3LAU sued by former collaborator over $11 million NFT project

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By Chris Cooke | Published Monday, November 14, 2022

An interesting lawsuit was filed last week against DJ and producer 3lau in a dispute over a mega-bucks NFT auction he hosted in early 2021 related to his 2018 album “Ultraviolet.”

3lau – real name Justin Blau – has been sued by Luna Aura, who co-wrote and appeared on ‘Walk Away’, a track that appeared on ‘Ultraviolet’.

Coinciding with the record’s third anniversary, the producer’s NFT auction offered buyers various products and perks, all related to his 2018 record, and some specific to “Walk Away.” The auction generated more than $11 million for the manufacturer.

In her lawsuit, Luna Aura — real name Angela Anne Flores — says that while Blau owns the copyright to the recording of “Walk Away,” she has an ownership interest in the song’s copyright, and that she should also have an artist royalty under contract from the exploitation of the recording. She then claims that Blau did not license the inclusion of “Walk Away” in his NFT release and has not paid her a proper royalty.

Blau offered Flores a one-time payment of $25,000 toward the NFT sale, but she doesn’t feel that’s an appropriate fee given how much the broader NFT auction generated for the manufacturer.

It’s an interesting legal battle because, despite all the hype and talk surrounding music NFTs over the last couple of years, there’s no real consensus on how to license them when recordings are part of the offering, but the artist or label that leads on NFT drop does not control all the rights to the songs in these recordings. Something they often don’t want.

There are industry conventions for how revenue should be split between the recording rights and song rights whenever recorded music is exploited, but these splits vary depending on usage, meaning that with new products it’s not clear what kind of split is fair.

There is also often great disagreement about what the divisions should be. Many songwriters and music publishers argue that the split on streams is still unfair, despite the fact that streaming has been an important revenue stream for many years now, and that the song’s share of rights has increased slightly over the past decade.

In the US, song royalty rates are actually set by law in many cases, including with downloads and discs, and most music NFTs usually involve a download and/or a disc. Although these statutory prices are set in cents, not a percentage of revenue, which makes them seem very inappropriate for NFT sales that generate millions.

So of course, with music NFTs, there are added complications. First, as with the 3lau NFT campaign, buyers of each non-fungible token receive different products and benefits that must be taken into account.

And secondly, there is a discussion about to what extent the value of a token comes from the music associated with it, and to what extent it is really about the artist’s brand.

With all these uncertainties and complexities, it’s probably a good idea to sort out any licensing deals before embarking on a music NFT project. But it can stop a project from moving forward at all. And presumably Team 3lau was eager to cash in on all the early 2021 NFT hype that led to tokens going for super crazy money.

Regardless, Flores reckons Blau failed to fulfill his legal obligations to ‘Walk Away’ before launching the ‘Ultraviolet’ NFT drop, meaning he and his company 3lau Entertainment are liable for breach of contract and unjust enrichment.

Her lawyers write: “Luna Aura has not received any compensation from income generated from the NFT project, nor has Luna Aura [received] appropriate credit in connection with the NFTs ‘Walk Away’ and ‘Ultraviolet’. Despite the commercial and financial success of the NFT auction, the defendant only offered Luna Aura a one-time payment afterwards.

Blau has already hit back at Flores’ claims. His manager Andrew Goldstone told reporters: “These allegations are without merit and we will vigorously defend the lawsuit that was just filed yesterday without warning. There are no set standards for how to deal with an NFT project like this, which involved much more than just the music. Justin’s team tried for months to reach a good-faith settlement with Flores, but she stopped responding and instead chose to file a lawsuit.”