Two articles from Volume 1 of the INTERNATIONAL JOURNAL OF BLOCKCHAIN LAW
Thoughts on Volume 1 of the IJBL
Some thoughts on LEGAL DISPUTES INVOLVING DAOS CREATE NOVEL ISSUES FOR LAWYERS by Andrew Hinkes and NON-FUNGIBLE TOKENS (NFTS): ARE THEY A WAY FOR CELEBRITIES TO ‘RECLAIM’ THEIR IMAGE? by Ciara Cullen, Alessandro Cerri, and Sophie Parkinson. These two articles appeared in Volume 1 of the International Journal of Blockchain Law by the Global Blockchain Business Council.
You can find Volume 1 here or in the embed at the end of this post.
LEGAL DISPUTES INVOLVING DAOS CREATE NOVEL ISSUES FOR LAWYERS
Some legal issues with DAOs mentioned in the article include:
- Can a DAO comply with a court order to turn over assets to a trustee or receiver if the assets are controlled by a smart contract?;
- Should a court consider code transparency (i.e., is the software open source?) in it’s analysis whether the plaintiff has been aggrieved?; and
- Is the DAO a legally addressable entity?
You can find some snippets from the article below.
There are structural differences in the way that assets controlled by smart contracts are to be handled versus digital assets controlled by legally addressable entities. So, if the code takes control over a digital asset and will only give up control over the digital asset under a certain set of circumstances, and a court orders that the asset be turned over, there isn’t really a legal person that can effectuate that. Nor can a court order a smart contact to have the code rewritten. Contrast that, for instance to a bank that holds specific assets. The court can send an order to the bank and require the banks to turn over specific assets to a receiver or trustee
The result is that certain court remedies may or may not be available to be implemented against digital assets controlled by smart contracts. You might only be able to have ex post or ex ante remedies as opposed to remedies that affect digital assets while they’re in the process of being transacted with
The next consideration is to what extent the court’s analysis is informed by code transparency. That is, to what extent does the fact that code is open for all to see inform the court’s judgment on whether the plaintiff has been aggrieved.
When you think about DAOs, the first question
that comes to mind is whether the defendant is a legally addressable
entity.The question of who can be held to be a representative of a DAO raises interesting questions. Imagine that a DAO requires a token for their governance. Could anybody who holds a token be an agent that could be sued? Hypothetically, could a plaintiff serve a crypto exchange and allege that, because the exchange
owns tokens or holds tokens for third parties, it is acting on behalf of a decentralized organization? That could lead to an absurd outcome.
NON-FUNGIBLE TOKENS (NFTS): ARE THEY A WAY FOR CELEBRITIES TO ‘RECLAIM’ THEIR IMAGE?
Interesting article noting the intellectual property (primarily copyright) implications that arise with Non-fungible Tokens (NFTs).
The authors go over some of the issues I previously mentioned in Legal Issues with Copyrightable NFTs concerning the differences between JPEG-linked NFTs and Generative Art NFTs. I think the one thing I glossed over that is mentioned here is that for JPEG-linked NFTs, the link to the file is hosted on a third party server (can be federated, distributed, or corporate), which can be manipulated without any changes being recorded on the blockchain. For these type of situations, I recommend that the NFT is stored on a decentralized data storage network such as the InterPlantery File System (IPFS), via a service like NFT.storage, or arweave. I also liked how the authors discussed the right to publicity can be another means to protect the underlying work if copyright is not available.
Though, not mentioned very much in the article, another issue to watch out for are trademark implications if a company’s brand or logo is mentioned in the work offered as an NFT.
As mentioned in the article, some things to watch out for include:
- Does the individual or group offering the NFT for sale has an assignment or license from the underlying work’s creator?
- Does the individual or group offering the NFT for sale have a rights clearance with any person shown or referred to in the underlying work?
- Does the individual or group offering the NFT for sale have permission to use the company’s brand or logo shown or referenced in the underlying work?
You can find some snippets from the article below.
Ultimately, it will be important for NFT creators to ensure that they
obtain the necessary rights from the underlying work’s creator — for example
by obtaining a licence or assignment from the photographer (in the case of
a photo NFT) or artist to use the photo/artwork for the purposes of the NFT, as
without this they will likely be infringing the creator’s copyright.Whereas some argue that the use of one’s own images ought to fall within the fair dealing exception (fair use in the USA), which may protect a user from an infringement of copyright claim, this exception only applies in the UK in a small number of specific (and largely non-commercial) uses, such as research, private study, criticism or review, or parody or pastiche. However, the safest course is always to obtain an assignment or licence from the copyright owner. On the other hand, if the image in an NFT features a person’s name or likeness (such as the photograph of a celebrity) the person in question may have recourse under the package of rights loosely referred to in English law as “image rights”. These are rooted in a number of legal regimes, including the law of privacy and data protection, and some jurisdictions such as the US even recognise a specific “right of publicity”. Again, where an individual is featured in an NFT photograph, it would be prudent to seek that individual’s consent, as well as the photographer’s (or copyright owner’s, if different).
Unfortunately, the use of blockchain technology cannot act as a complete safety net for authenticating an underlying asset. This is because digital assets may not be directly attached to the blockchain, which is often an expensive and cumbersome process. Instead, the blockchain token may only contain a link to the file that is hosted on a third-party website. Although any changes to the link itself will show up on the blockchain, if an artist (or hacker) alters the page being linked to or the host server, the NFT may no longer direct the viewer to the original asset.
Disclaimer: This content is provided for informational purposes only, and should not be relied upon as legal, business, investment, or tax advice. You should consult your own advisers as to those matters. References to any securities or digital assets are for illustrative purposes only, and do not constitute an investment recommendation or offer to provide investment advisory services.
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