Division I Football Athletes Share their Thoughts on EA Sports’ NCAA Football Video Game Controversy Concerning Athlete NIL Compensation

Division I Football Athletes Share their Thoughts on EA Sports’ NCAA Football Video Game Controversy Concerning Athlete NIL Compensation

Jul 1, 2023 | Blog

By Kinsale Philip, Jake Pollack

Fans and athletes alike are enthusiastic about EA Sports’ plans to release an NCAA football video game (“Video Game”) in summer 2024—for the first time since 2013. The ongoing ethical debate over athletes’ Name, Image, and Likeness (“NIL”) rights in the Video Game, however, has grown more complex with each step of EA Sports’ athlete licensing approach.

EA Sports’ NCAA Football Video Game Controversy

 

In this scenario, NIL refers to a collegiate athlete’s right to get paid for commercial uses of their identity, which may encompass, among other things, product endorsements, video games, and social media marketing. This practice was strongly prohibited before 2021.[1]

There have been a lot of questions concerning NIL implications, particularly regarding how much athletes should be paid for their NIL. Football athletes are being offered $500 each without royalties if they opt into the Video Game.[2] Few media outlets have focused on NCAA football players’ perspectives despite the issue drawing an abundance of media attention.

We spoke with a Canadian FBS football athlete (“FBS Athlete”) who requested anonymity, Nolan Ulm (“Ulm”), a talented receiver and affable content creator from Kelowna, BC, who plays football at Eastern Washington University, and Ethan Yip (“Yip”), an explosive defensive back at William & Mary University who was raised in Surrey, BC, in order to gauge Division I athletes’ opinions of the Video Game.

Both Ulm and the FBS Athlete assert that being in a Video Game is essentially the materialization of a childhood dream; however, they draw attention to the primary concern that NCAA football athletes should be compensated commensurately “for allowing their name and likeness to be used” and that, in the existing licensing framework, athletes in the Video Game would not be “compensated correctly.”

EA Sports and their licensing partner appear to enjoy a unique bargaining position because they have emotional control over collegiate athletes as a result of generational nostalgia. Yip explains that the “NCAA football video game is huge… and everyone talks about how much they miss it.” Most twenty-something football fans and athletes can relate to the cover stars of the Video Game, Reggie Bush, Tim Tebow, and Robert Griffin III. They were undoubtedly shaped into the larger-than-life personas that they are today by the Video Game.

The Video Game’s release has been delayed since 2013 due to EA Sports’ struggle to facilitate a workable solution to pay and fairly licence the athletes that would be featured in the Video Game. Due to regulatory changes in 2021 permitting collegiate athletes to gain income from their NIL, EA Sports is now able to licence them.

NCAA athletes who receive compensation for their NIL are obligated to comply with the NCAA’s interim NIL policy, with conference and program rules, as well as with any applicable state NIL laws.[3] Thirty-two states had passed NIL legislation as of July 2023.[4] While this may be true, the “ ‘NCAA has been saying, until just recently, follow your state law if you have one,’ Jim Cavale, CEO and founder of INFLCR, said. ‘Now all of a sudden they’re changing their tune.’ ”[5]

Differences among state NIL laws may be resolved by federal legislation, but it is unlikely that federal law would pass because affected parties cannot agree on a single proposal. Simply put, some desire legislation that benefits the NCAA, such as the “Pass Act” proposed by U.S. Senators Joe Manchin and Tommy Tuberville, while others support athletes, such as the “College Athlete Economic Freedom Act” proposed by U.S. Senator Chris Murphy and U.S. Representative Lori Trahan.[6]

The FBS player considers that only a select group of renowned athletes end up entering into NIL deals and that the Video Game provides those lesser-known athletes an opportunity to be recognized. He states that “now the tough question is asking yourself whether you want to be in a video game [that] you have always looked forward to being in or give up potentially larger earnings.”

In Ed O’Bannon v NCAA, the United States Court of Appeals for the Ninth Circuit (the “USCA”) deliberated on an antitrust action against EA Sports, the NCAA, a licensing group, and two collegiate conferences.[7] The USCA held that the NCAA’s rules/bylaws unreasonably restrained trade and thus violated the American iteration of the Competition Act.[8] The decision resulted in the payment of financial settlements to athletes featured in previous NCAA Video Games.[9]

In his concurring decision that affirmed the USCA for the Ninth Circuit’s decision, United States Supreme Court (“USSC”) Justice Brett Kavanaugh even stated in NCAA v Alston that “the NCAA’s business model would be flatly illegal in almost any other industry in America.” with regard to the NCAA’s monopolization of American amateur sports.[10] As such, the USSC decided that the NCAA’s rules and bylaws violated antitrust law.

 

EA Sports’ Approach to Licensing

 

To cautiously address the player licensing challenge, EA Sports entered into a collegiate group licensing deal with OneTeam Partners (“OneTeam”), a business that specializes in managing athletes’ intellectual property. EA Sports and OneTeam’s group licensing deal gathers a number of individual NIL licences into one collective licence.[11] Its principle essentially hinges on a “co-branding force multiplier that maximizes the value of each licensee beyond its individual marketability.”[12]

According to On3, EA Sports plans to pay college football athletes a total of $5M USD (for approximately 11,050 athletes) through their deal with OneTeam.[13] The Video Game would include athletes from 130 Division I FBS football teams—excluding Division I FCS athletes.[14]

Given that athletes are frequently compensated based on performance and talent, many individuals object to the legitimacy of a deal that equally compensates athletes involved in the Video Game. The noticeable disadvantage of a group licence, therefore, is that each player’s NIL worth is treated identically, disregarding the meritocratic values embedded in American collegiate football.

The FBS Athlete argues that starters “or even second strings should receive a bit more [pay] than a fourth string,” because “athletes work their tails off to make it in these positions let alone starting so… they should be rewarded.” He believes that $500 is a reasonable starting rate, but it is insufficient for high-value NIL athletes.

The FBS Athlete however adds that in some ways, a deal that is not contingent on personal performance gives him a sense of security because he would not have to worry about receiving less or no money in the event of an injury. Additionally, it “could create more opportunities for athletes from poorer backgrounds… [because] many do not have the same access to endorsement deals as wealthier athletes.”

The FBS Athlete nevertheless posits that the Video Game’s earnings should be transparent and they “should take into account the amount of practice and skill needed to play, the number of games the player has played, the player’s impact on team performance, and the player’s overall contribution to the team.” This model, he says, would “incentivize athletes to work hard and improve their skills to maximize their earnings.”

Moreover, EA Sports’ offer of $500 USD per player is clearly meagre in comparison to settlements that averaged $1600 USD paid to athletes featured in past EA Sports college video games.[15]

Former Clemson centre and College Football Players Association (“CFPA”) vice president Justin Falcineli (“Falcineli”) has been vocal about athletes rejecting EA Sports’ NIL licensing offer. He calls it a “ridiculously low amount of money.”[16] Nevertheless, it is unknown how many athletes belong to the CFPA, and it is unlikely that they represent the majority opinion of FBS football athletes. The FBS Athlete, in fact, had never heard of the CFPA before our conversation.

Falcineli contends that he spoke with FBS football athletes who expressed a desire to turn down the offer and with those who wanted compensation in excess of $500 USD. Jalon Daniels, the University of Kansas’ starting quarterback, warned reporters that if athletes were given a small amount of money, there might be a boycott.

The FBS Athlete and Ulm expressed that a college athletes’ union presents pros and cons. Unions, do give athletes a voice in “decision-making” but they also state that “athletes would be subject to dues or other fees and the majority rules when decisions are made.” The CFPA does not charge membership fees for current college athletes but they do charge $50 USD for alumni.[17]

Student-athletes would almost certainly have to be defined as employees in order to legitimize the CFPA’s capacity to collectively bargain, which may be the case for FBS football and Division I basketball athletes as Johnson v NCAA continues its way through U.S. appellate courts.[18]

Mit Winter, an American sports lawyer and former Division I basketball athlete stated that a collective bargaining agreement is “immune from antitrust law,” giving a union like the CFPA authority to negotiate for athlete-specific rights.[19] By enhancing their conditions at work and instituting revenue sharing—when schools split income generated by sports with athletes—a recognized athletes union in collegiate football may drastically alter the quality of life for student-athletes.

The football space is well aware that, while receiving less pay, collegiate teams’ practices are much riskier and more physically demanding than those of professional teams.[20] Conversely, the National Football League’s (the “NFL”) 2020 Collective Bargaining Agreement mandates that athletes participate in a minimal number of contact practices and that they share in earning around forty-eight percent of revenues.[21]

 

Professional Football Athletes’ NIL Compensation

 

Falcineli suggests that his friends in the NFL are paid around $28,000 USD each for EA Sports’ use of their NIL in Madden NFL video games (“Madden”).[22]

In 2020, EA Sports renewed their contract with the NFL and their players’ association to continue to produce Madden for five years. The contract is worth $1.5B USD and provides $1B USD to the NFL Players Association (“NFLPA”).[23] EA Sports’ financial commitment to the athletes is illustrated by the NFLPA’s distribution of $500M USD out of the $1.5B USD to them.[24]

Yip critically drew our attention to the experiences of many young athletes who used to play the NCAA football game as much as they played Madden, if not more, and “since they discontinued [the Video Game], people have been wanting them to come out with it just as much as they want a new Madden out every year.”

The FBS Athlete, however, understands that the disproportionality in compensation between Madden and the NCAA Video Game exists because Madden involves professional athletes that “make football their full-time job.”

Justifications for the gap in pay between professional and collegiate athletes frequently cite that the NFLPA represents employees, unlike the CFPA, and that the NFL has about 1700[25] athletes compared to 11,050 in college football. On top of that, Madden outsells NCAA football Video Games.[26]

 

The Brandr Group, LLC v. Electronic Arts Inc.

 

Some college football teams are represented by The Brandr Group (“TBG”), a licensing company, similar to OneTeam. TBG submitted a request for a temporary restraining order to receive issuance of a preliminary injunction against EA Sports in June of this year for ignoring TBG’s group licensing agreements with schools; and, importantly, to obstruct the Video Game’s development.[27]

TBG claimed that EA Sports “was threatening [their] clients to comply or be excluded from the Video Game.”[28] TBG asserted, in other words, that it had exclusive licensing rights to the athletes who are members of the teams they represent and that EA Sports must negotiate with or obtain consent from TBG to acquire their athletes’ NIL licences.[29] Yet, some reports speculate that TBG’s lawsuit “is just as much about OneTeam” since the two companies are competitors and were once partners.[30]

EA Sports is headquartered in Redwood City, California and the Northern District of California Court’s threshold for a temporary restraining order is high.

The Court denied the application for temporary restraining order, with Judge Haywood S. Gilliam opining that TBG had not shown sufficient evidence that “the value of the students’ NILs would be diminished by their use in the Video Game.”[31] TBG could not prove that EA Sports’ deal with OneTeam caused “irreparable harm” to TBG’s clients’ NILs and to the public. Judge Gilliam concluded that TBG’s reasoning in their claim, above anything, emphasized the Video Game’s advantage to their athletes’ NILs.[32]

 

What is Next for EA Sports?

 

Ulm and the FBS Athlete were asked about alternate remuneration methods such as revenue sharing and hiring individual player agents to negotiate their NIL licensing deals.

The FBS Athlete stated that “if each athlete were on their own to negotiate with an individual agent, not everyone would be given a fair amount… [causing] higher profile athletes [to receive large sums and others with little to nothing].”

For Ulm, “revenue sharing is definitely a possibility but then I would not want to take away from my school’s growth” and he states that “player agents are the answer. If this is going to become pro sports then we need some management.”

EA Sports’ current desire is to release the Video Game sometime, in the summer of 2024, and for the first time, by paying collegiate athletes for their NIL.

 

 

 

 

 

[1] Piccola L., Amy. Duffy, Tricia. Schy R., Levi. “Your Guide to Federal and State Laws on Name, Image and Likeness Rules for NCAA Athletes.” Saul Ewing LLP. 14 March, 2022. https://www.saul.com/nil-legislation-tracker
[2] Nakos, Pete. “EA Sports to allow FBS athletes to op into 2024 video game.” On3, 17 May, 2023. https://www.on3.com/nil/news/ea-sports-to-allow-fbs-athletes-to-opt-into-2024-video-game-oneteam-partners/
Nakos, Pete. “Athlete Boycott Being Organized over 2024 EA Sports College Football Video Game.” On3, 7 June, 2023. https://www.on3.com/nil/news/college-football-athletes-association-organizing-boycott-of-2024-ea-sports-video-game/
[3] Piccola L., Amy. Duffy, Tricia. Schy R., Levi. “Your Guide to Federal and State Laws on Name, Image and Likeness Rules for NCAA Athletes.” Saul Ewing LLP. 14 March, 2022. https://www.saul.com/nil-legislation-tracker
[4] Piccola L., Amy. Duffy, Tricia. Schy R., Levi. “Your Guide to Federal and State Laws on Name, Image and Likeness Rules for NCAA Athletes.” Saul Ewing LLP. 14 March, 2022. https://www.saul.com/nil-legislation-tracker
[5] Prisbell, Eric. “The Big Story: NCAA NIL subcommittee developing a Plan B to federal legislation” On3. 10 July, 2023. https://preview.mailerlite.io/emails/webview/327565/93311344889038751
[6] Winter, Mit. “A flurry of federal #NIL bills have been released over the past few days. The PASS Act released by Senators…” Linkedin. 26 July, 2023.
[7] Ed O’Bannon, et al. v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
[8] Wolohan, John. “A Full Review of the O’Bannon v. NCAA Judgment.” Law in Sport. 21 August, 2014. https://www.lawinsport.com/topics/item/your-full-review-of-the-o-bannon-v-ncaa-judgment
Ed O’Bannon, et al. v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
[9] Ed O’Bannon, et al. v. NCAA, 802 F.3d 1049 (9th Cir. 2015).
[10] National Collegiate Athletic Assn. v. Alston et al., 594 U.S. ___ (2021), No. 20-512, decided June 21, 2021. https://www.supremecourt.gov/opinions/20pdf/20-512_gfbh.pdf
[11] Flagel A., Zachary & Marino A., Gregory. “Collegiate Group Licensing: a New Frontier in the NIL Wild West.” 29 August, 2022. https://www.foley.com/en/insights/publications/2022/08/collegiate-group-licensing-new-frontier-nil
[12] Flagel A., Zachary & Marino A., Gregory. “Collegiate Group Licensing: a New Frontier in the NIL Wild West.” 29 August, 2022. https://www.foley.com/en/insights/publications/2022/08/collegiate-group-licensing-new-frontier-nil
[13] Nakos, Pete. “Athlete Boycott Being Organized over 2024 EA Sports College Football Video Game.” On3, 7 June, 2023. https://www.on3.com/nil/news/college-football-athletes-association-organizing-boycott-of-2024-ea-sports-video-game/
[14] A tier below the FBS whose members’ institutions are smaller than those of the FBS. Division I FCS athletes are unlikely to be featured in the game because they were not featured in previous iterations and because the current proposed group licensing fee would only cover the costs of FBS athletes. However, according to a reporter who received access to EA Sports’ Video Game proposal to schools through an open records request, FCS athletes may become available in the game through downloadable/live content. Brown, Matt. “Here’s what the EA Sports College Football video game proposal looked like.” 10 March, 2021. Extra Points. https://www.extrapointsmb.com/p/heres-what-the-ea-sports-college
[15] Vannini, Chris. “EA Sports sued by the Brandr Group: What’s the future of the college football game?” The Athletic, 20 June, 2023. https://theathletic.com/4626567/2023/06/20/ea-sports-college-football-lawsuit/
[16] Nakos, Pete. “College Football Players Association organizing boycott of 2024 EA Sports Video Game.” On3, 7 June, 2023. https://www.on3.com/nil/news/college-football-athletes-association-organizing-boycott-of-2024-ea-sports-video-game/
[17] “Memberships — CFBPA college football athletes association.” (n.d.). CFBPA — College Football Players Association. https://www.cfbpa.org/member-cfbp
[18] Goldberg, Josh, Esq. & Gaines, Carter “What you need to know about Johnson v. NCAA” Greenspoon Marder, LLP, 1 May, 2023 https://www.gmlaw.com/news/what-you-need-to-know-about-johnson-v-ncaa/Johnson v. Nat’l Collegiate Athletic Ass’n, Civil Action 19-5230 (E.D. Pa. Dec. 28, 2021)
[19] Graham, Andrew. “As college football athletes inch toward employee status, what could they stand to gain from getting organized?” On3, 5 July, 2023 https://www.on3.com/news/as-college-football-athletes-inch-toward-employee-status-what-could-they-stand-to-gain-from-getting-organized/
[20] Graham, Andrew. “As college football athletes inch toward employee status, what could they stand to gain from getting organized?” On3, 5 July, 2023 https://www.on3.com/news/as-college-football-athletes-inch-toward-employee-status-what-could-they-stand-to-gain-from-getting-organized/
[21]  Graham, Andrew. “As college football athletes inch toward employee status, what could they stand to gain from getting organized?” On3, 5 July, 2023 https://www.on3.com/news/as-college-football-athletes-inch-toward-employee-status-what-could-they-stand-to-gain-from-getting-organized/
[22] Florio, Mike. “College Football Players Are Urged to Reject EA’s NIL Offer for Upcoming Video Game.” NBC Sports, 9 June, 2023. https://www.nbcsports.com/nfl/profootballtalk/rumor-mill/news/college-football-athletes-are-urged-to-reject-eas-nil-offer-for-upcoming-video-game
[23] Goldberg, Rob. “NFL, EA Sports Announce $1.5B Multiyear Contract Renewal for Madden NFL Games.” Bleacher Report, 28 May, 2020. https://bleacherreport.com/articles/2893853-nfl-ea-sports-announce-15b-multiyear-contract-renewal-for-madden-nfl-games
[24] Goldberg, Rob. “NFL, EA Sports Announce $1.5B Multiyear Contract Renewal for Madden NFL Games.” Bleacher Report, 28 May, 2020. https://bleacherreport.com/articles/2893853-nfl-ea-sports-announce-15b-multiyear-contract-renewal-for-madden-nfl-games
[25] Putnik, Gary. “NFL Players by College on 2021 Rosters” NCAA.com, 12 September, 2021. https://www.ncaa.com/news/football/article/2021-09-06/nfl-athletes-college-2021-rosters#:~:text=A%20total%20of%201%2C696%20athletes%20make%20up%20the%20NFL’s%20active%20rosters.
[26] Rodriguez G., Juan. “Madden NFL 13 Vs. NCAA 13: Madden Is Breaking Sales Records.” GameNGuide, 8 September, 2012. https://www.gamenguide.com/articles/3239/20120908/madden-nfl-13-vs-ncaa-breaking-sales.htm
[27] Nakos, Pete. “Court Denies the Brandr Group’s Temporary Restraining Order Motion against EA Sports.” On3, 30 June, 2023. https://www.on3.com/nil/news/ea-sports-college-football-the-brandr-group-temporary-restraining-order-denied/
The Brandr Grp. v. Elec. Arts, 4:23-cv-02994-HSG (N.D. Cal. Jun. 29, 2023)
[28] Nakos, Pete. “Court Denies the Brandr Group’s Temporary Restraining Order Motion against EA Sports.” On3, 30 June, 2023. https://www.on3.com/nil/news/ea-sports-college-football-the-brandr-group-temporary-restraining-order-denied/
[29] The Brandr Group, LLC v. Electronic Arts Inc., No. 4:2023cv02994 – Document 23 (N.D. Cal. 2023)
[30] Nakos, Pete. “Court Denies the Brandr Group’s Temporary Restraining Order Motion against EA Sports.” On3, 30 June, 2023. https://www.on3.com/nil/news/ea-sports-college-football-the-brandr-group-temporary-restraining-order-denied/
[31] The Brandr Grp. v. Elec. Arts, 4:23-cv-02994-HSG (N.D. Cal. Jun. 29, 2023)
[32] The Brandr Grp. v. Elec. Arts, 4:23-cv-02994-HSG (N.D. Cal. Jun. 29, 2023)

Division I Football Athletes Share their Thoughts on EA Sports’ NCAA Football Video Game Controversy Concerning Athlete NIL Compensation

Elizabeth S. Dipchand Among Top Leading Intellectual Property Lawyers in Canada

Jan 10, 2023 | Awards & Recognitions

Elizabeth S. Dipchand recognized as a Lexpert-ranked lawyer in the 2023 Lexpert/ ALM 500 Directory.

Elizabeth S. Dipchand

Elizabeth S. Dipchand was voted one of the 2023 Leading Legal Practitioners across Canada based on an extensive peer survey.  The identification of leading practitioners and firms is based upon a comprehensive annual survey, ongoing since 1994. The selected lawyers have been recommended by their law firm leaders. They are acknowledged as leaders in their respective fields, lawyers prominent in their practice areas and professional organizations, and professionals worthy of significant recognition from their colleagues.

About The Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada: 

 The Lexpert/American Lawyer Guide to the Leading 500 Lawyers in Canada (Lexpert ALM 500) is the sister publication of The Canadian Legal Lexpert Directory, which has been published since 1997 and is based on an extensive peer review survey process. The Lexpert ALM 500 features the top-ranked lawyers from a selection of over 30 Lexpert Practice Areas.

Learn more at: https://www.lexpert.ca/rankings

Division I Football Athletes Share their Thoughts on EA Sports’ NCAA Football Video Game Controversy Concerning Athlete NIL Compensation

Pandora’s Barrel of Monkeys: Seth Green’s Stolen Bored Ape NFT and Copyright Conundrum

May 27, 2022 | Blog

By Zach Nickels, Elizabeth S. Dipchand  

 Image of Bored Ape #8398 AKA “Fred Simian” (image via OpenSea)

The recent theft of four of actor Seth Green’s (“Green”) NFT’s has stoked the fire for further debate about the intersection of personal property rights, licenses, and intellectual property rights in the context of NFTs.  Beyond Green’s obvious financial loss, the situation is complicated by the fact that he has spent several months developing an animated TV series featuring as the main character one of his stolen NFTs, Bored Ape #8398 AKA “Fred Simian” (“Bored Ape”).

Now, Green has a serious problem on his hands: he did not actually own the copyright in the NFT’s artwork as the (former?) Bored Ape owner, he only had a licence for its commercial use. As such, his ability to use Bored Ape in the show and his avenues for legal recourse are unclear.

The Facts

On May 8th, 2022 four of Green’s NFTs were stolen in a phishing scam, where the Bored Ape was eventually sold to a pseudonymous collector identified as “DarkWing84”. The Bored Ape was (unwittingly?) purchased by DarkWing84 for over $200,000 and transferred to a collection identified as “GBE_Vault” where it currently remains, and has since been frozen by the NFT marketplace OpenSea.

Although Green tweeted over the past weekend that he would like to get in touch with the DarkWing84 to “fix” the situation, the two have yet to make contact. In a recent interview with DarkWing84, she said that although he was interested in talking with Green, he had “no plans” yet for the Stolen Ape. Green has since tweeted that he would “rather meet DarkWing84 to make a deal, vs in court [sic]”. If this situation does escalate to litigation, it would provide a great opportunity to clarify how courts characterize NFTs and how NFTs square with intellectual property laws.

The Fine Print

At front and center in this conundrum is the nature of the rights acquired by purchasers of NFTs, here the Bored Ape NFT purchasers (“Owners”). Rights conferred by copyright ownership must be distinguished from rights arising from copyright licences which commonly grant permission to use under certain conditions. Copyrights provide an owner the exclusive right to produce, reproduce, sell, publish, perform or licence a work. In contrast, copyright licence only allows a licensee to do the specific thing(s) that the copyright owner allows them to do. In this instance, Green did not own the copyright to the Bored Ape – he only had a commercial licence to use the “Fred” as long as he owned the NFT.

Looking at Bored Ape Yacht Club’s (“BAYC”) rather sparse and somewhat contradictory Terms and Conditions (“Terms”), Owners own “the underlying Bored Ape, the Art, completely”. However, this section appears to only refer to personal property rights in the token and Art, as the Terms’ Commercial Use clause clarifies that Owners merely have an “unlimited, worldwide license to use…” the purchased Art for commercial purposes, as opposed to full copyrights in the Art. In other words, although the Terms say Owners own the Bored Ape and the Art “completely”, they actually do not own the copyright in the Art and only have a licence to use the Art commercially. In Canada, this is a critical practical reality given that any assignment of copyright ownership needs to be in writing and signed by the author. Although it is not explicitly stated, this commercial licence right seems to transfer with the NFT itself based on whoever owns it.

Since Green’s commercial use rights appear to be contingent upon his ownership of the Bored Ape and the licence seems to transfer with the token itself, his ability to feature the Bored Ape in his TV series with impunity seems to be in legal purgatory until this dispute is resolved. Unfortunately for Green, BAYC is unable to intervene in the matter, as their Terms explicitly state that “[u]sers are entirely responsible for the safety and management of their own private Ethereum wallets…” and that “at no point [will BAYC] seize, freeze or otherwise modify ownership of any Bored Ape”.

Apes As A Barrel of Monkeys vs Negotiable Instruments – Nemo Dat or Not?

While its not entirely clear how a court may respond to a request for relief from Green – presumably seeking to re-establish his ownership of the Bored Ape and commercial licence to use it in his TV series –it has not derailed consideration and debate from a few camps online.[1]

One avenue open to common law courts is the old common law rule of nemo dat quod non habet, namely, “no one can give better title than he himself has” (“Nemo Dat Rule”). In other words, you cannot give another person legal rights that you do not have yourself. Since the thief did not have legal rights to the Bored Ape at the time of the transfer, Darkwing84 could not acquire any legal rights in the Bored Ape  at the time of its purported sale,[2] including the licence for commercial use of the NFT’s Art. Under this principle the Bored Ape (and all associated rights he held before the theft, including the commercial licence) could revert to Green the same way stolen tangible personal property would, restoring his ability to use “Fred” in his TV series.  This approach would focus on maintaining Green’s personal property rights in the Bored Ape, despite the malfeasance of the thief and the DarkWing84’s lack of notice.

However, it would also be open to the court to apply one of the exceptions to the Nemo Dat Rule by considering the Bored Ape as a negotiable instrument instead of personal property. Negotiable instruments can be described as documents that guarantee the payment of a specific amount of money to a specific person, such as a bearer stock certificate. Negotiable instruments are essentially “tokens” that represent rights in something else – a characteristic that Bored Ape NFTs arguably share to some extent. From a policy perspective, tokenization serves a commercial purpose by allowing tangible items of trivial worth (i.e. pieces of paper) to represent monetary value.[3] NFTs could also arguably be construed as serving a similar commercial efficacy purpose.

This is an important point because when someone purchases a negotiable instrument for value without notice, the Nemo Dat Rules does not apply.[4] Thus, if DarkWing84 had no notice of the circumstances underlying the transaction and a court were to characterize the Bored Ape as a negotiable instrument instead of personal property or chattel, it is open for her to argue that Green may not be able to recover the NFT and potentially expose himself to liability for copyright infringement by using “Fred” in the TV series.

If Green had owned the copyright in the Art from the outset, recovering the NFT and restoring his status as an Owner to re-assume the commercial use licence would be a moot point. Ownership of the personal property that contains or incorporates a copyright protected work is not necessary for an author to maintain their ownership of the copyright in the work itself. For example, if Green was the author of an original work of (let’s say a portrait of “Fred”) instead of a merely a prior Owner of the Bored Ape NFT, it wouldn’t matter if the painting had been stolen or sold to a third-party. He would still own copyright in the work and enjoy the right to exploit it.

Don’t Wait Until You’ve Got A Monkey On Your Back – Understand Your Rights, Identify and Protect Your Intellectual Property

While we will have to wait to see how this situation unfolds, it serves as a reminder of the importance of understanding the intersecting legal rights associated with ownership of NFTs. Regardless of whether you are looking to mint NFTs, purchase them, or create derivative works based on NFT artwork, it is imperative you understand the scope and extent of your rights with respect to the NFT and its how they interact with other legal rights.

[1] Twitter user @gonbegood is one such commentator who has discussed what could happen to Bored Ape NFT Owners’ rights if their NFTs are stolen, depending on whether courts characterize the NFT as property/chattel versus negotiable instruments.

[2] Historically, one of the exceptions to the Nemo Dat Rule was the Sale In a Market Overt” exception. This exception held that where goods were sold in a market overt (a public and legally constituted market) according to the usage of the market, the Nemo Dat Rule did not apply. The idea was that in medieval times, if the victim did not bother to check their local market for their stolen goods, they were not being sufficiently diligent. Although the application of this exception has been abolished in Ontario by section 23 of the Sale of Goods Act, R.S.O. 1990, c. S.1., one can wonder whether OpenSea could be considered a market overt otherwise? Probably not.

[3] For an in-depth discussion of tokens and property law (which actually concludes that traditional property concepts do NOT support the idea that NFTs are true tokens), see https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3928901 by Juliet M. Moringiello and Christopher K. Odinet.

[4] For example, see UCC SS 3-306; Bills of Exchange Act s. 55(1)(b).

Division I Football Athletes Share their Thoughts on EA Sports’ NCAA Football Video Game Controversy Concerning Athlete NIL Compensation

Hold Your Horses: Personal Property Rights, Licences, Copyright and NFT’s

Feb 15, 2022 | Article

By Zach Nickels, Dan Pollack

 

 

 

 

M.F. Husain’s “Lightning” Painting https://lightningnft.io/

 

A recent filing in the U.S. District Court for the Southern District of New York provides yet another example of the importance of understanding the intersection of personal property rights, licences, copyright and non-fungible tokens (“NFTs”) and the distinctions between them.

The Claim

In TAMARINDART, LLC v. Raisa Husain and Owais Husain as Administrators of the Estate of Maqbool Fida Husain,[1] the plaintiff TamarindArt (“Tamarind”), a fine art gallery located in New York City, filed a complaint in response to a cease-and-desist letter it received from the estate of the late artist Maqbool Fida Husain (“Estate”). The Estate’s cease-and-desist was aimed at derailing Tamarind’s imminent NFT project based on Husain’s famous painting entitled “Lightning”, accusing them of copyright infringement. In their complaint, Tamarind seeks, among other things, a declaratory judgment of non-infringement of copyright purported to be owned by the Estate and monetary damages in an amount determined at trial.

The Facts

Tamarind purchased the 60-foot-long “Lightning” in 2002 for $400,000, and upon the sale Husain (the work’s creator and copyright owner) allegedly granted Tamarind an “exclusive, royalty-free, worldwide license to display, market, reproduce and resell all or any part of the artwork”, which included “all digital and off-line media”.[2]

However, beyond this expansive licence, Tamarind also claims that Husain offered “all the rights [in Lightning] including the copyright” such that Tamarind would be able to print posters, graphics or any digital works of Lightning in order to recoup some of the money spent purchasing the work.[3]

Eventually, Husain passed in 2011, and earlier this year Tamarind prepared to launch the “LightningNFT project” which involved the release of a still undetermined number of NFTs incorporating aspects of Lightning with 62 unique traits.

Lightning Strikes… Twice?

On January 8, 2022 Tamarind received the cease-and-desist letter from the Estate, which claimed that although Tamarind owned the physical artwork, it did not own the copyright in the work, and therefore had no right to reproduce, distribute copies or create derivative works based on the work or display it publicly.[4]

Considerations of Interest (From a Canadian Copyright Perspective)

Although this dispute has yet to be resolved, it highlights some of the issues that both copyright holders and licensees can face in the burgeoning NFT-minting industry, and provides an opportunity to reflect on some important considerations when dealing with copyright and NFTs:

Personal Property Rights Are Not The Same As Copyrights

  • Owning a physical copy of a work in which copyright subsists =/= owning the copyright in the work.
    • When you buy a copy of a work, you have personal property rights in that work. You can even re-sell that work according to what is known as the doctrine of exhaustion where the copyright holder’s exclusive rights to distribution are “exhausted” after the first purchase (think second hand books or vintage vinyl). However, because you do not have copyrights in the work, you cannot reproduce or make copies of that work.
    • This situation recently raised its ugly head out of the sand when a group of “Cryptobros” purchased a copy of a rare book about Alejandro Jodorowsky’s “Dune” for $2.66M and planned to make NFTs and an animated limited series following the acquisition. Little did they know, the purchase of the book did not confer any copyrights in the book – just the rights to the book itself!

What Does Your Licence Actually Entail?

  • As copyright holders/licensors and licensees, it is critical to understand the scope and the nature of any intellectual property licence that you are a party to. Consider: are you a non-exclusive or exclusive licensee? What rights to use the work and in what manner can you use the work as a licensee?
    • For example, the popular NFT platform NBA Top Shot’s Terms of Use clearly set out that NFT purchasers are granted a “non-exclusive, non-transferable, royalty-free license to use, copy and display the [NFT]…”, and not true ownership of the NFT (in the traditional sense) nor any copyright in the work subsisting in the NFT. Who reads Terms anyways?

Get It In Writing!

  • Any assignment of copyright must be made in writing and signed by the copyright owner (or duly authorized agent) under section 13(4) of Canada’s Copyright Act.
    • In the event that slip—ups are made when parties’ intentions are such that copyright should have been assigned upon the completion of a transaction, retroactive assignments of copyright can be drafted.

Obtain A Waiver of Moral Rights

  • Moral rights can only be waived under section 17.1(2) of the Copyright Act – they cannot be assigned like copyrights can.
    • It’s critical to ensure that if you are planning to modify a work in which you have obtained the copyrights (perhaps to mint some NFTs?) that you also obtain a waiver of the author’s moral rights – otherwise, you could expose yourself to liability for infringing their rights to paternity or integrity!

Substantial Parts Unknown…

  • As a non-copyright owner or non-licensee, even if you only reproduce “part” of a copyright protected work as an NFT or otherwise, you can still be found liable for copyright infringement if the portion constitutes a substantial part of the work.
    • According to the Supreme Court of Canada’s seminal decision in Theberge v. Galerie d’Art de Petit Champlain Inc.,[5] the “principal economic benefit [of copyright]… to an author… is the sole right to reproduce the work or any substantial part thereof in any material form whatever”.[6] In other words, if an NFT or other derivative created by a non-copyright owner includes a substantial part of a work in which copyright subsists, the non-copyright owner could be opening themselves up to liability for copyright infringement under section 27 of the Copyright Act.

 

 

[1] 1:22-cv-595 (S.D.N.Y) [TamarindArt].

[2] See TamarindArt at para. 2.

[3] See TamarindArt at para. 32.

[4] See TamarindArt at para. 4.

[5] 2002 SCC 34 [Theberge].

[6] See Theberge at para. 12.

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Turn Off The Plastic Tap

Oct 20, 2021 | Article

Dipchand LLP is proud to share our support and participation in artist and activist Benjamin Von Wong’s latest project and symbol of environmental change, the Giant Plastic Tap.

In collaboration with the Embassy of Canada in France, Von Wong continues to raise the awareness of single-use plastics, but for the first time, his art directly tackles the source of plastic pollution -its production. 

To help amplify the movement, Von Wong created an opportunity for everyone to participate in the project and help #TurnOffThePlasticTap through a $10,000 giveaway in prizes.

Our lawyer Dan Pollack worked closely with Von Wong and his team to create the necessary agreements, rules, and releases to bring this project to life. The following breakdown discusses the various legal components that are an essential behind-the-scenes part of this spectacular installation and giveaway.

(The Giant Plastic Tap in an active container yard featuring Benjamin Von Wong’s mother posing as a construction worker.) 

The Giant Plastic Tap –Art Installation 

Releases and Terms & Conditions: 

  • Property/Location Releases
  • Production/Media Releases
  • Model Releases 
  • Contributor Terms
  • Terms of Use for Users (individuals, media, NGOs, and businesses) 

Contest

Creating official contest rules with a “short rule” summary Contest Platform

  • Gleam.io 

Gleam.io is a third-party marketing platform used for running various campaigns with an app that allows you to track and monitor your competition on the platform, social media, and your website.
Von Wong uses Gleam.io to allow the audience to complete a variety of tasks, including sharing the contest link, creating mash-ups, and watching videos to increase their chances of winning a prize.

While Gleam provides excellent tools for this kind of campaign, it’s still vital to ensure that the applicable terms and contest rules are customized to your needs and properly vetted. 

(Remixed photo by Ted Chin for the #TurnOffThePlasticTap campaign -IG Account: @TedsLittleDream) 

Promotion
  • Social Media Platforms 

Social media is one of the easiest and most impactful ways to reach and engage with your audience. However, when it comes to sponsoring promotional campaigns, you need to consider the legal regulations and restrictions unique to each social media platform. 

To run a successful campaign, it’s essential to make sure you understand each platform’s policies, or you run the risk of penalties such as takedowns and even possible account suspension or termination.

You can find the rules for some of the top platforms here: Facebook, Twitter, and Instagram. 

Remember, to run a successful campaign of any kind it’s essential to have your legal ducks in a row with the correct documentation and to review the policies of all the platforms you’re using. While this due diligence can be daunting, it’s a critical step to avoid potentially serious legal headaches in the future.

We’re very excited to share Von Wong’s Giant Plastic Tap initiative and the contest with you and wish everyone the best of luck! For more information on the Giant Plastic Tap and the $10,000 giveaway in prizes, please visit https://www.turnofftheplastictap.com/. 

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