Creative Works Become Blockchain NFTs, Lawsuit Rules in Copyright

In March 2021, Artnet News reported that Beeple’s $69 million sale of a non-fungible token (“NFT”) artwork at Christie’s was the highest on record to date. For those who hadn’t been paying attention, the sale was a head-turning event.

Dash, Jay-Z, and A Lesson in Copyright

NFTs are digital assets on the blockchain with unique identification codes and metadata that distinguish them from each other. NFTs can be used to represent real-world tangible assets such as creative works. But when NFTs represent original creative works, can just anyone tokenize them? The answer is a resounding no.

A federal lawsuit filed on June 18, 2021, pits Roc-A-Fella Records, Inc., (“RAF”) against Damon Dash. RAF is owned in equal parts by Shawn Carter, a/k/a Jay-Z, Kareem Burke, and Dash. On June 23, the Court entered a temporary restraining order enjoining Dash from selling an NFT of Jay-Z’s Reasonable Doubt album. Dash claimed to be selling his one-third interest in RAF via the NFT sale. And here’s where Dash got it wrong. Simply because he owned a one-third interest in RAF does not mean Dash owned a joint interest in the copyright in the master recordings comprising the Reasonable Doubt album.

Rather, the 1995 master recording agreement between Jay-Z and RAF clearly specifies that RAF commissioned the master recordings for Reasonable Doubt as works made for hire, with copyright ownership and authorship in the name of the commissioning party, RAF, according to the Complaint in the case. Therefore, copyright in the masters is owned by RAF, not by one or more of its individual owners.

Tokenizing Creative Works

Dash’s mistake was in failing to understand that he could not tokenize a creative work protected under the copyright law if he were not the owner of copyright in the work. The lesson: be aware of the copyright status of creative works before you attempt to exploit them by tokenizing them and selling them as an NFT. If you are not aware, you just may end up in court.