Copyright Ownership, Transfers, and NFTsMarch 14, 2022

Twitter recently went ablaze after Spice DAO, a decentralized autonomous organization, won an auction for 2.66 million euros (a little over $3 million USD) for an unpublished manuscript of Frank Herbert and Alejandro Jodorowsky’s never completed film Dune.

The viral reaction wasn’t due to the purchase of the manuscript, rather it occurred after the organization posted their “mission” to: 1. Make the book public (to the extent permitted by law) 2. Produce an original animated limited series inspired by the book and sell it to a streaming service 3. Support derivative projects from the community – the organization quickly received significant ridicule for their seemingly lack of understanding of copyright laws (this could of course all be a joke or internet prank).

https://twitter.com/TheSpiceDAO/status/1482404318347153413?s=20

The situation above illustrates a common copyright misconception regarding the transfer of copyright rights. We regularly hear similar statements in connection with the sale of NFTs (“Non Fungible Tokens”). It seems like every musician, artist, and even athletes are selling NFTs. NFTs are digital files with a unique identity that is verified on a blockchain. NFTs can represent a one-of-one “original,” such as a unique audio recording, video file, or other work of art. NFTs can also represent one of a fixed number of copies in a limited series. In theory, NFTs can represent almost any real or intangible property, including artwork, music, videos, collectibles, trading cards, or real estate. Ultimately an NFT is the digital version of a certificate of authenticity, embodied in the blockchain.

However, purchasing an NFT does not also give you the underlying exclusive copyright rights in the Work, unless those rights are expressly detailed and included in any purchase agreement.

Under 17 USC § 204(a), “a transfer of copyright ownership, other than by operation of law, is not valid unless an instrument of conveyance, or a note or memorandum of the transfer, is in writing and signed by the owner of the rights conveyed or such owner’s duly authorized agent.”

Thus, the only way to transfer ownership of a copyright, or any of the exclusive rights afforded to a copyright owner, including the right to reproduce, prepare derivatives, distribute copies, publicly perform, and publicly display, is to enter into a signed, written, agreement transferring those copyright rights.

If you are currently in the market for an NFT, a rare book, or any other work, it’s important to know what you are purchasing and what rights attach, or do not attach, to that specific purchase. There are significant factors to take into consideration when you purchase rare or digital works and in order to gain a thorough understanding of your rights, we recommend that you consult an attorney experienced with these issues prior to any such purchases.

Brandon W. Clark is the Chair of the Copyright, Entertainment & Media Law Practice Group at McKee, Voorhees & Sease, PLC. For additional information, please visit www.ipmvs.com or contact Brandon directly via email at brandon.clark@ipmvs.com.