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NFTs and the Right of Publicity: Assessing the Legal Risks | Latham & Watkins LLP


NFT creators should craft strategies to avoid minting or auctioning NFTs that use the likeness of an individual without their consent.

As non-fungible tokens (NFTs) increase in popularity, the so-called common law “right of publicity” may create additional legal risks for NFT minters. The common law right of publicity prevents the commercial exploitation of an individual’s identity without that person’s consent.[1] Most U.S. states have defined a right of publicity and, correspondingly, a standard tort for violation of that right — frequently referred to as the tort of appropriation.

While the law is similar across most US jurisdictions, California — the heart of the entertainment industry — has particularly well-developed authority in this area. For this reason, this blog post focuses on California law in describing the unique issues that NFTs may present.

Background

Over the last several years, NFTs have become an increasingly popular medium for collecting and selling fine art, digital memorabilia, and in-game items. Stored on the Ethereum blockchain, NFTs offer a degree of transparency and verifiability that even many fine art pieces lack. However, as NFTs become common, they raise novel legal issues, such as intellectual property rights implications, whether they constitute securities under federal law, and the extent to which they generate state-law tort liability risks.

California Law and the Public Personalities

In California, a plaintiff can prevail on a claim for violation of the right of publicity by proving four elements: (1) the defendant’s use of the plaintiff’s identity; (2) the appropriation of plaintiff’s name or likeness to the defendant’s advantage, commercially or otherwise; (3) lack of consent by the plaintiff; and (4) resulting injury.[2] The protected aspects of one’s “identity” include a person’s name, likeness, and voice.[3] The right of publicity essentially seeks to protect the proprietary interest people have in their own images.[4]

While theoretically any individual could assert a claim for infringement of their right of publicity, such claims are often brought by notable figures and celebrities whose likenesses have been commercialized without their consent.

In this respect, the right of publicity is particularly relevant to NFTs bearing the likeness of public personalities. Such NFTs are not uncommon. For example, creators have minted NFTs depicting Kurt Cobain’s “The Last Session” photo shoot and featuring YouTube celebrity Logan Paul on a Pokémon card. But little has been written on the legal implications of NFT minting in view of the right of publicity. NFT creators should consider this issue in crafting strategies to avoid minting or auctioning NFTs that use the likeness of an individual without their consent and to the creator’s or seller’s advantage. The consequences of foregoing a sound risk-avoidance strategy could be significant: remedies for violating the right of publicity are wide-ranging, including both compensatory and punitive damages, statutory damages, and equitable relief such as disgorgement of profits.[5]

Lessons From Comedy III Productions

The 2001 California Supreme Court case of Comedy III Productions, Inc. v. Gary Saderup, Inc.[6] highlights the contours of how a claim for infringement of the right of publicity could be analyzed in NFT-specific contexts. There, an artist (Gary Saderup) had created drawings of celebrities that he later reproduced on T-shirts, including famed comedy trio The Three Stooges.[7] The owner of the rights to The Three Stooges act sued, alleging that Saderup violated its right of publicity.[8] The trial court ultimately entered a judgment against Saderup for $75,000, attorneys’ fees totaling $150,000, and a permanent injunction restraining Saderup from using the likeness of The Three Stooges on T-shirts and any other work that he could sell or market.[9] On appeal, the California Supreme Court upheld the trial court’s verdict that Saderup had violated the plaintiff’s right of publicity. The court stated that Saderup’s artistic skill “is manifestly subordinated to the overall goal of creating literal, conventional depictions of The Three Stooges so as to exploit their fame,” and “the marketability and economic value of Saderup’s work derives primarily from the fame of the celebrities depicted.”[10] In essence, the court found no defense to Saderup’s efforts, which were geared to profit off the likeness of The Three Stooges.

The right of publicity could be seen by courts to apply to NFTs just as it applies to T-shirts. NFTs associated with “literal” (i.e., photorealistic) depictions of an individual for the sake of commercial gain could be subject to challenge if they were not created with that individual’s consent (or the consent of whoever owns the rights to that person’s likeness). Indeed, California has applied the tort to everything from greeting cards to lithographs and T-shirts. The medium of the infringing work is not determinative.[11]

Moreover, while there are risks associated with minting NFTs in view of state-by-state publicity laws, the right to publicity is not so broad that any depiction of an individual without consent is prohibited. NFT creators can raise defenses, if the facts are on point, in the event an NFT sale is challenged. For instance, in the context of the right of publicity, creators frequently assert that their work is “transformative” and thus protected by the First Amendment.

Gary Saderup made that argument, claiming that his depictions of The Three Stooges were “protected speech” under the First Amendment.[12] However, the California Supreme Court heavily scrutinized the defense.[13] According to the court, “[d]epictions of celebrities amounting to little more than the appropriation of the celebrity’s economic value are not protected expression under the First Amendment,” but works that are sufficiently transformative (i.e., works that creatively comment on or transform the original) may be.[14]

Litigation Risks and Viral Images

All creators typically face litigation risks in using the likeness of prominent figures — including by minting NFTs — without consent. In 2010, Paris Hilton brought a right of publicity claim against Hallmark Cards,[15] which had created a birthday card depicting Hilton (with a photo of her head and a cartoon body) as a waitress and asserting her signature catchphrase: “That’s hot.”[16] The card, Hilton argued, depicted a scene from her television series The Simple Life, in which she worked as a waitress.[17] The Ninth Circuit determined that, while Hallmark Cards could argue that its use of the card was protected First Amendment speech because the card was transformative, Hilton could succeed on a right of publicity claim.[18] Today the analysis could be similar if, instead of a birthday card, the same depiction of Hilton had been created through an NFT.

The risk of liability for violating an individual’s right of publicity is pronounced with respect to NFTs, which can be created by anyone — no legal expertise required. And the NFTs that tend to make headlines are often those that appear to have required little effort to create but sell for a staggering profit, such as an NFT of a widely shared Nyan Cat GIF. Entrepreneurs may be tempted to associate an existing image of an individual with an NFT as a quick way to make money, especially because viral images are popular choices for NFTs. NFTs of viral images are almost poetic in a way — a sort of meta-commentary on the internet’s insatiable appetite for the monetization of the trendy and absurd. However, creating NFTs associated with an individual’s likeness without that person’s consent can open the door to a host of legal issues, including liability for violating the right of publicity. The democratized nature of NFTs is both their promise and their complication; the low barrier of entry can facilitate more variety and creativity, but also leave creators exposed to risks.

Takeaways

As NFTs continue to cement themselves as mainstream investments in fine art and memorabilia, NFT minters should be aware of the legal exposure that can come from using an individual’s likeness without consent. Even those who hold a copyright in the NFT and an underlying work are not completely insulated from legal liability, particularly at the state level. While protections under copyright law and the right of publicity overlap, they are not coextensive. Thus, NFT minters should pay close attention to the ways in which their work can expose them to liability for violating the right of publicity.

Endnotes

[1] Hilton v. Hallmark Cards, 599 F.3d 894, 910 (9th Cir. 2010).

[2] Kieu Hoang v. Phong Minh Tran, 60 Cal. App. 5th 513, 538 (2021).

[3] Practical Law Intellectual Property & Technology, Right of Publicity: Overview, Practical Law Practice Note Overview 2-505-8377.

[4] California Civil Code Section 3344 provides, “Any person who knowingly uses another’s name, voice, signature, photograph, or likeness, in any manner, on or in products, merchandise, or goods, or for purposes of advertising or selling,” without a person’s prior consent, is liable for damages. Cal. Civ. Code § 3344(a).

[5] See Hon. Kimberly A. Gaab & Sara Church Reese, Cal. Prac. Guide, “Civil Procedure Before Trial: Claims & Defenses,” Ch. 4 (VII)-E (The Rutter Group 2020). Moreover, while courts often focus on commercial or economic advantage in assessing damages, a litigant may prove a violation of the right of publicity even where there is no economic or pecuniary advantage obtained by the alleged infringer.

[6] 25 Cal. 4th 387 (2001).

[7] Id. at 393.

[8] Id.

[9] Id. at 393-94.

[10] Id. at 409.

[11] Section 3344 of the California Civil Code excludes certain categories of media to which the right of publicity does not apply, but that list is narrow and does not textually exempt blockchain-generated content like NFTs. Cal. Civ. Code § 3344(f).

[12] Comedy III, 25 Cal. at 396.

[13] Id. at 396-97.

[14] Id. at 400, 404.

[15] 599 F.3d 894.

[16] Id. at 899.

[17] Id. at 905.

[18] Id. at 911.



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