Jay-Z vs Damon Dash: lessons for emerging tech companies – tech


United States: Jay-Z vs Damon Dash: Lessons for Emerging Tech Companies

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Rapper Jay-Z’s legal beef with record director Damon Dash interweaves old-fashioned creativity and cutting-edge technology, offering classes to artists, promoters, developers, and anyone else involved in the arts. The disagreement between two-thirds of the founding brains of Roc-A-Fella Records is over the ownership and regulation of non-fungible tokens (NFTs) and is likely to start a wave of problems related to NFTs. This article examines the legal issues that may arise in court in this case, and its potential impact on emerging technology companies, particularly video game developers.

Background

In 1996, Jay-Z joined forces with Damon Dash to sell CDs of his first album. Reasonable doubt. In June 2021, Dash launched an auction to sell this album as NFT. Jay-Z’s label Roc-A-Fella sued Dash in an attempt to prevent him from auctioning off the album’s copyright as NFT. Roc-A-Fella’s claim was that the copyright to the album was held exclusively by Jay-Z and that Dash did not have the legal right to sell the album even though Dash held a third of the shares. of the label. Dash, meanwhile, argued that he never intended to sell his stake in
Reasonable doubt and that he never hit an NFT to reflect his involvement in the album or in Roc-A-Fella.

U.S. District Court Judge John Cronan issued a temporary restraining order prohibiting Dash from selling the album as NFT. Since Dash and his attorneys did not appear at the hearing, the lawsuit is expected to continue and the court should likely decide the legal issues related to the DTVs. With the stage set, we’ll now delve into some of the potential legal issues that may arise in court and what they mean for emerging tech companies.

Legal issue

These are some of the legal issues we plan to raise in court in Jay Z’s legal dispute with Damon Dash.

  • Ownership – Roc-A-Fella Records argued that although Dash owns a third of the shares in the company, the company owns the album itself and he has no legal right to sell the NFT. The main question that is likely to come before the court is who owns the right to convert the album to NFT? Can only the copyright owner strike DTV from existing works or can the right to strike DTV for existing works be assigned to a third party? At present, there is no clear answer to these questions. Either way, this case is a reminder of the complex issues involved in determining who can strike DTVs from existing works. It also highlights the importance of copyright registration and the need for a strong licensing agreement before assigning or licensing copyright to a third party.
  • Distribution – Usually, a TVN can only be created, or legally “struck”, with the consent of the owner of the underlying work. To create an NFT, the software that generates the NFT must make a copy of the content file. To do so without the consent of the owner of the intellectual property is tantamount to copyright infringement. The basic question that is likely to be brought before the courts is whether the TVN is done without the permission of the copyright owner, is the resale of NFT also constitute copyright infringement? While such a sale is akin to the resale of a counterfeit book or musical composition, there is no clarity on the legality surrounding the use and distribution of DTV by third parties. This legal issue is significant for video game companies, as they often provide gamers with digital collectibles and virtual in-game items. The issue extends beyond beef Jay-Z Damon Dash. To ensure transparency, video game companies have started to define them as individual “non-replaceable” NFTs. Therefore, video game companies, AR / VR companies; digital music producers as well as record labels need to ensure that they have the right to convert digital assets to NFT.
  • Right to sell – Another key question that may arise in court is “Who has the right to sell NFTs?” Roc-a-Fella Records is likely to argue that, since it owns the copyright to Reasonable doubt, Jay-Z’s debut album, he has the right to sell the NFT. The initial auction on SuperFarm was called off, but Roc-a-Fella Records feared Damon Dash would attempt to sell the NFT again even though Judge Cronan issued a temporary restraining order. This case is a reminder of the need to take timely advice on copyright matters. It is in particular a reminder that professional legal assistance must be sought for the drafting of the sales right compromise.
  • Securities regulation – The court will also have to decide whether the NFTs are securities and therefore subject to regulation by the United States Securities and Exchange Commission (SEC). According to broker Arkonis Capital LLC, NFTs have enormous potential value but do not function like traditional securities and do not clearly fit into the existing legal framework. The SEC is likely to be interested, however, when NFT coin mechanisms make their tokens look like or act like securities. This can be the case when NFTs are obtained through fractional ownership (like stocks) or distribute the income from subsequent sales. Therefore, it is likely that the court could address the financial categorization of the status of NFTs and whether they qualify as securities under the Securities and Exchange Act of 1934.
  • Assignment of copyright and license –Some commentators argue that the purchase of a TVN is simply a transfer of ownership from one person to another and that no assignment of copyright or license takes place. Conversely, some claim that the purchase of NFT is a form of copyright assignment. This view is problematic, because purchasing an NFT does not confer ownership of the underlying work on the buyer, unless it is explicitly provided by the owner of the underlying intellectual property. underlying. However, since there is little case law on digital art copyright infringement, there is no clarity regarding copyright assignment and licensing related to NFTs. In all cases, the purchase or sale of NFT involves several gray areas, particularly with regard to the drafting and interpretation of contracts. Given the complexity of copyright licensing, the legal advice of a suitably qualified lawyer should be sought before buying or selling NFT.

Conclusion

Jay-Z Damon Dash’s legal meeting sheds light on 99 issues and opens a pandora’s box of NFT-related legal issues that so far have not been subject to judicial review. Further litigation involving DTVs is expected as there is currently no clear ruling or guidance on how to regulate DTV. While the lawsuit can guarantee that there is no love lost between Jay-Z and Dash, it also serves as a warning to NFT buyers and sellers to make sure both parties know exactly what is sold. It also stresses the importance of expert legal advice at every step leading to the creation of digital art as TVN.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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