NFT lawsuit tests trademark, copyright rules

Off the chain

Inflation is a winner for Visa, CFO Vasant Prabhu said back in January, as it means expenses go up. And Visa and Mastercard collect exchange on most card transactions. The EU succeeded in reining in card fees. Will the US get anywhere? Sen. Dick Durbin, he of Durbin change fame, is still trying. But one of fintech’s dirty secrets is that many startups benefit from exchanges, making them willing partners with Mastercard and Visa. Sellers complain, but consumers don’t seem to care, as the fees are largely invisible to them. If anything, the most savvy users have figured out how to game the system by looking for the best cash-back offers, recycling the merchant-paid fees back into their pockets.

– Owen Thomas (e-mail | twitter)

SPONSORED CONTENT FROM MICRON

Chip shortages can undermine national security: The global shortage of semiconductors has hampered the production of everything from pickup trucks to PlayStations. But there are more serious implications than a lack of consumer goods. If the United States does not ensure continued domestic access to leading semiconductor manufacturing, experts say our national security could suffer.

Read more from Micron

Minting lawsuits

A wave of NFT lawsuits is growing as celebrities, corporations and startups vie for the intellectual property rights that may or may not come with the trendy symbols people trade.

NFTs do not themselves convey any intellectual property rights, unless a contract specifically grants those rights and gives them ownership of the token. But that hasn’t stopped many NFT buyers from trying to convince themselves and others that owning a shoe, script or other form of intellectual property gives them the right to put digital assets out of it.

New technology often creates conflict. It plays out until a standard set of understandings sets in and people find legal ways to get what they want, said Peter Willsey, an intellectual property attorney who has worked on NFT cases at Brown Rudnick.

• Trademark law is relatively fixed, but NFTs test some of the principles. One notable lawsuit involves Yuga Labs, the creator of the popular Bored Ape Yacht Club NFTs, suing Ryder Ripps, who minted NFTs that essentially copy Bored Apes. Ripps has said he was “trolling” consumers. Yuga accused Ripps of trademark infringement.
• Ripps’ attempt to claim parody or satire as a defense will be balanced against his clear ability to make money from the work, according to legal experts. “He’s come up with these explanations that ‘I’m making social commentary,’ but he’s also claiming that he’s made over $3 million from this,” Willsey said.
• In another trademark case, Nike sued shoe retailer StockX in February for creating NFTs derived from Nike shoes. StockX says the “Vault” NFTs represent ownership of a product it stores for customers, saving them the trouble of finding space in a closet, and they can redeem the NFTs at any time to have the actual shoes shipped to them . Nike argued that there is trademark infringement, pointing out that buyers can sell the NFT without taking possession of the shoes.

Old contracts run into new problems. In another recent case, Miramax sued Quentin Tarantino in November for making NFTs of his “Pulp Fiction” screenplay.

• The studio claimed that the filmmaker did not have the rights to do so. Tarantino’s lawyers responded that the NFTs are derivative of the script, for which he retained the publishing rights. The original agreements between the parties were before NFTs existed, so the case will depend on how language granting “other” rights is interpreted, Willsey said.
• In at least one case, the parties reached an agreement. Jay-Z’s Roc-A-Fella Records sued co-owner Damon Dash, claiming he attempted to sell part of the copyright to Jay-Z’s “Reasonable Doubt” album as an NFT. Dash said he wasn’t trying to sell an NFT of the album, but rather his interest in the label. Last month, the parties settled, agreeing that Dash could sell his one-third stake in the record label, but could not sell any part of the album, which was corporate property.
• The notion of tokenizing the music industry’s royalty streams has some merit. Justin Blau, known as 3LAU when performing as a DJ, has started a company called Royal that aims to do just that. But Royal sets up deals with NFTs in mind from the start, not trying to graft them onto old contracts.

As these cases wind their way through the courts, there are likely to be debates about whether the laws need to be changed to take NFTs into account. Willsey doesn’t think they do, but some in the industry disagree. Change may come either way: In June, two senators asked the US Patent and Trademark and Copyright Offices a series of questions about whether NFTs required changes to laws and regulations, and those agencies recently agreed to conduct a study.

— Tomio Geron (e-mail | twitter)

A version of this story first appeared on Protocol.com. Read it here.

On the money

Stablecoin rules are coming. The leaders of the House Financial Services Committee hope to advance a bill introducing new stablecoin rules on July 27.