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

Introduction
NIL challenges
Copyright Challenges
Trademark challenges
Comment

Introduction

Given the recent rise in popularity and profitability of non-fungible tokens (NFTs), celebrities have entered the market not only by buying NFTs, but also by minting their own. But because NFTs often involve the intersection of multiple layers of IP rights, celebrity NFT projects present a number of potential pitfalls. In particular, these NFT projects often involve trademark, copyright and name, image and likeness (NIL) rights.

The rise of NFTs has expanded the licensing landscape for athletes and celebrities alike. An NFT is a non-fungible 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 NFT platform Sorare. This broke the record for the highest priced football card ever sold, physically or digitally.

While the owner of an NFT has the right to use and own the NFT, the IP rights in the work remain with the respective property rights owners. Because NFTs can simultaneously incorporate multiple types of intellectual property rights, such as copyright, trademarks, and NIL, it is important to determine ownership of each before striking out an NFT.

Therefore, companies looking to join the proverbial gold rush to monetize NFTs in new ways must ensure that their new ventures comply with IP law. This article presents several ways that problems can arise for those looking to make money from NFTs, especially those involving celebrities.

NIL challenges

In January 2022, rapper Lil Yachty filed a trademark infringement lawsuit against Opulous and Dito Music for “maliciously” using his name, trademark and image to raise over $6.5 million in venture capital funding. 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. In essence, the complaint alleged that Opulous had not obtained licenses to trademarks, copyrights and NIL rights on the NFT platform. The ads included a picture of the rapper and his name, and indicated that his music would be for sale as part of the NFT drops. While Lil Yachty admitted he had spoken to the company about a potential collaboration, the rapper said ultimately no deals were 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 digitizes licensed clips from the NBA and turns them into a limited number of NFTs advertised as “Moments.” Such licensing agreements require companies like Dapper Labs to enter into dual agreements with the NBA and the National Basketball Players Association. However, some popular players have influence. 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 negotiate for a larger percentage of sales for any product using NIL.

Copyright Challenges

Entertainment company Miramax filed a copyright infringement lawsuit 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 retaining a limited set of reserved rights for himself in an original copyright agreement. Miramax took the position that Tarantino’s limited reserved rights did not give him the ability to unilaterally produce, market and sell Pulp Fiction NFTs, because they infringed on Miramax’s broader exclusive rights in the film. In response, lawyers for Tarantino argued that Miramax had wrongly assumed that an assignment of copyright to a film includes the underlying script of the film. On July 15, 2022, Tarantino’s motion for judgment on the pleadings—which, if granted, would dismiss the claims against Tarantino—was taken up by the court without oral argument.

Trademark challenges

While the National Collegiate Athletic Association allows student-athletes to earn their NIL through opportunities such as marketing partnerships and media appearances, individual schools may have their own policies that prohibit student-athletes from using their school’s 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 made to appear more generic.

Comment

The popularity of NFTs has increased the attention of both celebrities and businesses looking to market their association with such digital assets. With this technological innovation, celebrities and athletes alike have a new opportunity to leverage their name and image and would like to exercise that freedom through creative means such as NFTs. Yet, while the playing field may change, the rules remain the same. Anyone entering NFT’s business must continue to assess which IP rights are necessary to make a potential project possible.

For additional information on this topic, 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] 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.