December 12, 2024 • 19 mins
NFTs – or non-fungible tokens – have taken the digital world by storm – or perhaps just a downloadable picture of a storm – promising to revolutionize not only the way we perceive, protect, purchase, and own digital assets, but how we might even buy a house or other assets in the real world.
These unique digital certificates, recorded on a blockchain, exploded onto the scene in post-pandemic 2021 with record-breaking sales and widespread media coverage. One of the most amazing examples is "The Merge" by the anonymous artist Pak, which sold for a staggering $91.8 million.
The Bored Ape Yacht Club is another fascinating story. This collection of 10,000 unique, cartoonish apes, each with its own distinct features, became incredibly popular in 2021. Owning a Bored Ape would become a status symbol in the NFT community.
However, the meteoric rise of NFTs was followed by a significant downturn, leading many to question the future of NFTs. While the initial hype and astronomical prices may have subsided, the underlying technology and potential of NFTs remain promising.
For insights into this evolving landscape, listen to my conversation with Cameron Pick of Marshall Gerstein. An experienced expert in intellectual property law with a focus on emerging technologies, Cameron advises clients on a range of legal issues related to NFTs, blockchain, and cryptocurrency. He holds a J.D. from Duke University School of Law and a B.S. with honors in electrical engineering from the University of Illinois, Urbana-Champaign.
This podcast is the audio companion to the Journal on Emerging Issues in Litigation. The Journal is a collaborative project between HB Litigation Conferences and the Fastcase legal research family, which includes Full Court Press, Law Street Media, and Docket Alarm. The podcast itself is a joint effort between HB and our friends at Law Street Media. If you have comments or wish to participate in one our projects please drop me a note at Editor@LitigationConferences.com.
Tom Hagy
Litigation Enthusiast and
Host of the Emerging Litigation Podcast
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Tom Hagy (00:01):
Welcome to the Emerging Litigation Podcast.
This is a group project drivenby HB Litigation, now part of
Critical Legal Content and VLEXCompany's Fast Case and Law
Street Media.
I'm your host, tom Hagee,longtime litigation news editor
and publisher and currentlitigation enthusiast.
If you wish to reach me, pleasecheck the appropriate links in
(00:23):
the show notes.
This podcast is also acompanion to the Journal of
Emerging Issues and Litigation,for which I serve as
editor-in-chief, published byFastcase Full Court Press.
And now here's today's episode.
If you like what you hear,please give us a rating.
Nfts, or non-fungible tokensThey've taken the digital world
(00:47):
by storm, or maybe just adownloadable picture of a storm.
They promise to revolutionizethe way we perceive and own
digital assets.
As today's guest explains,these unique digital
certificates recorded on ablockchain have enabled artists,
musicians and collectors totokenize there's a new word
(01:13):
their creations and sell them aslimited edition digital assets.
I think a presidentialcandidate recently did that.
But what exactly are NFTs andwhy have they garnered so much
attention?
Well, in 2021, the NFT marketexploded, with record-breaking
sales and widespread mediacoverage.
One of the most iconic examplesis the merge by the anonymous
(01:34):
artist, pac.
I think I'm saying his name.
It could be Pac.
Anyway, it's P-A-K which soldfor brace yourself $91.8 million
.
That's almost twice what I makein hosting the Emerging
Litigation Podcast.
This digital artwork was soldto nearly 30,000 collectors on
(01:55):
the NFT marketplace NiftyGateway, for those of you
interested.
Each bought a piece of the NFT.
They merged them to increaseownership.
Another notable collection isCryptoPunks.
Who doesn't like that name?
That's a set of 10,000pixelated profile pictures.
Some of these digital avatarshave sold for millions of
dollars, with CryptoPunk number5822 fetching $23.7 million.
(02:20):
Not to be outdone.
Well, it was outdone, butCryptoPunk number 7523 sold for
$11.8 million.
What's in your wallet?
The Bored Ape Yacht Club isanother fascinating example.
This collection of 10,000unique cartoonish apes and who
doesn't love apes?
I know I do Each with its owndistinct features, became
(02:41):
incredibly popular in 2021.
Many celebrities andhigh-profile individuals
purchased these NFTs, whichoffer their owners exclusive
access to events, merchandiseand other perks.
Owning a Bored Ape has become astatus symbol in the NFT
community, and who doesn't needa status symbol?
I know I do.
However, the meteoric rise ofNFTs was followed by a
(03:03):
significant downturn.
The market value plummeted byover 90% since its peak in 2022,
leading many to question thefuture of NFTs.
But who knows, you know, maybethings can change.
While the initial hype inastronomical prices may have
subsided, the underlyingtechnology and potential of NFTs
remains promising.
See, I was watching somethingthe other day about a couple of
(03:26):
experts.
I think that was probably the1970s, and one guy was saying
how the internet.
That's just going to be apassing phase.
It's going to go out like CBradios for those of you old
enough to remember that breaker911.
I don't know what that means.
While the other expert wassaying imagine if they're all
(03:47):
connected, how we can talk toeach other through them and even
buy things.
So maybe that's where we arenow.
And speaking of humor, nobodywas.
Nft aficionados do have a senseof humor.
Their jokes come in the form,of course, of memes.
The website nfteveningcomposted some of its favorites
(04:13):
recently.
One shows the face of anextremely anguished and
disappointed grade school kid athis desk with the caption it's
career day.
And your dad walks in with hisNFT collection.
See, that's only something thatthe kids can find.
Anyway.
(04:33):
In another one, the first frameshows a mom and a dad gasping
in horror, as the wife says Ican't find them Still gasping.
The husband asks if she'sreferring to their NFTs.
No, she replies the kids.
She remains in anguish as thehusband exhales in relief.
Another meme shows a fatherwearing virtual reality goggles
(04:54):
and his son facing a blank wall.
The father says one day, son,this will all be yours.
The next frame shows a museumhall filled with digital
paintings, and there's a wholesub-thread of memes sub-memes I
don't know if that's a word, didI just make it up Called the
right-click save memes, whichare variations on why would I
(05:16):
pay X amount of money for thisJPEG when I could just
right-click and save it for free?
While amusing, these are basedon public perception more so
than reality, but you get thepoint.
The NFT market also facednumerous legal and regulatory
challenges.
Point the NFT market also facednumerous legal and regulatory
challenges, particularlyregarding the classification of
(05:37):
NFTs as securities.
The SEC has been activelyinvestigating NFT marketplaces,
including OpenSea, to determinewhether certain NFTs meet the
criteria of securities underwhat is known as the Howey test,
not How-we-test Howey as in youknow, a nickname for Howard the
Howey Test.
Additionally, nft marketplaceshave faced class actions, such
(05:59):
as one against OpenSea by userswho alleged that the platform
offered unregistered securitiesand misled users.
I read an article about that byour guest, cameron Pick, with
Marshall Gerstein.
He's an experienced expert inintellectual property law with a
focus on emerging technologies.
He advises clients on a widerange of legal issues related to
(06:19):
NFTs, blockchain andcryptocurrency.
Cryptocurrency is about to gethot, apparently.
That's what they're saying.
Cameron is a frequent speakerat industry conferences and has
published numerous articles.
Legal implications of digitalassets.
I'm laughing because I had tosay that four times to get it
right, because I made up a wordcalled implications.
What are the legal implications?
(06:41):
Okay, while earning his JDCameron, can I call you?
Cameron was a member of thePatent Law Society at Duke
University School of Law.
Before joining MarshallGerstein, he worked as a patent
extern US Patent and TrademarkOffice.
He has his JD from DukeUniversity School of Law and a
bachelor of science degree inengineering.
(07:02):
I'm doing that from memorybecause I apparently deleted it
from my script.
He has that degree fromUniversity of Illinois,
urbana-champaign.
You can read some of Cameron'sinteresting articles on his firm
bio page, which I've linked toin the show notes.
And now here's my interviewwith Cameron Pick of Marshall
(07:23):
Gerstein.
I hope you enjoy it.
Just a quick health note,though.
Sounds like I still had a coldwhen I did this one, so you'll
notice the change in my voice.
It's coming now.
Cameron Pick, thank you verymuch for talking with me about
this today.
Cameron Pick (07:39):
Thanks so much for having me.
Tom Hagy (07:42):
Let's give kind of a quick kind of basics about NFTs
for our listeners, who reallydon't understand what they are,
and I've only gotten a betterunderstanding of it by talking
to you.
So what are they and can yougive us some examples?
Cameron Pick (07:57):
The easiest way to think about it is that NFTs are
essentially a digital receiptor certificate of authenticity
that's recorded on a blockchain,so it gets all the benefits of
blockchain technology, whichmeans that it's decentralized
and it has the security andimmutability benefits and it's
(08:17):
protected by cryptography.
The essential idea behind NFTsis that they're a digital or
online receipt showing proof ofthe asset that you have, and
that asset can be many differentthings.
It can be digital art, sobefore people own physical art,
but there are a lot of onlineimages that could have value and
(08:38):
there just wasn't really agreat way to capture that value.
Nfts can be used for tickets.
Again, they're a digitalreceipt and it's a better way to
avoid counterfeiting.
They can also be used forbackstage passes or for fan
engagement for different artists.
And then they can also be usedas video game pieces.
So some video games are verypopular and they'll actually
(09:01):
sell different pieces in thegame, like a weapon or a castle
or a car, something like that.
But the game creator was alwaysin control of who could buy the
assets, what they'd be pricedat and whether or not someone
could transfer them on thesecondary market.
But by having this on ablockchain through NFTs.
(09:22):
The NFTs are available toanyone, so the creator is no
longer in control of these.
Another good example of the useof NFTs can be for real property
.
You can actually sell yourhouse through an NFT and that
can solve a lot of issuesrelated to title.
You can make it more liquid andit can allow for quick and easy
(09:44):
sales.
And you can actually break upNFTs and sell fractions, so it
can allow for people tospeculate on real estate that
they wouldn't have been able toin the past, where someone can
break their NFT up thatrepresents their property into
fractions, like, let's say, 1%,and other people can purchase
(10:07):
those and kind of speculate on ahome or on commercial real
estate.
Tom Hagy (10:12):
Can we talk about ownership rights?
So you talked about theunderlying assets a bit.
How can a creator of an NFTretain certain rights like
copyrights and others?
Cameron Pick (10:24):
So kind of the default is that the creator does
retain the copyright and otherIP rights, like trademark or any
patent rights.
But certain NFTs can have itbaked into them that when you do
transfer the NFT that youtransfer the copyright along
(10:45):
with it.
But that's not really thedefault.
The default is that when youbuy the NFT you would own the
asset.
So if I'm buying digital art, Iwould own that image and I'd
have the right to resell thatimage but I wouldn't necessarily
be able to reproduce that imageor make derivative works off of
(11:06):
it.
Tom Hagy (11:07):
How do you know, trace the authenticity or provenance
of NFTs?
How can the ownership beverified?
Cameron Pick (11:15):
So NFTs are verified on a blockchain, and
the blockchain is essentially apublic ledger.
There's a few differentblockchains I think the most
popular ones are Ethereum andthen Solana and this public
ledger is maintained bythousands of computers or nodes
that each store a copy of theblockchain, and so the way the
(11:38):
verification works is that ifeach of them store that copy and
have a consensus, essentiallythat you're the owner of the NFT
, then it's recorded in theledger and anybody can see it.
Tom Hagy (11:55):
It seems like, from what you're describing, that
it's pretty hard to counterfeitor to commit fraud here, but
like it's almost uncrackable butnothing is.
Are there additional securitymeasures you would recommend to
protect NFTs?
Cameron Pick (12:12):
So far, nobody's ever been able to change what's
stored in these publicblockchains.
No one's been able to hack ablockchain in a similar way that
people have hacked servers inthe past.
But the vulnerabilities aren'treally on the blockchain itself.
The vulnerabilities are on theusers that are maintaining these
(12:33):
.
The users have to maintaintheir keys and if anybody has
access to those keys, then theycan take the NFT, and there's no
way to really undo theoperations on a blockchain in a
similar way that a bank can undotransactions that are just
stored on their server.
(12:54):
So if someone tricks you,causes you to give them access
to their keys, they can stealthe NFT.
There wouldn't really be anyway to get them back.
Tom Hagy (13:04):
So it sounds like a lot of data breaches and things
like that.
It seems like the humans arethe vulnerability which leads to
kind of old school crime whereyou get people to sign things or
you scam them.
So old school criminals aregoing to have a future still
staying on intellectual propertyrights, how are they protected
in secondary market transactions?
Cameron Pick (13:25):
NFTs don't necessarily have to transfer
over IP rights but they can, andthere's certain examples of NFT
projects where they havetransferred them over.
One example is Bored Apes.
So Bored Apes is some projectwhere they sold different
cartoon images of apes.
That actually became verypopular.
(13:49):
It kind of went viral for a bitof a time, and when you
transferred the board ape itself, you also received the, the
copyright to do whatever youwant with it.
And I think actually seth greenwas going to make a tv show off
the board ape that that hebought because he had the
(14:10):
copyrights to it, but somethingwent wrong with that.
I don't think he ever ended upmaking that show.
But there are different ways totransfer the copyright with the
NFTs, and so Andreessen Horowitz, for example, proposed this
idea of can't be evil licensesthat can be tied with NFTs and
(14:32):
these licenses hand overdifferent rights.
There's essentially, I think,six different licenses with
different flavors of what typesof rights are being transferred
whether they're display rights,distribution rights, making
derivative works rights,distribution rights making
(14:53):
derivative works and users canpick and choose what they want
to be able to transfer and theninclude that in what's called a
smart contract, which sets outthe terms for the NFT and those
terms are stored on theblockchain.
So when the NFT is transferred,those terms are automatically
transferred and everyone can seeexactly what those terms are,
(15:15):
and then the can't be evillicenses.
Tom Hagy (15:17):
They are what they sound like.
Cameron Pick (15:18):
Yeah, so this came from Creative Commons licenses,
which are open source licensesthat were referred to as don't
be evil licenses, basicallyallowing people to have open
source access to differentsoftware, but in exchange that
they would attribute it to theoriginal creator or they would
(15:40):
follow the terms that thatcreator wanted to have them
follow.
This was changed to can't beevil for blockchain technology
because it's placed in code.
And because it's placed in code, someone can't ignore the terms
in the same way that they couldwith a physical contract.
Tom Hagy (16:02):
Is there anything else you would say about what should
be included in NFT contracts?
Cameron Pick (16:07):
I think it's just important to have the terms
included in the smart contractso that way it is on the
blockchain and it's not in somekind of private communication
that doesn't necessarily getfollowed through.
But having the terms in a smartcontract on the blockchain
(16:28):
keeps them on this ledgerforever.
Tom Hagy (16:32):
Can you talk a little bit about how these things are
valued and pricing?
How is that done?
Is that strictly kind of a freemarket issue?
Cameron Pick (16:39):
Yeah, it's a free market issue.
I think it's similar to tryingto value physical artwork, which
can be very difficult to do.
I mean, I know I don't reallyhave a good understanding of why
certain art is very valuableand others are not.
I think that's similar for NFTs.
It's just about how popularthey are when it comes to
(17:04):
digital art and how excitedpeople get about the project.
But then for things like if itis an NFT representing physical
property like a car or a houseor something like that, I would
think the values would just bethe same values.
Tom Hagy (17:20):
What can you tell people about the size of this
market?
This is big business andthere's some big players in it.
We had chatted before aboutrecent developments with OpenSea
.
What can you tell us about themarket size and what happened
with them?
Cameron Pick (17:34):
The market got really hot for a little while in
2021.
And that's when a lot of thesekind of digital art NFT projects
launched.
The market's really cooled downrecently, but it's very
cyclical.
Markets really cooled downrecently, but it's very cyclical
, so it might heat up again inthe 2021 market.
Nfts were mostly digital art,but they can be all these
(17:59):
different things, and so themarket might move towards
tickets or video game assets orother types of NFTs like
backstage passes or having VIPaccess with certain celebrities
or influencers.
I could see the market movingtowards something like that, but
(18:20):
right now the market's reallycooled off substantially.
Tom Hagy (18:25):
Well, cameron.
Thank you very much.
That concludes this episode ofthe Emerging Litigation Podcast,
a co-production of HBLitigation, critical Legal
Content, vlex Fast Case and ourfriends at Lost you Media.
I'm Tom Hagee, your host, whichwould explain why I'm talking.
Please feel free to reach outto me if you have ideas for a
(18:45):
future episode and don'thesitate to share this with
clients, colleagues, friends,animals you may have left at
home, teenagers you'veirresponsibly left unsupervised,
and certain classifications offruits and vegetables.
And if you feel so moved,please give us a rating.
Those always help.
Thank you for listening.
Welcome to the Emerging Litigation Podcast.
This is a group project drivenby HB Litigation, now part of
Critical Legal Content and VLEXCompany's Fast Case and Law
Street Media.
I'm your host, tom Hagee,longtime litigation news editor
and publisher and currentlitigation enthusiast.
If you wish to reach me, pleasecheck the appropriate links in
(00:23):
the show notes.
This podcast is also acompanion to the Journal of
Emerging Issues and Litigation,for which I serve as
editor-in-chief, published byFastcase Full Court Press.
And now here's today's episode.
If you like what you hear,please give us a rating.
Nfts, or non-fungible tokensThey've taken the digital world
(00:47):
by storm, or maybe just adownloadable picture of a storm.
They promise to revolutionizethe way we perceive and own
digital assets.
As today's guest explains,these unique digital
certificates recorded on ablockchain have enabled artists,
musicians and collectors totokenize there's a new word
(01:13):
their creations and sell them aslimited edition digital assets.
I think a presidentialcandidate recently did that.
But what exactly are NFTs andwhy have they garnered so much
attention?
Well, in 2021, the NFT marketexploded, with record-breaking
sales and widespread mediacoverage.
One of the most iconic examplesis the merge by the anonymous
(01:34):
artist, pac.
I think I'm saying his name.
It could be Pac.
Anyway, it's P-A-K which soldfor brace yourself $91.8 million
.
That's almost twice what I makein hosting the Emerging
Litigation Podcast.
This digital artwork was soldto nearly 30,000 collectors on
(01:55):
the NFT marketplace NiftyGateway, for those of you
interested.
Each bought a piece of the NFT.
They merged them to increaseownership.
Another notable collection isCryptoPunks.
Who doesn't like that name?
That's a set of 10,000pixelated profile pictures.
Some of these digital avatarshave sold for millions of
dollars, with CryptoPunk number5822 fetching $23.7 million.
(02:20):
Not to be outdone.
Well, it was outdone, butCryptoPunk number 7523 sold for
$11.8 million.
What's in your wallet?
The Bored Ape Yacht Club isanother fascinating example.
This collection of 10,000unique cartoonish apes and who
doesn't love apes?
I know I do Each with its owndistinct features, became
(02:41):
incredibly popular in 2021.
Many celebrities andhigh-profile individuals
purchased these NFTs, whichoffer their owners exclusive
access to events, merchandiseand other perks.
Owning a Bored Ape has become astatus symbol in the NFT
community, and who doesn't needa status symbol?
I know I do.
However, the meteoric rise ofNFTs was followed by a
(03:03):
significant downturn.
The market value plummeted byover 90% since its peak in 2022,
leading many to question thefuture of NFTs.
But who knows, you know, maybethings can change.
While the initial hype inastronomical prices may have
subsided, the underlyingtechnology and potential of NFTs
remains promising.
See, I was watching somethingthe other day about a couple of
(03:26):
experts.
I think that was probably the1970s, and one guy was saying
how the internet.
That's just going to be apassing phase.
It's going to go out like CBradios for those of you old
enough to remember that breaker911.
I don't know what that means.
While the other expert wassaying imagine if they're all
(03:47):
connected, how we can talk toeach other through them and even
buy things.
So maybe that's where we arenow.
And speaking of humor, nobodywas.
Nft aficionados do have a senseof humor.
Their jokes come in the form,of course, of memes.
The website nfteveningcomposted some of its favorites
(04:13):
recently.
One shows the face of anextremely anguished and
disappointed grade school kid athis desk with the caption it's
career day.
And your dad walks in with hisNFT collection.
See, that's only something thatthe kids can find.
Anyway.
(04:33):
In another one, the first frameshows a mom and a dad gasping
in horror, as the wife says Ican't find them Still gasping.
The husband asks if she'sreferring to their NFTs.
No, she replies the kids.
She remains in anguish as thehusband exhales in relief.
Another meme shows a fatherwearing virtual reality goggles
(04:54):
and his son facing a blank wall.
The father says one day, son,this will all be yours.
The next frame shows a museumhall filled with digital
paintings, and there's a wholesub-thread of memes sub-memes I
don't know if that's a word, didI just make it up Called the
right-click save memes, whichare variations on why would I
(05:16):
pay X amount of money for thisJPEG when I could just
right-click and save it for free?
While amusing, these are basedon public perception more so
than reality, but you get thepoint.
The NFT market also facednumerous legal and regulatory
challenges.
Point the NFT market also facednumerous legal and regulatory
challenges, particularlyregarding the classification of
(05:37):
NFTs as securities.
The SEC has been activelyinvestigating NFT marketplaces,
including OpenSea, to determinewhether certain NFTs meet the
criteria of securities underwhat is known as the Howey test,
not How-we-test Howey as in youknow, a nickname for Howard the
Howey Test.
Additionally, nft marketplaceshave faced class actions, such
(05:59):
as one against OpenSea by userswho alleged that the platform
offered unregistered securitiesand misled users.
I read an article about that byour guest, cameron Pick, with
Marshall Gerstein.
He's an experienced expert inintellectual property law with a
focus on emerging technologies.
He advises clients on a widerange of legal issues related to
(06:19):
NFTs, blockchain andcryptocurrency.
Cryptocurrency is about to gethot, apparently.
That's what they're saying.
Cameron is a frequent speakerat industry conferences and has
published numerous articles.
Legal implications of digitalassets.
I'm laughing because I had tosay that four times to get it
right, because I made up a wordcalled implications.
What are the legal implications?
(06:41):
Okay, while earning his JDCameron, can I call you?
Cameron was a member of thePatent Law Society at Duke
University School of Law.
Before joining MarshallGerstein, he worked as a patent
extern US Patent and TrademarkOffice.
He has his JD from DukeUniversity School of Law and a
bachelor of science degree inengineering.
(07:02):
I'm doing that from memorybecause I apparently deleted it
from my script.
He has that degree fromUniversity of Illinois,
urbana-champaign.
You can read some of Cameron'sinteresting articles on his firm
bio page, which I've linked toin the show notes.
And now here's my interviewwith Cameron Pick of Marshall
(07:23):
Gerstein.
I hope you enjoy it.
Just a quick health note,though.
Sounds like I still had a coldwhen I did this one, so you'll
notice the change in my voice.
It's coming now.
Cameron Pick, thank you verymuch for talking with me about
this today.
Cameron Pick (07:39):
Thanks so much for having me.
Tom Hagy (07:42):
Let's give kind of a quick kind of basics about NFTs
for our listeners, who reallydon't understand what they are,
and I've only gotten a betterunderstanding of it by talking
to you.
So what are they and can yougive us some examples?
Cameron Pick (07:57):
The easiest way to think about it is that NFTs are
essentially a digital receiptor certificate of authenticity
that's recorded on a blockchain,so it gets all the benefits of
blockchain technology, whichmeans that it's decentralized
and it has the security andimmutability benefits and it's
(08:17):
protected by cryptography.
The essential idea behind NFTsis that they're a digital or
online receipt showing proof ofthe asset that you have, and
that asset can be many differentthings.
It can be digital art, sobefore people own physical art,
but there are a lot of onlineimages that could have value and
(08:38):
there just wasn't really agreat way to capture that value.
Nfts can be used for tickets.
Again, they're a digitalreceipt and it's a better way to
avoid counterfeiting.
They can also be used forbackstage passes or for fan
engagement for different artists.
And then they can also be usedas video game pieces.
So some video games are verypopular and they'll actually
(09:01):
sell different pieces in thegame, like a weapon or a castle
or a car, something like that.
But the game creator was alwaysin control of who could buy the
assets, what they'd be pricedat and whether or not someone
could transfer them on thesecondary market.
But by having this on ablockchain through NFTs.
(09:22):
The NFTs are available toanyone, so the creator is no
longer in control of these.
Another good example of the useof NFTs can be for real property
.
You can actually sell yourhouse through an NFT and that
can solve a lot of issuesrelated to title.
You can make it more liquid andit can allow for quick and easy
(09:44):
sales.
And you can actually break upNFTs and sell fractions, so it
can allow for people tospeculate on real estate that
they wouldn't have been able toin the past, where someone can
break their NFT up thatrepresents their property into
fractions, like, let's say, 1%,and other people can purchase
(10:07):
those and kind of speculate on ahome or on commercial real
estate.
Tom Hagy (10:12):
Can we talk about ownership rights?
So you talked about theunderlying assets a bit.
How can a creator of an NFTretain certain rights like
copyrights and others?
Cameron Pick (10:24):
So kind of the default is that the creator does
retain the copyright and otherIP rights, like trademark or any
patent rights.
But certain NFTs can have itbaked into them that when you do
transfer the NFT that youtransfer the copyright along
(10:45):
with it.
But that's not really thedefault.
The default is that when youbuy the NFT you would own the
asset.
So if I'm buying digital art, Iwould own that image and I'd
have the right to resell thatimage but I wouldn't necessarily
be able to reproduce that imageor make derivative works off of
(11:06):
it.
Tom Hagy (11:07):
How do you know, trace the authenticity or provenance
of NFTs?
How can the ownership beverified?
Cameron Pick (11:15):
So NFTs are verified on a blockchain, and
the blockchain is essentially apublic ledger.
There's a few differentblockchains I think the most
popular ones are Ethereum andthen Solana and this public
ledger is maintained bythousands of computers or nodes
that each store a copy of theblockchain, and so the way the
(11:38):
verification works is that ifeach of them store that copy and
have a consensus, essentiallythat you're the owner of the NFT
, then it's recorded in theledger and anybody can see it.
Tom Hagy (11:55):
It seems like, from what you're describing, that
it's pretty hard to counterfeitor to commit fraud here, but
like it's almost uncrackable butnothing is.
Are there additional securitymeasures you would recommend to
protect NFTs?
Cameron Pick (12:12):
So far, nobody's ever been able to change what's
stored in these publicblockchains.
No one's been able to hack ablockchain in a similar way that
people have hacked servers inthe past.
But the vulnerabilities aren'treally on the blockchain itself.
The vulnerabilities are on theusers that are maintaining these
(12:33):
.
The users have to maintaintheir keys and if anybody has
access to those keys, then theycan take the NFT, and there's no
way to really undo theoperations on a blockchain in a
similar way that a bank can undotransactions that are just
stored on their server.
(12:54):
So if someone tricks you,causes you to give them access
to their keys, they can stealthe NFT.
There wouldn't really be anyway to get them back.
Tom Hagy (13:04):
So it sounds like a lot of data breaches and things
like that.
It seems like the humans arethe vulnerability which leads to
kind of old school crime whereyou get people to sign things or
you scam them.
So old school criminals aregoing to have a future still
staying on intellectual propertyrights, how are they protected
in secondary market transactions?
Cameron Pick (13:25):
NFTs don't necessarily have to transfer
over IP rights but they can, andthere's certain examples of NFT
projects where they havetransferred them over.
One example is Bored Apes.
So Bored Apes is some projectwhere they sold different
cartoon images of apes.
That actually became verypopular.
(13:49):
It kind of went viral for a bitof a time, and when you
transferred the board ape itself, you also received the, the
copyright to do whatever youwant with it.
And I think actually seth greenwas going to make a tv show off
the board ape that that hebought because he had the
(14:10):
copyrights to it, but somethingwent wrong with that.
I don't think he ever ended upmaking that show.
But there are different ways totransfer the copyright with the
NFTs, and so Andreessen Horowitz, for example, proposed this
idea of can't be evil licensesthat can be tied with NFTs and
(14:32):
these licenses hand overdifferent rights.
There's essentially, I think,six different licenses with
different flavors of what typesof rights are being transferred
whether they're display rights,distribution rights, making
derivative works rights,distribution rights making
(14:53):
derivative works and users canpick and choose what they want
to be able to transfer and theninclude that in what's called a
smart contract, which sets outthe terms for the NFT and those
terms are stored on theblockchain.
So when the NFT is transferred,those terms are automatically
transferred and everyone can seeexactly what those terms are,
(15:15):
and then the can't be evillicenses.
Tom Hagy (15:17):
They are what they sound like.
Cameron Pick (15:18):
Yeah, so this came from Creative Commons licenses,
which are open source licensesthat were referred to as don't
be evil licenses, basicallyallowing people to have open
source access to differentsoftware, but in exchange that
they would attribute it to theoriginal creator or they would
(15:40):
follow the terms that thatcreator wanted to have them
follow.
This was changed to can't beevil for blockchain technology
because it's placed in code.
And because it's placed in code, someone can't ignore the terms
in the same way that they couldwith a physical contract.
Tom Hagy (16:02):
Is there anything else you would say about what should
be included in NFT contracts?
Cameron Pick (16:07):
I think it's just important to have the terms
included in the smart contractso that way it is on the
blockchain and it's not in somekind of private communication
that doesn't necessarily getfollowed through.
But having the terms in a smartcontract on the blockchain
(16:28):
keeps them on this ledgerforever.
Tom Hagy (16:32):
Can you talk a little bit about how these things are
valued and pricing?
How is that done?
Is that strictly kind of a freemarket issue?
Cameron Pick (16:39):
Yeah, it's a free market issue.
I think it's similar to tryingto value physical artwork, which
can be very difficult to do.
I mean, I know I don't reallyhave a good understanding of why
certain art is very valuableand others are not.
I think that's similar for NFTs.
It's just about how popularthey are when it comes to
(17:04):
digital art and how excitedpeople get about the project.
But then for things like if itis an NFT representing physical
property like a car or a houseor something like that, I would
think the values would just bethe same values.
Tom Hagy (17:20):
What can you tell people about the size of this
market?
This is big business andthere's some big players in it.
We had chatted before aboutrecent developments with OpenSea
.
What can you tell us about themarket size and what happened
with them?
Cameron Pick (17:34):
The market got really hot for a little while in
2021.
And that's when a lot of thesekind of digital art NFT projects
launched.
The market's really cooled downrecently, but it's very
cyclical.
Markets really cooled downrecently, but it's very cyclical
, so it might heat up again inthe 2021 market.
Nfts were mostly digital art,but they can be all these
(17:59):
different things, and so themarket might move towards
tickets or video game assets orother types of NFTs like
backstage passes or having VIPaccess with certain celebrities
or influencers.
I could see the market movingtowards something like that, but
(18:20):
right now the market's reallycooled off substantially.
Tom Hagy (18:25):
Well, cameron.
Thank you very much.
That concludes this episode ofthe Emerging Litigation Podcast,
a co-production of HBLitigation, critical Legal
Content, vlex Fast Case and ourfriends at Lost you Media.
I'm Tom Hagee, your host, whichwould explain why I'm talking.
Please feel free to reach outto me if you have ideas for a
(18:45):
future episode and don'thesitate to share this with
clients, colleagues, friends,animals you may have left at
home, teenagers you'veirresponsibly left unsupervised,
and certain classifications offruits and vegetables.
And if you feel so moved,please give us a rating.
Those always help.
Thank you for listening.
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