NFT and right of publicity: legal risk assessment | Latham & Watkins LLP

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NFT creators should develop strategies to avoid minting or auctioning NFTs that use an individual’s likeness without their consent.

As non-fungible tokens (NFTs) grow in popularity, the so-called common law “right of publicity” may create additional legal risks for NFT makers. The common law right of publicity prevents commercial exploitation of an individual’s identity without consent.[1] Most US states have defined a right of publicity and therefore a standard tort for violation of that right – often referred to as a tort of appropriation.

Although the law is similar in most US jurisdictions, California – the heart of the entertainment industry – has a particularly well-developed authority in this area. For this reason, this blog post focuses on California law by outlining the unique issues that NFTs can present.

Fund

Over the past few years, NFTs have become an increasingly popular way to collect and sell artwork, digital memorabilia, and game items. Stored on the Ethereum blockchain, NFTs offer a degree of transparency and of verifiability that even many works of art lack. However, as NFTs become mainstream, they raise new legal questions, such as intellectual property rights implications, whether they constitute title under federal law, and to what extent they create liability risks. tort under state law.

California law and public figures

In California, a plaintiff can prevail over a right of publicity claim by proving four things: (1) the defendant’s use of the plaintiff’s identity; (2) appropriation of Plaintiff’s name or likeness for Defendant’s benefit, commercially or otherwise; (3) lack of consent of the applicant; and (4) resulting injury.[2] Protected aspects of one’s “identity” include a person’s name, image and voice.[3] The right of publicity essentially aims to protect the right of ownership that people have in their own images.[4]

While in theory any individual could assert an action in violation of his image rights, such actions are often brought by personalities and celebrities whose portraits have been marketed without their consent.

In this respect, the right of publicity is particularly relevant for NFTs bearing the image of public figures. Such NFTs are not uncommon. For example, the creators created NFTs depicting Kurt Cobain’s “The Last Session” photoshoot and featuring YouTube celebrity Logan Paul on a Pokémon card. But little has been written about the legal implications of NFT minting with respect to publicity rights. NFT creators should consider this issue in developing strategies to avoid minting or auctioning NFTs that use an individual’s likeness without their consent and to the benefit of the creator or seller. The consequences of abandoning a sound strategy of risk avoidance could be significant: the remedies for violation of the right of publicity are broad, including compensatory and punitive damages, statutory damages and equitable remedies such as as the return of profits.[5]

Lessons from Comedy III Productions

The 2001 California Supreme Court case Comedy III Productions, Inc. v. Gary Saderup, Inc.[6] highlights the contours of how a right of publicity claim might be analyzed in NFT-specific contexts. There, an artist (Gary Saderup) had created designs of celebrities which he then reproduced on T-shirts, including the famous comedy trio The Three Stooges.[7] The owner of the rights to the Three Stooges act filed a lawsuit, alleging that Saderup violated his right of publicity.[8] The trial court ultimately granted judgment against Saderup for $75,000, attorneys’ fees totaling $150,000, and a permanent injunction restraining Saderup from using the Three Stooges’ likeness on T-shirts and other work. that he could sell or market.[9] On appeal, the California Supreme Court upheld the trial court’s verdict that Saderup violated the plaintiff’s right of publicity. The court said that Saderup’s artistic skill “is clearly subordinate to the overall objective of creating literal and conventional representations of the Three Stooges in order to exploit their fame” and that “the marketability and economic value of the work of Saderup stem mainly from the fame of the celebrities depicted.[10] Essentially, the court found no defense to Saderup’s efforts to cash in on the likeness of the Three Stooges.

The right of publicity could be considered by the courts to apply to NFTs in the same way as it applies to T-shirts. NFTs associated with “literal” (i.e. photorealistic) representations of an individual for commercial purposes could be challenged if they were not created with that individual’s consent (or the consent of whoever owns the rights to that person’s likeness). Indeed, California has applied tort liability to everything from greeting cards to lithographs and T-shirts. The medium of the infringing work is not decisive.[11]

Additionally, while there are risks associated with minting NFTs given state-by-state advertising laws, the right to publicity is not so broad that any depicting an individual without their consent is prohibited. The creators of NFTs can raise defenses, if the facts are proven, in the event of a challenge to a sale of NFTs. For example, under the right of publicity, creators frequently claim that their work is “transformative” and therefore protected by the First Amendment.

Gary Saderup made this argument, saying his performances of the Three Stooges were “protected speech” under the First Amendment.[12] However, the California Supreme Court carefully considered the defense.[13] According to the court, “[d]celebrity epics amounting to little more than the appropriation of the economic value of celebrity are not protected expression under the First Amendment”, but sufficiently transformative works (i.e. works that comment on or creatively transform the original) can be.[14]

Risks of litigation and viral images

All creators generally face the risk of litigation using the likeness of prominent figures – including striking NFTs – without consent. In 2010, Paris Hilton filed a publicity lawsuit against Hallmark Cards,[15] who created a birthday card featuring Hilton (with a picture of her head and a cartoon body) as a waitress and claiming her catchphrase: “It’s hot.”[16] The card, Hilton argued, depicted a scene from her TV series simple life, in which she worked as a waitress.[17] The Ninth Circuit determined that, although Hallmark Cards could argue that its use of the card was shielded from First Amendment speech because the card was transformative, Hilton could prevail on a publicity right claim.[18] Today, the analysis could be similar if, instead of a birthday card, the same representation of Hilton had been created via an NFT.

The risk of liability for violation of an individual’s right of publicity is pronounced with respect to NFTs, which can be created by anyone – no legal expertise required. And the NFTs that tend to grab the headlines are often the ones that seem like they took little effort to create but sold for a mind-boggling profit, like an NFT of a widely shared Nyan Cat GIF. Entrepreneurs may be tempted to associate an existing image of an individual with an NFT as a quick way to make money, especially because viral images are popular choices for NFTs. Viral image NFTs are almost poetic in a way – a kind of meta-commentary on the internet’s insatiable appetite for monetizing the hip and the absurd. However, creating NFTs associated with an individual’s likeness without that person’s consent can open the door to a host of legal issues, including liability for violation of the right of publicity. The democratized nature of NFTs is both their promise and their complication; the low barrier to entry can facilitate more variety and creativity, but also exposes creators to risk.

Take away food

As NFTs continue to assert themselves as traditional investments in fine art and memorabilia, NFT coiners should be aware of the legal exposure that can arise from using an individual’s likeness without sound. consent. Even those who own a copyright in the NFT and an underlying work are not completely immune from legal liability, especially at the state level. Although the protections under copyright law and the right of publicity overlap, they are not coextensive. Thus, NFT coiners should pay particular attention to how their work may expose them to liability for violation of the right of publicity.

Endnotes

[1] Hilton Cards vs. Hallmark, 599 F.3d 894, 910 (9th Cir. 2010).

[2] Kieu Hoang vs. Phong Minh Tran, 60 Cal. App. 5th 513, 538 (2021).

[3] Intellectual Property and Technology Practice Law, Publicity Law: Overview, Practice Law Practice Notes Overview 2-505-8377.

[4] California Civil Code Section 3344 states: “Anyone who knowingly uses another’s name, voice, signature, photograph, or likeness in any manner on or in products, merchandise or property, or for the purpose of advertising or selling”, without prior consent of the person, is liable for damages. Cal. Civil. Code § 3344(a).

[5] See Hon. Kimberly A. Gaab & Sara Church Reese, CA. Practice Guide, “Civil Procedure Before Trial: Claims and Defences”, chap. 4 (VII)-E (The Rutter Group 2020). Additionally, while courts often focus on commercial or economic benefit in assessing damages, a litigant may prove a violation of the right of publicity even in the absence of any economic or pecuniary benefit obtained by the alleged infringer. .

[6] 25 Cal. 4th 387 (2001).

[7] Identifier. at 393.

[8] Identifier.

[9] Identifier. at 393-94.

[10] Identifier. at 409.

[11] California Civil Code Section 3344 excludes certain categories of media to which the right of publicity does not apply, but this list is narrow and does not textually exempt blockchain-generated content such as NFTs. Cal. Civil. Code § 3344(f).

[12] Comedy III, 25 Cal. at 396.

[13] Identifier. at 396-97.

[14] Identifier. at 400, 404.

[15] 599 F.3d 894.

[16] Identifier. at 899.

[17] Identifier. at 905.

[18] Identifier. at 911.

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