Recently recognized in Variety's Dealmakers Impact Report 2021, Christopher O'Brien, a corporate and entertainment transactions partner and co-chair of Venable’s Blockchain and Digital Currencies Group, has been practicing at the intersection of crypto, entertainment, and the explosion of interest in NFTs. In this recent conversation, Chris discusses his involvement in the evolution of blockchain technology, some of the wild west aspects of the NFT trade, and how his team is protecting clients in this emerging marketplace.
Can you describe the types of deals you and your team typically work on and how you got involved in crypto?
Chris: My core practice is corporate transactions, with a focus on the entertainment and media space – that could mean representing actors, directors, production companies, or studios in connection with mergers and acquisitions, financings, joint ventures, and so on. I got into crypto about four years ago when a client wanted to bring the blockchain technology that underlies all of crypto into the digital advertising space. It was very early days for crypto, and I got to know the technology while helping this client; out of that experience I co-founded the blockchain and digital currencies group here at Venable. Initially most of the work we did was for clients in various industries who wanted to exploit the technology. But in 2021 and 2022, a lot of our work has become more entertainment focused.
We're certainly seeing a lot in the news about celebrities getting involved with the blockchain and more recently NFTs.
Well interestingly my two practice areas kind of converged with the emergence of NFTs or non-fungible tokens in general but especially in entertainment. NFTs hold a big allure for artists, athletes, and other celebrities, because they create the concept of digital scarcity. Before NFTs digital content has always meant ubiquity, not scarcity. Anyone can copy a song a billion times or listen to it without paying the artist or the studio, right? NFTs bring the possibility of digital scarcity into the picture, and that's why they're exploding right now.
So NFTs are essentially another way of monetizing digital content?
Yes. Let's say, for example, that a 5-second clip of a famous moment in a championship basketball game gets minted by the creator of the content as an NFT. Now, there is a digital file with the 5-second clip of a player making a winning shot, and whoever purchases that file will then receive a certificate of authenticity that will sit on the blockchain. Now you might say, "Well, anybody can still watch that 5-second clip on YouTube," which is true. But that certificate of authenticity from the creator comes with showing ownership and provenance on the blockchain, allowing the file or NFT to be transferred as a unique thing. So, for artists or creators, NFTs provide another brand extension opportunity, one that can be very lucrative.
As the NFT market is a new area, with an intangible quality, do the usual intellectual property laws apply, or are lawyers like you having to forge new paths with these types of deals?
Well, it's both, really. The laws of intellectual property didn't go out the window because we're talking about a new technology. But how they apply to this particular intellectual property isn't necessarily clear, and this is already giving rise to disputes. One famous example involves the filmmaker Quentin Tarantino, who was sued by the production studio when he released some NFTs based on his film Pulp Fiction. The studio's argument is that they own the picture and so he doesn't have the rights to turn clips into NFTs and sell them. So now they're in a legal dispute.
So how do you protect clients who are embarking on NFT deals?
This is an emerging marketplace without standards. But to a certain extent lawyers like us are creating a standard through the contracts we draw up, because we understand the concepts at play. When we represent an artist or anybody in the chain, we're very intentional about the wording of the underlying contract. But what we do when we limit the rights isn't necessarily what everyone else is doing. There's a lot of "cowboyism" out there, and a lack of clarity. What we bring to it is an understanding of the intellectual property laws and principles and the ability to draft agreements that protect our clients and mitigate the risk of lawsuits.
A lot of the content that is being turned into NFTs now is governed by contracts that were drawn up before NFTs existed. How do you protect clients retroactively?
Well, again, it's a question of the contract language, right? Everybody at the studios and the creators are furiously going back to their agreements and asking, "Was this covered?" or "How could it be covered?" since the word NFT didn't exist. Typically, there is license grant language in contracts referring to exploitation of the work "in any medium now known or hereafter created." That means there is a catchall that is supposed to cover new media. So, say an artist produced an album back in the days when there was only vinyl. Whatever rights they have to the work should flow through to CDs and Spotify and beyond. A well-drafted agreement should cover any and all unknown future technologies. That's for old works. For new, original works it's a blank page. And, in the NFT world right now, a lot of the contracts are not sufficiently protecting the creators or artists because it's a wild west atmosphere where people are making tons of money and not slowing down to pay attention to the legal niceties.
So how do you rein in that wild west atmosphere?
We're in the very early days of this technology, and I think it's going to evolve in ways that can't be predicted at the moment. But a client who comes to Venable is going to be better protected and is going to do better in the marketplace because they will have somebody who understands intellectual property law and contracts and knows how to protect their interests.
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