right to use and own the NFT, intellectual property rights within the project remain with the respective owners of property rights. Because NFTs can incorporate multiple types of intellectual property at the same time, such as copyright, trademarks, and NIL, it is important to determine the 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 copyright law. This article outlines several ways in which problems can arise for those seeking 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, trademark and likeness to successfully raise more than $6.5 million in funds venture capital. 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 alleged that Opulous had not obtained licenses for trademarks, copyrights and NIL rights displayed on its NFT platform. The ads included a picture of the rapper and his name, and indicated that his music would be sold as part of NFT drops. While Lil Yachty admitted that he had spoken to the label about a possible collaboration, the rapper said that, ultimately, no deals had been reached and that the use of his name and likeness was 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 celebrity 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 turns them into a limited number of NFTs advertised as “Moments.” Such licensing deals require companies like Dapper Labs to enter into dual deals with the NBA and the National Basketball Players Association. However, some popular players have leverage. Media reports about 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 they negotiate for a higher percentage of sales for any product that uses their NIL.
Entertainment company Miramax has filed a copyright infringement lawsuit against screenwriter Quentin Tarantino over his announcement that he plans to auction off seven exclusive scenes from the 1994 cult classic. Pulp Fiction as an NFT. According to the complaint, Tarantino granted Miramax all current and future rights to the film and the film, while retaining a limited set of rights for himself in an original copyright agreement. Miramax took the position that Tarantino’s limited proprietary rights did not allow him to produce, market and sell unilaterally Pulp Fiction NFTs, for infringing Miramax’s broader exclusive rights to the film. In response, Tarantino’s lawyers argued that Miramax had wrongly assumed that the assignment of copyright in a film includes the underlying screenplay for the film. On July 15, 2022, Tarantino’s motion for judgment on the pleadings – which, if successful, would dismiss the claims against Tarantino – was taken up by the court without oral argument.
While the National Collegiate Athletic Association allows student-athletes to leverage 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 permission. For example, in December 2021, Michigan’s Blake Corum released a collection of NFTs, but was not allowed to use any of the university’s trademarks. Because Corum did not receive a licensing permit, Corum is not pictured in the NFT wearing an official Michigan uniform. Instead, his helmet and jersey were shaped to look more generic.
The popularity of NFTs has increased the attention of both celebrities and businesses looking to promote their connection to such digital assets. With this technological innovation, celebrities and athletes have a new opportunity to leverage their name and image and would like to exercise freedom through creative means like NFTs. However, while the playing field may change, the rules remain the same. Anyone entering the NFTs business should continue to consider what intellectual property rights are necessary to make a potential project possible.
For more information on this matter, 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] the [email protected]). Venable LLP’s website can be accessed at www.venable.com.
Oluwatobiloba Kalejaiye, Summer Associate, helped prepare this article.