Lawyer Monthly - November 2021 Edition

Addison Liu Attorney, Film & Ink Law Group 1100 Glendon Avenue, 17th Floor, Los Angeles, CA 90024 Tel: +1 310-689-7291 E: addison.liu@filmandink.com www.filmandink.com Addison Liu represents a wide range of clients in music, art and entertainment with a focus on production and music agreements for feature film, television, and digital productions. He routinely provides legal advice on content distribution and intellectual property licensing strategies for new emerging technologies. In addition, he has experience in a wide range of marketing and advertising issues relating to music, art and design. Besides his legal practice, he is also the co-founder of HVW8 Art + Design Gallery with locations in Los Angeles and Berlin. Film & Ink is a law firm that focuses on guiding clients through the integration of media with technology, representing both established studios and streaming services on live action and animated projects for television, theatrical, and digital platforms. Founded in 2005, the firm also provides general counsel services to growing companies on day- to-day legal matters such as contract review and negotiation, employment issues, regulatory compliance, and marketing issues in both traditional and digital formats. 72 WWW.LAWYER-MONTHLY.COM | NOV 2021 INTELLECTUAL PROPERTY - WHAT IP CHALLENGES DO NFTS FACE? royalties as originally intended across all NFT platforms and marketplaces. To what extent are NFTs susceptible to “copyfraud” or “copycats”? This is one of the biggest challenges in the NFT space today. The enforcement of IP rights is inevitable and will likely be shaped by future legal challenges in the space. We havealready seensigns of thiswithoneof the biggest blue-chip NFT projects, CryptoPunks (10,000 pixel art characters with over $1 billion in total trading sales volume). Larva Labs, the creator of CryptoPunks, sent a takedown notice under the Digital Millennium Copyright Act to OpenSea (the largest NFT marketplace platform) regarding PolygonPunks, a copycat project on the Polygon “Layer 2” sidechain. After an initial removal of the project by OpenSea, the project was re-listed several weeks later and available again for trading. So far, it does not appear that Larva Labs has filed an infringement claim against PolygonPunks. OpenSea attempts to help buyers identify official NFT projects with a “checkmark”. However, buyers may still encounter unauthorised and infringing collections side by side with the official collection, and it is up to the buyer to conduct adequate diligence before buying. OpenSea’s terms and conditions make it clear that despite the official-looking checkmarks, it does not actually verify the identify, legitimacy or authenticity of any NFT sold on its platform. It appears that courts will need to eventually step in to settle many of these IP disputes that are already present in the space. However, issues from proper jurisdiction to simply identifying the responsible party may present obstacles for formal legal claims. What developments do you expect to see in this area of intellectual property, from both a business and a regulatory point of view? A growing trend in the NFT space is the emergence of decentralised autonomous organisations (DAOs). An oversimplified definition is that DAOs are online communities that share a bank account (typically through some kind of multi- signature electronic wallet) and allow community members to collectively govern and pool their resources (financial and labour) together towards a common purpose. DAOshave sprungup tocollectively buy high-priced NFTs or to fractionalise ownership of NFTs, ranging from digital assets to real-world assets. PleasrDAO’s recent acquisition of the Wu-Tang Clan album “Once Upon A Time In Shaolin” provides collective ownership of the physical one-of-a-kind album represented by NFTs for each of its members. These evolving community models will impact businesses dealing with intellectual property rights and the traditional corporate structure, but may also draw scrutiny from securities regulators. Blockchain technology and NFTs have enabled creators to capture value in a way that was not previously possible. This will create paradigm shifts in many creative industries, including for example the music industry, where there is currently a large gap between the value capture of fan community support and artist monetisation. NFTs are changing the dynamics of the value of IP rights, the relationship between creators and their communities, and enabling the creation of wealth in unexpected and non- traditional ways. The enforcement of IP rights is inevitable and will likely be shaped by future legal challenges in the space.