Property Law

NFTs and the Tweet Worth $2.9 Million: Beliefs Versus the Legal Reality

April 24, 2021
Copyrights, Intellectual Property, Internet, Property Law

Emily Newman, MJLST Staffer

A clip of Lebron James dunking a basketball, a picture of Lindsay Lohan’s face, and an X-ray of William Shatner’s teeth—what do all these seemingly random things have in common? They’ve all been sold as NFTs for thousands to hundreds of thousands of dollars. It seems like almost everyone, from celebrities to your “average Joe” is taking part in this newest trend, but do all parties really know what they’re getting themselves into? Before addressing that point, let’s look at what exactly are these “NFTs.”

What are they?

NFT stands for “non-fungible token.” In contrast to fungible items, this means that it is unique and can’t be traded or replaced for something else. As explained by Mitchell Clark from The Verge, “a bitcoin is fungible — trade one for another bitcoin, and you’ll have exactly the same thing. A one-of-a-kind trading card, however, is non-fungible. If you traded it for a different card, you’d have something completely different.” NFTs can basically be anything digital, and while headlines have been made over Twitter founder Jack Dorsey selling his first tweet as an NFT for $2.9 million, their popularity has really exploded within the world of digital art. Examples include the Nyan Cat meme selling for around $700,000 and the artist Beeple selling a collage of his work at Christie’s for $69 million (for reference, Monet’s “Nymphéas,” was sold for $54 million in 2014).

Anyone can download and view NFTs for free, so what is all the hype about? Buyers get ownership of the NFT. “To put it in terms of physical art collecting: anyone can buy a Monet print. But only one person can own the original.” This originality provides a sense of authenticity to the art, which is important these days “when forged art is proliferating online.” To facilitate this buying, selling, and reselling of digital art, several online marketplaces have emerged such as OpenSea (where one can purchase their very own CryptoKitties), Nifty Gateway, and Rarible.

NFTs, Copyright Law, and Consumer Protection

As mentioned above, NFT purchasers can own an original piece of digital art—but there’s a catch. Owning the NFT itself does not necessarily equate to ownership of the original work and its underlying copyright. In other words, buying an NFT “does not mean that the copyright to that artwork transfers to the buyer,” it is simply a “digital receipt showing that the holder owns a version of the work.” Without the underlying copyright, the purchaser of an NFT does not have the right to reproduce or prepare derivative works, or to distribute the work—that right belongs exclusively to the copyright owner.

Mike Shinoda, one of the musicians behind Linkin Park and an NFT artist himself, states that “there’s nobody who’s serious about NFTs who really humors the idea that what you’re selling is the copyright . . . .” However, as Pramod Chintalapoodi from the Chip Law Group points out, oftentimes “buyers’ beliefs about what they own do not translate to legal reality.” Chintalapoodi also describes how companies who sell NFTs are not transparent about this either; for instance, Decentraland describes itself as the “first-ever virtual world owned by its users,” but “according to Article 12.1 of Decentraland’s Terms of Use, it is Metaverse Holdings Ltd. that owns all IP rights on the site.” However, its users still spend millions of dollars on the site buying NFTs.

Going forward, NFT purchasers should clarify with the seller about what exactly it is they are purchasing. Preston J. Byrne from CoinDesk encourages consumers to ask “are you buying information, copyrights, bragging rights or none or all of those things? Do you have the documentation to back all of that up?” Additionally, are you even buying an original work or did the seller create an NFT of someone else’s work? Asking these questions early on can help with avoiding “significant financial or legal pain down the road.” While it may not be the norm to receive the underlying copyright when purchasing an NFT today, and while lawmakers may not step in anytime soon (or at all) and force sellers to display their terms explicitly, it is predicted that transferring copyrights to the purchaser will be a “valued feature for NFT platforms” in the future.

Estate Planning in the Digital Age: What Every Millennial Needs to Know

November 12, 2019
Property Law, Trusts and Estates

Nicole Petrow, MJLST Staffer

As our society becomes increasingly tied to digital technologies, the world of estate planning is faced with novel questions. Today, many people own significant digital assets, including anything from electronically stored photos and videos to valuable domain names and cryptocurrency. The field of estate planning is evolving with law of digital property as well as the digitization of the will drafting process.

How is estate planning complicated by advancing technologies?

After death, accessing a loved one’s digital presence can be a significant way by which grieving loved ones preserve cherished memories. There are over 2.5 quintillion bytes of data created each day, many of these through communication platforms, social media, online storage, and other digital mediums. However, passwords, data encryption, criminal laws, and data privacy laws complicate how to plan for the eventuality of passing these assets.

Social media presents interesting challenges for proper planning, because simply sharing account passwords may not always be proper. Using another person’s password to access an account, even if freely given, is potentially punishable under the federal Computer Fraud and Abuse Act as it may violate the account’s Terms of Service agreement by “exceeding authorized access.” Platforms have various methods of handling the deaths of users: Facebook and Instagram have options to “memorialize” accounts after death, while other platforms such as Twitter and LinkedIn allow account deactivation.

Data privacy laws add an additional wrinkle in accessing a loved one’s online accounts after death. Until recently, the privacy protections ensured by the Stored Communications Act prevented a duly appointed fiduciary from accessing the contents of a deceased user’s online account. In response to this problem, the Uniform Law Commission promulgated the Revised Uniform Fiduciary Access to Digital Assets Law (RUFADAA), which has been adopted in 44 jurisdictions. The RUFADAA is significant for many reasons, particularly because it formally recognizes digital property as a property right that can be managed and accessed by third parties after death.

Proper planning is also essential for anyone with digital assets of significant financial value. Problems arise when owners of domain names or cryptocurrency die without having identified their assets, or planned for their transfer.

Why should I care?

For the average Millennial and Gen Zer, death planning may feel like a morbid project, better suited for the wealthy and elderly. A 2019 survey shows that only 1 in 5 of 18-34 year olds have an estate plan in place. However, there are many reasons to prepare an estate plan regardless of wealth, age, or family status.

Primarily, estate planning allows a person to direct what happens to their money and property after their death. But this is not the entire equation. Estate plans allow you to:

Outline and identify your online assets. Proper planning ensures that your loved ones will be able to identify, access, and preserve any online presence you may have. This includes social media accounts, personal blogs, and anything of financial value. If no one knows of your online presence, it may be lost after death.
Plan for the transfer of your debts. Depending on the type of loan you have, your debt may not die with you. Certain private loans will transfer to your co-signer in the event of your death.
Outline your desired end of life care. Drafting Health Care Directives and Powers of Attorney allow you to express your desired medical treatment in the event of your incapacitation.
Make things easier on your loved ones. Clearly expressing your desires for your end of life care, as well as outlining your intended asset distribution, will help your grieving loved ones make big decisions without the stress of wondering “what you would have wanted.”
Avoid unwanted “intestate” succession. If you die without a will, your state’s intestate succession laws will determine who receives and controls your assets. These may not reflect your desires – drafting a simple will can avoid this issue.
Arrange the guardianship of any minor children. Planning for this potential is essential for any parent, particularly if your state’s intestate succession statute does not reflect your desires for your children.

What about the will drafting process itself?

Technological advancements are changing the ways estate planning documents themselves are being drafted and admitted to probate courts around the world. Modern cases are asking new questions of previously settled law: is a will written on the iPhone Notes app sufficient? In Microsoft Word? What about a will hand-written by stylus on a tablet?

In response to questions such as these, the Uniform Law Commission drafted the Uniform Electronic Wills Act to accommodate electronic aspects of will executing. This act primarily encourages the validity of electronically signed and cloud-stored wills. Some commentators suggest that these electronic wills are likely to work best for young people with fewer assets and simple succession plans.

The law of wills and trusts is likely to continue evolving rapidly in order to keep pace with technological development. To preserve any Instagram masterpieces or bitcoin troves for those that will appreciate them in the future it is important to stay informed of the status of the law and have a plan in place. If this is your first time thinking about an estate plan, take stock of your assets, your family situation, and your state’s intestacy laws, and consider contacting a professional to plan for the future.

Renewable Energy vs. National Parks

February 6, 2019
Energy Law, Environment, Environmental Law, Property Law, Solar Energy

By: Bethany Anderson

That’s what happened in Animal Welfare Institute v. Beech Ridge Energy LLC, where a wind energy facility was curtailed because it stood in the migration pathway of an endangered species—Indiana bats. The court allowed the facility to operate, but with significant constraints. For instance, though construction on those turbines already under construction could continue, Beech Ridge could operate only after it applied for and obtained an Incidental Take Permit (“ITP”), which would immunize Beech Ridge from certain ESA penalties for killing and injuring bats. Moreover, construction of additional turbines was conditioned on obtaining an ITP. Additionally, the Court ordered the Fish and Wildlife Service (“FWS”) to determine when Beech Ridge could actually operate after Beech Ridge obtained an ITP, taking into account the migration and hibernation patterns of the bats (see this report for a brief discussion on the aftermath of the Beech Ridge case).

In a similar energy against nature context, significant outcry (see this article) over oil and gas drilling in and around national parks arose in the last year. The Trump Administration opened up more public lands for mineral leasing, and directed agencies to revise or rescind rules that burden domestic energy development. Environmental groups lamented the endangerment of pristine public lands, darkness of wilderness night skies, quiet of natural soundscapes, and tech- and industry-free experiences many visitors crave. These are all legitimate concerns because the experiences, sounds, and sights preserved in our national parklands are preserved relatively unspoiled only in these limited corners of the country. The groups’ sentiment seems to be “let’s just drill somewhere else, okay? It’s a big country. Preservation uses claim few acres in the scheme of things.”

The recent outcry misses, however, concern over greener energy projects that also threaten wilderness and nature values. Like in Beech Ridge, there are two sometimes competing goals here. Renewables serve climate change goals, displacing carbon-emitting energy sources like coal, natural gas, and oil. National parklands preserve land and culture in their natural and historical state. What happens when green energy development requires a huge expanse of flat land exposed to sun year round? A solar facility one mile from Mojave National Preserve presents an example. Is such a land use plan any less invasive than drilling? Maybe it’s quieter and lower to the ground, and maybe it serves a goal that those in the nature fight can get behind better than oil and gas drilling. In this instance, the solar facility still a mile away and does not in any way reach into the park through something comparable to directional drilling. But the facility uses land that was previously untouched and is still potentially visible from parks. As another example, what happens when the only way to get offshore wind online is to construct a high-voltage transmission line across a historic park? Developers say alternative energy sources that replace closing coal plants require a transmission line crossing a historic trail. Opponents say the line undermines the historic atmosphere of the trail and surrounding park area, and may open the floodgates to more industrialization in historic and pristine areas. In the same way as oil and gas drilling, these developments undermine some of the wilderness and historic values park advocates fight for.

So how do we balance these seemingly competing values? National parks are to be preserved unimpaired for the enjoyment of present and future generations. That mandate may conflict with climate change-combatting green energy tech seeking the most effective locations for new facilities.

The 9B regulations (“regulations”) that govern nonfederal oil and gas rights in and around national parks are a framework from which to balance renewables with the preservation mandate. The regulations require a plan of operations, plans in case of spills or other emergencies, a security bond in case of harm to park resources, and eventual restoration of the land, returning it as close to its original status as possible after operations conclude. Renewables are likely more permanent than an oil or gas well, so space and distance restrictions will need to be stricter. But a similar plan of operations, with mitigation strategies and emergency contingencies, is a good start, especially since the regulations are already in place in one piece of the energy sector. As energy technology develops, it constantly brings novel challenges into the existing legal context. The 9B regulations provide a starting point for the ever-growing green energy versus preservation debate.

The Music Modernization Act May Limit Big Name Recording Artists’ Leverage in Negotiations With Music Streaming Companies

October 28, 2018
Business Law, Competition, Copyrights, Economics, Economy, Intellectual Property, Property Law

By: Julia Lisi, MJLST Staffer

Encircled by several supportive recording artists, President Trump signed the Music Modernization Act (“MMA”) into law on October 11, 2018. Supporters laud the MMA as a long overdue update for U.S. copyright law. Federal law governs roughly 75% of recording artists’ compensation, according to some estimates. The federal regulatory scheme for music license fees dates back to 1909, before the advent of music streaming. Though the scheme has been tweaked since 1909, the MMA marks a major regulatory shift to accommodate the large market for music streaming services like Spotify and Apple Music.

Prior to the MMA, streaming services virtually had two options for acquiring music catalogs: (1) either acquire licenses for each individual song or, (2) provide music without licenses and prepare for infringement suits. Apple Music adopted the first strategy and as a result initially suffered from a much leaner music catalog. Spotify went with the second strategy, setting aside funds to weather litigation.

The MMA offers a preexisting mechanism, the mechanical license, on a broader scale. Once the MMA takes full effect, streaming services can receive blanket licenses to entire catalogs of music, all in one transaction. The MMA establishes the Mechanical Licensing Collective (the “Collective”), a board of industry participants, which will set license prices. The MMA is, in part, meant to ensure that more participants in the music industry will be paid for their work. For example, music producers and engineers can expect to receive more compensation under the MMA.

While the MMA may broaden the pool of industry participants who get compensation from streaming, the MMA could weaken big name artists’ bargaining positions with streaming services. Recording artists like Taylor Swift and Adele have struggled to keep their albums off streaming services like Spotify. Swift resisted music streaming based on her conviction that streaming services did not fairly compensate artists, writers, and producers. While Swift may have come to an agreement with Spotify and allowed her albums to be streamed, there are still holdouts. More than two years after its release, Beyoncé’s Lemonade still is not on Spotify.

With the Collective controlling royalty rates, big name artists might not have the holdout power that they wield now. If Swift’s music had been lumped into a collective mechanical license, she may not have had the authority to withdraw or withhold her albums from streaming services. The MMA’s mechanical licenses are compulsory, indicating the lower level of control copyright owners may have. Despite this potential loss of leverage, the MMA is widely supported by artists and industry executives alike. Only time will tell whether the Collective’s set prices will make compensation within the music industry fairer, as proponents suggest.

Westward (And Then Some) Expansion: One Theory of Property Rights on the Moon and Mars

September 28, 2016
International Law, Property Law, Space Law

Jordan Rude, MJLST Staffer

Recently a friend of mine received, for his birthday, a deed to one acre of land on Mars. That’s right—he is the proud owner of property located approximately 34 million miles from Earth. This is possible thanks to the efforts of various (and often interconnected) websites such as Buy Mars, Buy Planet Mars, Lunar Registry, and Lunar Land. While selling extraterrestrial property is not a recent development (see here and here), and there does not appear to be any recent lawsuits regarding this practice, these methods still deserve scrutiny. With the rapid advancement of technology in recent decades and increasing participation by private companies in space programs (SpaceX recently tested a Mars-capable rocket), human settlement on the Moon and Mars is becoming a possibility (albeit a distant one) within our lifetimes. At that point, property ownership will become an important and possibly contentious issue. For the millions of people who have bought land on the Moon and Mars, the question of whether their claims will be recognized in such a situation is a not insignificant one.

Some of these websites claim to have legal standing for their ownership of property on Mars. Consider Buy Mars (owned by Lunar Land). Under the heading “Lunar Land’s Legal Right To Offer Planet Mars Land,” the site makes reference to the U.N. Outer Space Treaty of 1967 as well as the tradition “dating back to early U.S. settlers” of staking a claim on surveyed land through the U.S. Office of Claim Registries. The Outer Space Treaty has been previously discussed by this blog (in a different context). Suffice it to say that this treaty prohibits countries from claiming ownership of land on Mars and other extraterrestrial property, but says nothing about individuals or corporations. Thus, the argument would be that Buy Mars, because it is not a sovereign nation, is not subject to the treaty specifically prohibiting claims of ownership on Mars.

Beyond the lack of a direct prohibition, Buy Mars also claims historical precedent as an affirmative justification. This reference to historical precedent is problematic for two reasons: first, the U.S. Office of Claim Registries does not exist, and likely never existed; and second, this is not an accurate statement of the process by which the West was settled. In fact, the federal government sold the land—first as townships and other large plots, and later in smaller, more affordable plots, before finally offering land for free under the Homestead Act of 1862 (see Michael C. Blumm & Kara Tebeau, Antimonopoly in American Public Land Law, 28 Geo. Envtl. L. Rev. 155, 165–71 (Winter 2016)). That is, the federal government owned the land it sold to speculators and other settlers (though this ownership came more or less from the government declaring it to be so, not dissimilar to what Buy Mars has done). So, because the U.S. government does not own land on Mars that it could sell to Buy Mars (to then sell to us), on its face the claimed historical precedent is not in fact proof of the legality of the process.

However, setting aside the flaws in Buy Mars’ formulation of the argument, let’s assume that the principles of westward expansion can be applied to property on Mars—would this type of claim survive a legal challenge?

Most likely it would not. Construing the westward expansion analogy narrowly, the U.S. government would have to first own land on Mars and then distribute it to corporations like Lunar Land or individuals. This is clearly prohibited by the Outer Space Treaty. That being said, if a company like SpaceX lands on Mars, the Outer Space Treaty would potentially not restrict its ability to claim land. At that point, it is unclear what the legal policies governing ownership would be. In that situation, a process loosely similar to westward expansion could be utilized, wherein a larger entity (in this case a large company) distributes land to newcomers. The key difference between the Buy Mars argument and SpaceX landing on Mars would be the latter company’s physical presence on the planet—an important aspect of making such property claims and the most likely way to get around the Outer Space Treaty. This could be extremely lucrative for SpaceX but problematic for those who have already purchased land on Mars. Ultimately, the websites currently offering land on the Moon or Mars do not have legal standing to do so, and any person who bought such land is unlikely to find legal protections should the need arise. The law in this field is very uncertain, if it exists at all, and the day may come where a true answer is needed.

Of course, the legal implications of this process should not deter you from investing in extraterrestrial property for the fun of it. My friend’s deed comes from Buy Planet Mars, whose website makes quite clear, in the FAQ section, that the deed is “a novel gift and for entertainment purposes only.”

Geostationary Earth Orbit: Property for the Space Age

March 10, 2016
Property Law, Space Law

Ian Blodger, MJLST Note & Comment Editor

The past several years have seen great advances in space based technology and exploration. Most recently, scientists used the LIGO to prove the existence of gravitational waves. While the two detectors used to make this discovery were located in the United States, scientists have plans to deploy more advanced and precise measuring tools in space, likely in Geostationary Earth Orbit (GEO). GEO’s unique properties make it a perfect choice for this and similar satellite technology. Essentially, GEO is an orbital path around Earth where satellites remain in a fixed position above a specific point on Earth. This aspect of GEO makes it easier for the satellite to communicate with Earth based operations because the satellite operator does not need tracking technology to follow the satellite, but can simply build a stationary receiver. One additional result of GEO is that satellites that enter this orbital path remain there forever unless they are pushed out of orbit somehow. This is distinct from satellites in Low Earth Orbit (LEO) where satellites are not fixed above one point on Earth and remain for only a few years. This gives GEO satellites an additional advantage of reducing costs over the long term because operators do not need to replace them with the same frequency as LEO satellites. With the special conditions and long term cost savings of GEO, it is no wonder that more and more satellite operators and manufacturers are interested in placing a satellite in GEO.

One issue that will become more important as satellite operators continue to utilize GEO’s special attributes is the issue of property rights. Currently, satellite operators who place a satellite in GEO have no property right over that orbital position. In my Note “Reclassifying Geostationary Earth Orbit as Private Property: Why Natural Law and Utilitarian Theories of Property Demand Privatization,” recently published in Volume 17 of the University of Minnesota Journal of Law Science & Technology, I argue that this lack of a defined property right is both contrary to the underlying theoretical assumptions of various space treaties, and that granting a property right would be a good idea from a utilitarian perspective.

Allowing individuals to obtain property rights over a region of space makes sense from a natural law perspective. The various space treaties cite natural law for the proposition that an individual cannot own space, likening the vast emptiness to the sea. Under traditional natural law theory, the sea is not subject to homesteading and other means of property acquisition because it is so large and is not capable of being contained. However, Grotius, the natural law philosopher most responsible for this theory argued that when an area of the sea was slightly separated and could be wholly controlled, then property rights could exist.

While space generally is more like the uncontrollable sea, GEO is more akin to small inlets capable of control. First, GEO only comprises a small area of space; if satellites are too close to Earth or too far, they will not maintain their synchronicity with the planet’s rotation. Second, objects placed in this orbit will remain in a fixed position relative to the Earth. This is different than a ship on top of the ocean that moves with the waves and tides relative to shore. Finally, individuals who place satellites in orbit expend large amounts of money and energy to do so, and therefore meet the labor requirement expressed by both Grotius and Locke’s theories of property.

Granting property rights over certain portions of GEO makes sense from a utilitarian approach as well. This approach to property looks to see whether leaving things in common causes more harm than benefits. In this case, the tragedy of the commons has caused large costs and dangers that could be rectified by allowing GEO property rights. First, without property rights, individuals have little incentive to ensure their satellites leave orbit after failure. Under the current approach to GEO, satellite operators have little incentive to move their satellites to a graveyard orbit following failure because they can obtain another, similar, GEO position and do not have to worry about selling the inhabited position at a loss. With property rights over these positions, there would be a great incentive to move the satellite to a graveyard orbit to secure the best price for the position. Second, because no satellite operator has a property right which is harmed by space debris in the area, manufacturers create a race to the bottom in terms of quality parts, which in turn results in malfunctions and potentially more debris in the area. This leads to debris defense costs, such as special plating to deflect debris, that add up over the long term. Thus, a utilitarian approach to property yields the same result as the natural law: satellite operators should obtain a property right over GEO.

This is an interesting and fast moving area of law, and the decisions we make now can have great impacts on the future of space operations, especially considering debris in GEO will remain there forever.

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