NFTs Excite Hollywood But Not Because They Can Solve Piracy

The fleeting non-fungible token (NFT) craze showed that some people are willing to pay vast amounts of money for digital assets that are not guaranteed to retain their value.

 

These digital entries are stored on a blockchain and allow buyers to prove that they are legitimate ‘owners’ of some underlying asset or right.

 

While NFTs don’t grant copyrights, NFT owners are ‘rights’ holders in a sense, although the specifics may vary from project to project based on the fine print.

Corporate and Government Interest

In recent months interest in NFTs has waned, with some early adopters finding themselves heavily in the red thanks to their purchases. While some of these NFTs are bound to become irrelevant, the underlying technology has plenty of potential.

 

Many of the largest companies in the world acknowledged the opportunities and embraced NFTs. Major brands such as Coca-Cola, Disney, Nike, and Ubisoft were quick to jump on the bandwagon, for example.

 

Interest is in large part driven by the potential revenues the technology might deliver moving forward. At the same time, however, there are challenges as well; the copyright implications are not always clear and ‘pirated’ NFTs will almost certainly complicate matters.

 

The U.S. Government is taking these issues seriously. Late last year, the Patent and Trademark Office and the Copyright Office launched a joint consultation to take stock of the potential legal and policy questions related to NFTs.

MPA Shares Its NFT Views

Dozens of companies and organizations have responded to the call with detailed opinions. They include the Motion Picture Association (MPA), which represents Netflix and the major Hollywood studios.

 

In the past, major copyright holders have fiercely resisted novel technologies. When it comes to NFTs, the MPA and its members see an exciting business opportunity.

 

“NFTs represent an exciting business opportunity for MPA’s members to promote their core products —motion pictures and television programs — in new ways, expand their merchandise offerings, and connect with their audiences on a deeper level,” the MPA writes.

 

Potential copyright issues are always a concern but the Hollywood group believes that current laws are capable of handling any NFT-related challenges.

 

“Although NFTs are still in their infancy, and it is difficult to predict future marketplace developments and potential uses of this new technology, the MPA currently believes that existing intellectual property law can address issues if and when they arise.”

 

Blockchain technology is already widely used in the movie industry with official NFT releases for prominent titles including The Matrix, Star Trek, Star Wars, Jurassic Park, Lord of the Rings, Ghostbusters, Back to the Future, Stranger Things, and even the Powerpuff Girls.

 

Some of the same brands have also been exploited by third parties who created unauthorized NFTs. While that’s a problem, the MPA believes that U.S. law, including the DMCA’s takedown provision, is well-equipped to handle copyright and trademark issues as they arise.

Authentication and Piracy

The MPA’s submission shows that it has made considerable effort to understand the NFT ecosystem and its potential. In addition to the ‘collectible’ aspect, NFTs can also be used as proof of ownership or access.

 

The MPA says that streaming services could use NFTs as an authentication option, for example, replacing the traditional username and password.

 

“NFTs can serve a limited role in the context of access controls to streaming content. Specifically, if the user’s license were contained in an NFT, the streaming service could implement a system to ensure that the NFT is in the user’s crypto wallet before initiating the stream,” MPA notes.

 

There are also projects that envision the use of NFTs to fight piracy and counterfeiting, including an official EU initiative. However, the MPA doesn’t see blockchain authentication technology as a potential anti-piracy tool.

 

“This system has been utilized to a very limited extent thus far. Beyond that, there is no reason to believe that NFTs can currently solve the overall problem of online piracy,” the MPA writes.

 

The same applies to the content to which an NFT might provide access. Pirates can still copy the content and share it elsewhere, NFTs can’t prevent that.

 

“While the NFT may be perfectly secure on the blockchain, that fact does nothing to enhance the security of copies of the underlying work or prevent unauthorized exercise of any of the §106 rights. The NFT simply creates a chain of alleged ownership of the particular copy.”

 

The MPA seems positive about the potential of NFTs. Hollywood doesn’t believe the technology will stop piracy or revolutionize copyright management but recognizes the commercial potential.

RIAA Sees Opportinities and Threats

This overall sentiment is shared by other rightsholder groups, including the RIAA. In a joint submission alongside A2IM, Screen Actors Guild and SAG-AFTRA, the music industry’s trade organization sees endless commercial opportunities. Piracy remains a concern, however.

 

Coming from the RIAA, that’s hardly a surprise. The recording industry group has already sent DMCA takedowns and cease and desist letters targeting unauthorized music-inspired NFT projects.

 

“While NFTs and online interactive environments present endless and unprecedented opportunities for rightsholders to exploit their works and engage with consumers, they also present new and novel ways in which works, and especially digital music works, can be infringed and pirated,” RIAA notes.

 

Similar to the MPA, RIAA and partners don’t see NFTs as a replacement for current copyright registration or management options. At least, not at this stage.

 

“Further, claims that NFT and metaverse technology will solve digital transparency and accountability problems are overblown and premature, if not outright false,” RIAA writes.

 

“The current technology in the NFT and metaverse space, while innovative and promising, is simply not where it needs to be to ensure that copyright holders can consistently and effectively manage and enforce their copyrights.”

 

Finally, both the MPA and RIAA stress that NFT platforms must properly educate consumers on what they’re actually buying. Right now, it is often uncertain what rights are associated with an NFT and how these rights can be exploited. Falling prices aside, unmet expectations can lead to disappointment for buyers down the road.

 

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A copy of MPA’s submission for the ‘Study on Non-Fungible Tokens and Related Intellectual Property Law’ is available here (pdf) and the filing of RIAA and consorts can be found here (pdf)