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Non-fungible tokens (NFTs): are they a way for celebrities to 'reclaim' their image? And what happens to the IP?

06 August 2021. Published by Ciara Cullen, Partner and Alessandro Cerri, Senior Associate

Non fungible tokens, unique blockchain-backed certificates of authentication, can monetise digital assets, or in some instances help to 'reclaim' one's image – but it's not one NFT- fits-all for IP rights.

What is an NFT?

By now, most people in the art world, at least, have heard of non-fungible tokens (NFTs). NFTs are a certificate of title of the most original version of a digital asset, minted (certified) by blockchain. Blockchain, a digital ledger, provides a transparent trail of activity. The digital asset is tied to a blockchain location (the token). This uniquely identifies the digital asset and provides it with a non-fungible authenticity certificate (here, non-fungible means unique). 

A copy of the original NFT would not have the same blockchain details (or certificate) so would be recognisable as a fake. Digital art and other items can be backed by an NFT, ranging from animations, songs and videos to virtual handbags (Gucci) and racehorses (Zed Run, beer brand Stella Artois' virtual horseracing collaboration). Insightful actors, artists and creators are using NFTs to protect their digital property, with creatives like Emily Ratajkowski taking it to the next level – using NFTs to protect and monetise their own image. 

What happens to the IP rights in NFTs?

Digital assets only have value in their intellectual property (IP) as there is no tangible property; assets can be infinitely copied, replicated and forwarded (e.g. by downloading and saving an image with a new name). NFTs and the underlying agreements can protect the IP rights in digital assets – preventing NFT buyers from monetising and licensing the digital asset without permission. Unless ownership rights or use-permissions are granted, the copyright in the NFT-backed asset is not transferred to the buyer, and the agreement merely provides a licence to display the digital asset or artwork.

There can be multiple levels to copyright protections afforded in a single digital artwork. Emily Ratajkowski recently sold, for $140,000, an NFT of a photograph of herself standing next to a re-claimed Instagram photograph of herself from a Sports Illustrated shoot in 2014. 

Potential copyright protections may have been afforded to the original owners/authors of the first (and second) photograph, including Sports Illustrated and/or its photographer, and Richard Prince (who used the original photo and Instagram screenshot in his own "New Portraits" series). The story of how Ratajkowski had previously purchased the "New Portraits" canvas from Prince was detailed in her first published essay in The Cut in 2020. 

Photographers with rights to licence their photos have regularly challenged their muses over copyright infringement for re-posting on Instagram. Ratajkowski is one of many public facing individuals to have been challenged for re-posting pictures of themselves online. Ariana Grande, Gigi Hadid, Khloé Kardashian and Jenifer Lopez have all faced copyright infringement actions when re-posting pictures of themselves on Instagram. NFTs have provided an opportunity for such celebrities to 're-claim' their images. 

Protecting and purchasing (IP) rights

To protect the creator or rights-holder of the underlying work in an NFT, the purchase agreement should clearly outline the rights which it is intended that the buyer should obtain (e.g. whether the buyer should be permitted to copy, edit, adapt or distribute that work).  The terms governing an NFT are often set out in digital "smart contracts" which are written in code and embedded within the token itself, meaning that they should operate automatically, based on certain pre-defined triggers (for example, making any royalty payments automatically upon an onward sale of the NFT). Some NFT marketplaces have standard terms of sale, whereas others allow sellers to determine the terms in the relevant smart contract. It is worth noting however that the legal status of smart contracts is yet to be tested by the courts!  

Further protections which may be useful include indemnifying the rights-holder against any unauthorised use or breach. Royalty clauses can ensure the creator or rights-holder receives payment for any licensed activities, sub-licensing or onward transfers. 

For onward sales, would-be sellers should ensure they have all the rights necessary to transfer ownership. If a digital asset-creator has entered a robust agreement with no reserved rights and all the image rights cleared and moral rights waived, there should be little issue with selling the rights to an artwork-based NFT. For a video-form or music-based NFT, a seller will need to ensure that all underlying rights were cleared when the NFT was created, including composition/recording rights in music, the chain of title in films, as well as permissions from any actors/performers involved to use their likeness or performance. It is worth noting that film marketing and ancillary content rights often remain with the distributor.

Caution must be taken to avoid misleading advertising regarding the sale of the digital asset or artwork. Potential buyers should be notified where the digital authentication certificate alone is being sold – as opposed to the rights in and to use the underlying work. Increasing advertising, financial and tax regulation is likely and must be carefully navigated alongside consumer protection law (NFTs can be bought by the public!).

Comments

Having been faced with a copyright infringement lawsuit for posting an image of herself on Instagram, it is no surprise that Emily Ratajkowski was one of the celebrities who harnessed the power of NFTs to reclaim her image. 

When we spoke to Ellie Heisler (partner and Entertainment group lead at Nixon Peabody, a fellow TerraLex member) who advised Emily Ratajkowski on the legal aspects of her NFT, she remarked: "this digital marketplace allows creators to participate in the exploitation of their name, image and likeness on a perpetual basis, giving them proper credit and consideration". 

Unsurprisingly, other actors, artists and creatives have followed suit. Lindsey Lohan has also sold an NFT portrait containing the word Lightning, and "Lullaby" an NFT music single. Snoop Dogg, Damien Hirst, Kings of Leon, Grimes and John Cleese have also taken advantage of NFTs to protect their digital property. We will likely see more involvement from innovative companies like AB InBev (the owners of various brands including Stella Artois), looking to keep up with ever increasing digitalisation and the movement towards a virtual economy.