NFTs in the music industry and your intellectual property

The recent notoriety of HitPiece’s website positioning itself as a new platform for trading music-related NFTs has sparked outrage from artists and labels in the music industry, who have claimed that the organization was using their music, artwork, and branding without permission.

Hitpiece claimed that: “Each Hitpiece NFT is one of the NFTs for each unique song recording.”

HitPiece’s intent and actions are unclear, especially since their website has since been shut down and now contains only the wording “We have started the conversation and we are listening”, however, he highlighted a number of factors regarding an artist’s intellectual property rights and how they should be protected.

In this article, Alice Minza-Clark explores what an NFT is, what artists’ rights are, and what they can do to effectively manage the protection of their intellectual property rights to their songs and brand when they sing. engage in NFT trading.

What is an NFT?

NFT, stands for “non-fungible token”, and is a digital asset that represents the value of a single “real” item. It is described as ‘non-fungible’ as the token is not interchangeable, unlike other assets such as cash, where for example no matter which pound sterling you use they always have the same value and can be used for the same purpose.

Generally speaking, an NFT relates to a work or asset (for example, when music is tied to a song or album, merchandise or artwork tied to an album). However, some artists have created or “minted” a limited number of NFTs derived from the same work, where each token has its own unique identifying code and is held separately.

Artists also now combine the sale of the NFT with an offer of a physical item such as limited-edition merchandise or vinyl. Kings of Leon Reportedly Earned Around $2 Million from NFT Sales Related to Their Album When you see yourself (over $500,000 of which was donated to Live Nation’s Crew Nation Fund), which combined the tokens with real merchandise such as vinyl records and album covers. By attaching a physical asset to the sale, the buyer is able to receive a more tangible benefit to help them appreciate the value of the purchase.

Ownership of Music Artists and NFTs

A central problem with NFTs in the music industry is that the music ownership system is very complex. Many different people or entities may be entitled to royalties or own a particular share of a track. Music and lyrics are copyrighted. Copyright protects an original work once it is recorded in a permanent form and prevents third parties from doing certain prohibited acts in connection with the copyrighted work (including copying) without permission of the copyright owner. The first copyright holder is generally the creator unless otherwise agreed.

Also, songs usually have two main copyrights. First for the composition (composition copyright), and second for the specific recording of the song that is released (master copyright). Master copyright often belongs to a record company and/or the recording artist, and composition rights often belong to the songwriter or publisher. If an artist has signed with a record company, they cannot own the copyright to their music. First of all, it is therefore essential that artists can recognize their property rights in music, before offering to sell rights to it.

Without any assignment or transfer of intellectual property rights, the buyer of the NFT may only own a license to use the music, and in fact acquire no real property rights in the music, only on the NFT itself.

The need to put in place an agreement at the point of sale of an NFT is therefore essential to ensure that the ownership of any intellectual property rights between an artist and their musical performance and the buyer is clearly defined and that the conditions of sale and purchase are agreed in advance. Existing contracts that are already in place regarding music ownership will also be crucial in determining how the deal is written and what (if anything) can be sold.

The contract

The terms of the NFT sales agreement will be key in establishing what the potential buyer is buying and if any rights are attached to it.

We’ve noted some of the key aspects (among others) of the contract that you may want to consider:

  • Who owns the rights to the music?
  • What rights are sold to the buyer?
  • What is the value of NFT?
  • Alternatively, could the buyer purchase an NFT that holds a contract for certain rights to an interest in the revenue stream generated by the music recording, thereby being the owner of the applicable royalty payments?
  • If there are to be royalty payments, clearly indicate whether they relate to artist-specific royalties or all song royalties and if there are any restrictions on these ( such as a certain amount of time, or the song reaching a certain number of streams).
  • Does the contract align with existing agreements in place regarding an artist’s music?
  • What is the payment date of the NFT?

It is essential that the creator of the NFT fully understands the ownership rights to the music to which the NFT relates. As we’ve seen with the outraged response of artists and the music community to HitPiece’s moves, without such understanding misleading and false statements can lead to legal action.

Summary

Although not a new concept, the NFT market seems to be growing in popularity and apparently NFTs can provide another channel to promote music, build a fan base and potentially open up new sources. revenue, including new ways for unsigned artists to fund and sell music. However, NFTs and the digital market in general can be quite volatile, especially when it comes to an artist’s intellectual property and other legal rights.

Alice P. Darby