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We analyze the impact of NFT in music concerning copyright, intellectual property, and related legal issues for digital music artists.
The NFT phenomenon has begun to expand into the music industry as well. Artists of all kinds have found non-fungible tokens to be an innovative way to create direct and lasting contact with fans and gain more control over their music, bypassing intermediaries and retailers.
Several artists have already welcomed this trend, generating NFTs associated with digital works, physical goods, and live experiences. The use of NFTs, in this sense, grants a digital stamp of originality to the tokenized asset, as each non-fungible asset generated possesses unique characteristics that differentiate it from others, making it irreproducible and immutable. For example, the latest album by the rock band Kings of Leon was also released as a collection of NFTs. Mike Shinoda, the co-founder of the American band Linkin Park, created an NFT associated with a clip of an unreleased song accompanied by an animation.
Various collecting societies have long since grasped the potential of blockchain. SIAE, for example, the Italian collecting society, a few years ago partnered with Algorand, a leading blockchain platform, a partnership that recently led to the creation of more than 4 million NFTs, representing the rights of SIAE’s more than 95,000 member authors.
While, in theory, NFTs have the potential to significantly impact the role of music collecting societies and labels by giving artists the ability to control the exploitation of their musical works directly, it is certainly not easy to have the skills and tools to successfully coin and sell NFTs in the marketplace in compliance with copyright law. In addition, it is important to carefully consider what rights music artists actually hold, as copyright in the economic exploitation of a musical work is usually assigned to labels, and it is important to understand whether it can be incorporated into an NFT.
In addition, agreements with labels often use broad formulations, extending the exploitation of recordings to all technologies and platforms “developed in the future,” i.e., all technologies not yet developed at the time the artist signs the agreement. In such cases, it is quite possible that the wording of such clauses may also include the creation of NFTs associated with a recording. In this regard, after a long debate on the applicability of art. 119, paragraph 3 of Italian copyright law – which limits the possibility of transferring “future rights which may be attributed by subsequent laws, involving a broader protection of copyright in its content or longer duration” – to music publishing contracts, the Italian Supreme Court gave a negative answer. More precisely, the Court concluded that while specific provisions govern book publishing contracts, contracts having as their subject cinematographic or musical works are to be considered atypical contracts, not governed by the provisions provided for the “traditional” publishing contract (Italian Court of Cassation No. 12086/2013 and 26626/2008). Consequently, the transfer of exploitation rights of musical works and sound recordings through future technologies could be validly included in music publishing and recording contracts.
A second noteworthy issue is that the creation and sale of an NFT in the music industry must take into account all rights in the works, which are usually more than just copyright, taking into account that musical works generally involve multiple authors, such as composers of the music and authors of the literary part. For example, an artist who wishes to create and sell an NFT with a new music video clip as its subject matter will need to verify whether he/she has obtained all licenses to do so, including those of the musicians and the authors of the lyrics.
This analysis should include a careful review of the agreement with the co-authors and their label, if any. However, if no agreement is reached between the co-authors, the exploitation of the economic rights will not be free; on the contrary, it will be subject to the rules established by articles 33 and sub. of Italian copyright law, which govern musical works.
Finally, established artists may also face a third issue: as mentioned above, NFTs can be associated with any number of digital objects, including merchandising items bearing the artist’s name or image, backstage experiences, or exclusive events, to name a few.
In our opinion, it will become increasingly important concerning an agreement concerning NFTs to analyze in detail the considerable legal and reputational issues of agreements between artists and labels, especially when the artist is particularly well-known.
This is the third article in the series of articles on NFT by the professionals of DLA Piper. You can find the previous articles at these links “What are NFTs: speculative bubble or next digital revolution?” and “NFTs and art: a journey into the world of crypto art and its legal issues.”