Industry Sectors

Navigating NFTs: Considering Best Practices and Avoiding Pitfalls

By Sarah Conley Odenkirk, Partner

All of a sudden, no one can talk about anything but NFTs!  For those people who have used up all of their tech tolerance on Zoom meetings this year, understanding this latest frenzy can seem like an insurmountable task.  But FOMO tends to be very motivational!  Given that the value of the crypto art market has now reportedly surpassed $200 million, the fear of missing out may very well be warranted.  And actually, as it turns out, NFTs really aren’t that difficult to understand.  If you can shop online, then you can understand NFTs.

Let’s start with the 30,000-foot-view of what exactly is going on:  NFTs—or non-fungible tokens—are a mechanism to make digital files into a unique asset, created and sold on the blockchain using cryptocurrency.  If you only understood one or two words in the previous sentence, everything will be explained shortly.  In the meantime, as you may be aware, an important event happened few weeks ago when Christie’s auction house sold an NFT for $69 Million and everyone went crazy.  Now that it looks like there is a market with real money for digital assets, people are creating NFTs by the thousands in an effort to participate in the gold rush.  While this frenzy will likely settle down sooner than later (predictions of a bursting bubble are already circulating), there is technology here that is evolving, and almost certainly some version of what is happening now will endure into the future.  So, it is definitely worthwhile to become at least somewhat familiar with what this is all about.

There is a large quantity of incredibly complex information, and those with advanced crypto-savvy will want to interject all of the various nuances and details into the somewhat simplified explanations here, but this is crypto-triage.  If at the end of reading this article, your interest is piqued and you’re hungry for more, there is an entire (ever-expanding) universe of information online just waiting for you to dive in.  Hopefully, with the information here, you can at least doggie paddle your way through some of the more sophisticated information waiting for you in the digital ocean.

Part of the challenge for those trying to catch up is that the acronym “NFT” has been layered on top of “blockchain” and “cryptocurrency” and since many people are still struggling with those concepts, one more new tech term can easily lead to panic and surrender.  So let’s start at the beginning and break it down a piece at a time with some extremely simplified explanations in plain(ish) English.  Along the way, questions and considerations are highlighted so that you can start thinking about how to position yourself and hopefully avoid any big blunders.

Blockchain.  (If this is the 600,000th time you’ve heard this foundational element described, skip down to Cryptocurrency). The blockchain is an immutable ledger that stores information on a network of computers (each is called a “node”).  It is considered to be a secure system because once the information is entered into the blockchain, it cannot be changed.  One of the biggest pitfalls of the blockchain is a “garbage in, garbage out” problem.  In other words, if incorrect information is entered into a blockchain—intentionally or not—it cannot be edited or corrected. 

Best Practice:  Look before you leap!  Make sure that your information is correct and that, if applicable, you have all underlying rights, titles, permissions, and licenses before entering anything onto the blockchain.

Cryptocurrency.  (If you have cryptocurrency all figured out, skip down to NFTs).  Cryptocurrency is digital currency, or tokens, for which transactions are verified and maintained on the blockchain.  Cryptocurrency may be acquired three basic ways:  Mining, baking, or purchasing.

The most well-known and widely-used currency is Ethereum, which is based on a Proof of Work (POW) system. Mining is required for POW currencies.   Mining means having computers (often enormous groups of computers) solve complex algorithms to add blocks to the chain and in the process earn currency.  Whoever solves the algorithm first, wins the tokens as a reward.  The big criticism of this process is that it uses an enormous amount of carbon-based resources in powering the computers which are all competing to solve the algorithms first, making the whole process ridiculously harmful to the environment. 

Additionally, the transaction validation process of POW systems involves all nodes on the blockchain.  This creates a structure that is not easily scalable.  As it grows (ie. more blocks on the chain are added), more computational power is required, and thus more resources are used.  As a result, payments (called “gas”) are charged to users to compensate for the energy required to process and validate transactions on the blockchain.  These fees may change depending on the congestion on the blockchain at the moment that the user wishes to enter information onto the chain. 

The alternative cryptocurrency system is called Proof of Stake (POS).  With POS, tokens are earned by depositing an amount of that currency in an account where it is essentially an investment in the system.  Based on the value of the stake (and sometimes other factors as well), the owner staking the currency will be assigned blocks to solve and receive new tokens without competing.  This process is called “baking”, requires far less computing power, and is therefore a much more environmentally sound system.  Since transactions do not rely on computational power, gas is not an issue and transactions are extremely inexpensive.

While POS currencies are lagging behind their POW siblings, in the last few weeks, the chorus of environmentally-conscious cryptoverse voices has grown louder and is putting pressure on the entire ecosystem to embrace more earth-friendly solutions.  There is no question that as the NFT market evolves, the POS systems will gain traction and stability.  Certainly if this new frontier is to continue to develop in a sustainable manner, POS will have to lead the way.

Finally, you can, of course, simply purchase crypto with your debit or credit card online.  There are over 1500 currencies to choose from, and many fluctuate in value tremendously.  While you can always exchange currencies on exchange platforms, be aware of the fees and costs of buying with fiat and making exchanges.

Best Practice:  Understand the environmental consequences of your choices in cryptocurrencies and, of course, never invest more than you can afford to lose!  Also, it is important to note that there are potential tax consequences relating to exchanging crypto into fiat, so proceed with caution when pulling value out of cryptocurrencies to make use of it in dollars.

Wallets.  Cryptocurrency and the digital assets you purchase with it are stored in a “wallet”. This might be called a cryptocurrency wallet, or a blockchain wallet.  The password for a wallet is incredibly important to keep someplace safe as there is no way to retrieve a password (or in some cases a “seed phrase” consisting of a string of random words) if it is lost or forgotten.  If you lose the password, you lose your wallet.  As you can imagine, there have been some incredible, if not heartbreaking, stories of enormous amounts of cryptocurrency and digital assets lost when the holder of the password loses it or dies without storing the information someplace discoverable. 

Best Practice:  Hope for the best, but plan for the worst.  It is always good to keep your password someplace secure, but make sure that it is safely accessible in the event you forget it, or meet an untimely demise.  

NFTs.  (If you’ve already spent your mad money collecting the latest that Nifty Gateway has to offer, you can either skip to the last few paragraphs of this article, or go finish binging Cobra Kai, which I predict will be selling its own NFTs shortly).  So finally, we get to the heart of the matter:  NFTs.  Non-fungible token is just a fancy term for a unique item—in this case a unique digital asset.  This is in contrast to a fungible item such as currency where one item is interchangeable for another . . . like a dollar bill or Ethereum.  

NFTs are “minted” by using an online platform that creates the NFT by customizing a “smart contract” to include specific information pertaining to a particular asset.  In the case of artwork, music, or other creative endeavors contained in a digital file, the NFT includes metadata that points to the file containing the artwork.  The file might be “baked into” the NFT, but given the limited storage on the blockchain, the actual artwork most likely “lives” on an Interplanetary File Server (IPFS) off of the blockchain on which the NFT exists.

“Smart contract” is actually a somewhat inaccurate term to describe the coding that underpins NFTs.  Anyone who was first introduced to computer coding in the after-school classes at Radio Shack in the early 1980s, knows that the simplest form of coding relies on “if-then” propositions.  This is all that an NFT is—a series of “if-thens” that determine what happens when an NFT is bought or sold. 

NFTs can nevertheless be quite powerful in creating new standards for art world transactions.  Currently, one feature that often is included is a built-in resale royalties term.  This is one way that NFTs could potentially create real long term disruption in art market transactions—at least those happening online (we’ll have to see how well these new practices translate to non-digital transactions).  Some people minting NFTs are adding other terms as well, such as dedicating a portion of the sales to carbon offsets—presumably to make up for the horrendous toll all of this digital transacting is taking on our planet.

With the potential to be creative in customizing some of the transaction terms, NFTs could provide an interesting testing ground for new business models.  It is important to understand, however, that the terms embedded in the NFT are fairly limited currently due to the cost involved with creating elaborate and new structures.  The more elaborate, the more likely there will be problems in the ability of the NFT to interact in the digital ecosystem.  Until this environment has evolved quite a bit further, off-chain contracts—meaning agreements that are not embedded in the NFT itself—will still need to be integrated into the promotion and sale of NFTs.  These off-chain contracts can be pointed to in the metadata in the same way the NFT links to the artistic asset.  Thus, making sure that an NFT asset is protected over the long term will require a balancing of embedded language and referenced documents.   

Best Practice:  Understand the limits of NFT embedded terms and make sure to consider the entire scope of protection needed to ensure the sustainability of an NFT asset.  Figuring out how to dovetail “smart contacts” with off-chain contracts currently remains crucial.

If the NFT market can legitimately and sustainably grow beyond the group of crypto-bros who have made millions in the crypto market and need to circulate their inflated fortunes, NFTs could be the new gateway drug to developing new collectors of both digital and object-based art in the fine art marketplace.  Or NFTs might just evolve to be another world parallel to and only loosely affiliated with the fine art market. Given the flexibility of NFTs, it will likely be a little of everything, and without a doubt, the possibilities are endless.  For now, it is an exciting new frontier that offers a complex online laboratory for testing new business models in a wide range of creative practices.  While this digital frenzy sorts itself out, remembering to rely on common sense, well-drafted agreements, and traditional rights protection tools will be key in tempering the potential risks posed by this lightning-fast technological marketplace transformation.  Bottom line:  keep your crypto wallet close, and your legal counsel closer.

California District Court Dismisses “Tiger King” Case, Citing First Amendment Interests

After captivating home-bound viewers earlier this year, Netflix’s documentary series “Tiger King” had its day in court recently when a California district judge dismissed a case brought by the publisher of Hollywood Weekly Magazine (“HW”) against the producers and distributors of the show.  See Prather Jackson v. Netflix, Inc., Case No. 2:20-cv-06354-MCS-GJS (C.D. Cal. Dec. 9, 2020).  The magazine complained that Netflix had used two of its trademarks in the show: (1) the magazine’s name, and (2) “Tiger King,” a term which HW claimed that it had coined in 2013 when it published a series of articles that profiled Joseph Maldonado-Passage a/k/a Joe Exotic, who is now widely known as the Tiger King.  On Netflix’s motion to dismiss, Judge Mark C. Scarsi of the Central District of California determined that First Amendment interests in the expressive work “Tiger King” outweighed HW’s Lanham Act claims.

The dismissal adds to a growing body of case law stemming from the Second Circuit’s 1989 decision in Rogers v. Grimaldi.  In that case, actress and dancer Ginger Rogers asserted Lanham Act claims against the producers and distributors of a film entitled “Ginger and Fred”; the court considered how the Lanham Act should be construed so that it does not intrude on First Amendment values.  The Second Circuit adopted a test to determine when the Lanham Act should apply to artistic or express works—namely, when the use has “no artistic relevance to the underlying work whatsoever,” or when it “explicitly misleads as to the source or the content of the work.”  Though the use in question before the Rogers court was the name of a celebrity in the title of a film, the Second Circuit’s test has been extended to apply when a Lanham Act claim is asserted against a use of a trademark within an expressive work. 

As the Ninth Circuit adopted the Rogers test in 2002, the California district court was obliged to apply it to HW’s four Lanham Act claims for trademark infringement of its two marks, dilution, and false designation of origin, and in doing so, rejected HW’s arguments.  Applying the first  “artistic relevance” factor, the court considered the use of term “Tiger King” as both the title of Netflix’s documentary and within scenes throughout the film.  Notably, the term was used to refer to Joe Exotic, as he himself used it on merchandise, in the name of his reality television show, and in his short-lived campaign for president, which the documentary detailed.  The series also depicted issues of the magazine, bearing HW’s name, as Joe Exotic proudly showed off the articles that dubbed him the “Tiger King.”  As artistic relevance is a low threshold—the use of the mark need only have “some relevance” to the work—the court determined that this prong was easily met, because the documentary chronicles the life and business of Joe Exotic, who is publicly known as the Tiger King.

For the second prong of the test, the court considered whether Netflix’s use of the unregistered “Tiger King” mark would make the public believe that HW was somehow behind the documentary or sponsored the work. Because the question is whether the work explicitly misleads—or as the Rogers court put it, the work contains an “explicit indication,” “overt claim,” or “explicit misstatement”—the court was not satisfied by HW’s inability to point to any statement in the series that explicitly misled about the sponsorship of the documentary.  In its complaint, HW relied upon conclusory legal statements, rather than any allegations of explicit deception that would satisfy the second prong of the Rogers test.  The court applied the same analyses on the first and second prongs for the “Tiger King” mark to the HW mark and determined that Netflix’s use of the magazine’s name in the series did not give rise to actionable Lanham Act claims.

Additionally, the court dismissed HW’s copyright infringement claim over Netflix’s depiction of certain issues of the magazine, citing the deficiencies in HW’s allegations regarding what works their cited registrations covered and which parts of the copyrights Netflix infringed.  Though Netflix had also briefed a fair use argument for this claim, the court did not reach it since it determined that HW’s copyright infringement claim failed on the face of HW’s pleading.

Although HW can assert Lanham Act claims regardless of the federal registration status of its two trademarks, it is worth noting that HW is also facing an uphill battle with the U.S. Patent & Trademark Office (“USPTO”) over the registration of the “Tiger King” mark, which has become quite popular over the past year.  Notably, while HW claimed to have coined the term in 2013, it did not file for federal registration until July 2020 after the Netflix series had debuted and a host of others had already filed applications for the same mark.  HW is currently facing an office action from the USPTO, which is refusing registration on numerous grounds including the words Tiger King’s failure to function as a trademark.

The dismissal in this case is the latest decision in a robust and growing line of case law balancing First Amendment interests against Lanham Act claims.  As most courts have adopted the Rogers test (or some iteration thereof), the “Tiger King” decision provides further armaments to litigants facing Lanham Act claims for their use of a mark or other protected designation in an expressive work.  Clients clearing rights in expressive works should remember to consider the Rogers test, in addition to other commonly used doctrines like classic or nominative fair use and, when in doubt, seek legal counsel.

SDNY Judge Dismisses “Hustlers” Invasion of Privacy and Defamation Claims

By: Sara Gates


In an opinion rife with references to adult entertainment and drugs, a judge in the Southern District of New York recently dismissed an invasion of privacy and defamation case over a plaintiff’s apparent depiction in the 2019 film “Hustlers.”  See Barbash v. STX Financing, LLC, Case No. 1:20-cv-00123-DLC (S.D.N.Y. Nov. 10, 2020).  For the uninitiated, the film was based on a 2015 article in New York Magazine that described a scheme undertaken by a group of adult entertainment hosts and dancers at two clubs in Manhattan who allegedly drugged patrons and stole large sums of money while they were incapacitated.  The plaintiff, Samantha Barbash, along with several others were charged for their roles in the scheme, and Barbash ultimately pled guilty to conspiracy, assault, and grand larceny. 

Though Barbash herself spoke with the New York Magazine reporter, and later gave other interviews, and published a memoir on the subject, she did not consent to Jennifer Lopez’s depiction of her character in “Hustlers,” so she filed suit against the producers and distributors of the film earlier this year for invasion of privacy, under N.Y. Civil Rights Law § 50 and § 51, over the use of her identity, likeness, and character in the film and marketing materials.  She also alleged that six statements and scenes in the film, primarily regarding the preparation and possession of various drug cocktails, were defamatory. 

On the defendants’ motion to dismiss, District Judge Denise Cote considered whether New York’s statutory right to protect an individual’s “name, portrait, picture and voice” from commercial appropriation—in the absence of a common law right, which New York does not recognize—also protects an individual’s likeness and character.  Looking at the legislative intent that the statute be construed narrowly, and prior case law, the court determined that Barbash’s allegations in her amended complaint that the film’s use of her likeness and character was insufficient to support a claim under N.Y. Civil Rights Law § 50 and § 51.

Turning to the defamation claim, the court considered whether Barbash had alleged the requisite elements for such a claim, focusing on (1) whether the film was “concerning the plaintiff,” (2) whether the statements and scenes were false, and (3) whether, as the defendants argued, Barbash was a limited-purpose public figure, which would require her to allege a higher burden of fault.  For the first point, the court questioned whether the plaintiff is recognizable in the film, such that someone who knows her would be able to make her out.  Based on the allegations in the amended complaint, which the court accepted as true on the motion to dismiss, this element was satisfied. 

For the second point, the court evaluated each of the six statements, one by one, to determine whether Barbash alleged that the statements were “substantially” false, given that “substantial truth” or that the overall gist or substance of the statement is true, is the benchmark to avoid defamation liability in New York.  Five of the statements (and accompanying scenes) were drug-related, namely, alleging that the character (1) concocted, (2) manufactured, (3) possessed, (4) used, and (5) provided drugs to individuals without consent.  The sixth statement concerned the character’s personality, describing her as cold and indifferent.  As the court was able to take judicial notice of Barbash’s guilty plea, in which she pled guilty to conspiracy for providing victims with illegal drugs to gain control of their credit cards, the court determined that her provision of drugs to unconsenting victims was substantially true, and drug possession could be inferred, so these two statements could not support a defamation claim.  The court also determined that the sixth statement regarding the character’s personality was non-actionable opinion.  The court, however, could not make a determination about the other drug-related statements at this early stage in the case.

Finally, the court turned to the question of whether Barbash was a limited-purpose public figure, which would heighten the level of fault that Barbash would need to prove in order to succeed on her defamation claim.  For private persons, a plaintiff litigating a defamation claim in New York (and most other jurisdictions, for that matter), need only show that the defendant was negligent in making the alleged defamatory statement.  For celebrities and public figures, however, the plaintiff must demonstrate that the defendant had acted with “actual malice” (i.e., knowledge that statements were false or reckless disregard as to their falsity) in making the statement.  The higher burden for public figures serves an important First Amendment purpose and provides breathing room so that people and publishers may engage in free public debate about people in the public eye, that may include some inadvertently false factual assertions without being subject to liability (and, consequently, chilling free speech).  Actual malice has also been applied in limited circumstances to private persons who become limited-purpose public figures where they voluntarily inject themselves into a public controversy or issue, seek media attention, and assume a position of prominence in relation to the particular issue.

Arguing for dismissal of the defamation claim, the defendants asserted that, based on Barbash’s criminal conduct, in which she voluntarily injected herself into the public arena, she should be treated as a limited-purpose public figure.  The court agreed, relying on Barbash’s 2015 guilty plea, her continued cooperation with the press, including for the 2015 New York Magazine article and 2019 and 2020 Vanity Fair articles after the film was released, both of which included portraits of Barbash, and her 2020 memoir on the events depicted in the film.  In opposition, Barbash argued that she should not be required to meet the higher standard because she was unwillingly dragged into the public arena, and that her later interviews were an attempt to set the record straight.  The court disagreed, noting that while Barbash is entitled to tell her side of the story, her engagement rendered her a limited-purpose public figure.  As such, Barbash would have had to plead actual malice, which she did not do in her amended complaint.  For these reasons, the court granted the defendants’ motion to dismiss without resolving whether the remaining statements were legally defamatory.

The Barbash decision adds to a growing body of case law in the Southern District on the proper application of N.Y. Civil Rights Law § 50 and § 51 and the analysis of defamation claims involving films based on prior public articles or records.  Barbash confirms that New York’s right of privacy statute remains limited in scope. As to defamation, the plaintiff’s use of the media worked against her, as it provided grounds for the defendants to argue that she rose to the level of a limited-purpose public figure.  That may not be available in every case involving prior reports and guilty pleas, especially where the individual did not continue to make themselves available to the media. 

In any case involving the use of a person’s likeness and character, filmmakers, producers, and distributors should ensure that they are consulting counsel about rights and clearances, especially because other states’ right-of-publicity laws may have a broader statute or recognize common law privacy rights, and courts in other parts of the country will likely have diverse views on who constitutes a public figure for purposes of defamation. 


Five Qualities of Next Generation Entertainment Platforms

By Simon Pulman, Partner

If your only exposure to TikTok is seeing the occasional funny video pop up on Facebook or watching your nieces studiously rehearse one of Charli D’Amelio’s signature dances, then you could be forgiven for wondering what all of the fuss about a potential ban is about. Likewise, if you’ve heard of Fortnite but you have no idea how Twitch works, you might not be aware of the degree to which Twitch is disrupting the audience for traditional television and even live sports.

Irrespective of whether TikTok survives (at least, in its present form), the impact that it has had on the future of entertainment consumption is immeasurable. And likewise, having fended off competition from the likes of Mixer, Twitch is poised for further extreme growth. Both platforms have lessons that those in traditional media would do well to heed when seeking to identify (or perhaps create) the next major media platform.

1. They Are A Culture And A Language: TikTok is not merely a video sharing platform. It is its own discrete culture and language that is impenetrable to those who are not on the platform. In essence, TikTok is an extreme evolution of “meme culture,” and without familiarity with the various “trends” that move rapidly through TikTok and the key creators and personalities who often create them, it is impossible for a viewer to understand many TikTok videos in isolation. Like all languages, TikTok builds upon itself, as users create videos that mimic, parody or comment upon an existing popular video. None of this is explained to the user upon joining the app. It has to be absorbed and understood by interacting with videos. This means that for Gen Y and college students, it is simply essential for them to be on TikTok in order to communicate with and relate to each other. It’s the concept of tuning into an old broadcast “watercooler show,” just amplified exponentially.  Likewise, Twitch has its own “language” in the form of “emotes” that viewers can post in chats while watching videos. Like memes, emotes require an understanding of context and meaning – and a shared understanding of emotes can create a common bond between the user base.

It is not an exaggeration to state that TikTok in particular is the single biggest communication and culture platform for Gen Y, and accordingly, is also the easiest way to mobilize young people. If TikTok still exists, it could have a significant impact on the upcoming US election – which is perhaps why President Trump is so keen to shut it down. We have already seen the influence of TikTok in action when TikTok users apparently reserved tickets to Trump’s June rally in Tulsa Oklahoma, falsely giving the impression that the event was a sellout. TikTok content is also highly shareable, meaning that content can live and spread off of the platform. This helps to bring new users into the platform. Compare with Quibi, which launched with zero sharing or social capability whatsoever, and a rigidly old-world walled garden approach.

2. They Have Their Own Stars: To millions of teenagers, the biggest celebrities on the planet are not actors or pop stars, but rather two sisters from Connecticut – Charli D’Amelio and Dixie D’Amelio. The D’Amelio sisters built a presence on TikTok at an astoundingly fast rate (at the time of writing, Charli alone has almost 86 million followers and over 6.6 billion “likes”). The D’Amelios have parlayed that platform into myriad commercial endorsements (Charli has her own drink at Dunkin Donuts) and, in Dixie’s case, a singing career. Likewise, within the world of Twitch, the likes of Ninja and Pokimane are bona fide stars, often attracting millions of fans for their “streams.” Like the D’Amelios, big Twitch influencers monetize their profiles in multiple ways, ranging from traditional product endorsements, to sponsored content, to Twitch “donations” whereby fans can simply donate cash to the influencers to thank them for their content (and for a moment of fleeting recognition).

These new influencers operate differently to celebrities of old. While they still have managers and publicists, and seek to curate a brand, they are generally more open about their personal lives because “authenticity” is highly valued by their audiences. With that said, several influencers have publicly articulated their struggle at maintaining a distance between their public persona and private life, most recently Twitch streamer Pokimane, who has been unfairly accused of concealing that she has a boyfriend in order to maintain her fanbase. Maintaining a level of distance can be difficult for influencers whose livelihoods depend on interacting regularly and directly with fans. Indeed, there are many “gossip accounts” that focus on the rumors surrounding influencers and their personal lives.

The challenge for traditional entertainment executives is that the new era of talent does not necessarily need to crossover into traditional media. While it was recently announced that Addison Rae Easterling has accepted a role in “He’s All That” (a reimagining of the Rachael Leigh Cook/Freddie Prinze Junior romcom), most TikTok influencers, and certainly most leading Twitch influencers can make more money, more quickly simply sticking to their core platforms (or other media that they can exert more control over, such as podcast).

Moreover, as an attorney who has negotiated many deals to hire Twitch influencers for “traditional media,” it is important to note that new media influencers, and their reps, value different things to traditional talent and are not always prepared to agree to otherwise accepted “industry norms.” For example, we typically see a lot of pushback against “options” in TV or anything that could lock the talent in for an extended period of time. Additionally, the concept of providing free promotional services (including by social media) as part of the engagement is totally foreign to influencers used to being paid on a “per post” basis.

3. They Are Broadcast Platforms: While platforms such as Instagram and particularly Snapchat have leant into the concept of users sharing content with people that they already know, TikTok and Twitch are broadcast platforms on a massive scale. They operate on a “one to many” model, whereby an individual user can theoretically reach millions of total strangers all across the world from their own home. TikTok in particular is probably the biggest and most effective broadcast ever built, with its “your page” discovery algorithm allowing hit videos to potentially reach billions of users. Many Gen Y users want to experience stardom above all else, and while TikTok’s incumbent “stars” (such as the D’Amelios, Addison Rae, the inhabitants of Hype House, and now Bella Poarch) certainly have a leg up, TikTok remains the only platform in the world where a user can potentially acquire half a million followers in a day. Twitch is a harder platform to crack, and many streamers labor away streaming for few viewers. However, there are still opportunities to rapidly grow a userbase on Twitch – especially around the launch of a new game. For example, multiple Twitch users gained over one hundred thousand followers in the month following the release of the hit battle royale game “Fall Guys,” with the user “MrKeroro10” gaining almost 400,000 users.

4. They Are Highly Personalized. At first glance, there may be little that seems to differentiate TikTok from predecessors such as Vine, or its many clones. It’s a platform for short videos, right? Well, yes and no. The strength of TikTok is actually in its algorithm, which by tracking user behaviors and habits in many ways (some no doubt concerning to privacy advocates), is simply the most accurate recommendation engine ever created in a media app. As a result, within a few hours of using TikTok, the algorithm will learn an individual’s preferences – whether that’s music, cooking, dancing or humor. Thus, while it is likely that most TikTok users will see videos from the megastars (Charli, Addison Rae, etc.) at some point, it is not unusual for the “for you page” of two users to be completely different.

It’s quite fascinating to see the differing approaches of two media companies through 2020 so far. Quibi bet on extremely expensive, traditional television or film content chopped up into smaller chunks and, presumably, aimed at a broad audience. TikTok focused on serving up an endless stream of short, user generated, highly personalized content. It’s not a secret that one company’s approach was more successful than the other. Media companies need to accept that the future of media is personalization – which is perhaps why Netflix has invested so heavily in a diverse range of scripted and unscripted content, often internationally focused.

5. They Can Create New Hits – And Revive Old Ones: The power of TikTok to create hits and stars (it is now the essential driver for creating new music hits) is well documented, as is the influence of Twitch in popularizing new video games. However, both platforms have the capability to revive catalogue titles as well. On TikTok, a popular influencer posting a lipsync to a scene from an old movie, or a dance to an old song (which will inevitably lead to thousands of copycat videos) may lead to millions of users discovering that piece of content for the first time -essentially introducing it to an entirely new audience and increasing its value significantly. For that value, media companies may wish to advise their legal departments to be judicious in policing content that could arguably be infringing (whether TikTok videos are sufficiently “transformative” to be fair use is a discussion for another day), because the halo effect of trending on TikTok could be significant.

Disclaimer: While our firm does not represent either Twitch or TikTok, we do represent multiple clients active on both. We also represent Triller, a TikTok competitor.

When Social Media Finally Holds Feet to the Fire, Trump Fires Back: Undermining the Communications Decency Act’s Safe Harbor by Executive Order

By Joshua M. Greenberg

Like most other providers of interactive computer services, such as websites or mobile applications that allow their users to post or contribute their own content, Twitter through its Terms of Service and community guidelines has long prohibited its users from posting or communicating, among other things, defamatory, profane, infringing, obscene, unlawful, exploitive, harmful, racist, bigoted, hateful, or threatening content through its service. Yet for many years, Twitter has declined to deactivate or take any further action against President Trump’s account, despite tacitly acknowledging that his tirades might very well violate these prohibitions, on the basis that the blusterous Tweets were nevertheless newsworthy. Facebook’s Marc Zuckerberg has similarly stood by his company’s decision not to fact check politicians on the platform, expressing concerns over free speech and democratic values and being an “arbiter of truth.”

That was until last week. On Wednesday, citing its civic integrity policy, Twitter added a label advising viewers to “Get the facts about mail-in ballots” from a page of curated news articles hyperlinked below two of President Trump’s Tweets that had falsely claimed California was “sending ballots to millions of people, anyone living in the state no matter who they are or how they got there” to seemingly undermine voter confidence in mail-in voting when, in fact, ballots were only being sent to registered California voters. Then on Friday, Twitter limited the viewability of President Trump’s Tweet about protestors in Minneapolis that contained the racially inflammatory trope “when the shooting starts, the looting starts” by placing the Tweet behind a notice stating the Tweet violated Twitter’s rules against glorifying violence before allowing viewers to click through to see it. In neither case did Twitter remove or delete the Tweets.

On Thursday, President Trump channeled his ire towards Twitter and other social networking platforms (namely, Facebook, Instagram, and YouTube) who he believes are censoring speech, particularly conservative speech, into a highly controversial executive order. The purpose of the order was to undermine the immunity from civil liability found in Section 230 of the Communications Decency Act (CDA), 47 U.S.C. § 230(c), which protects interactive computer service providers and their users from liability for certain types of content posted or transmitted by users through those services, websites, apps, etc. and any actions or harm resulting from that content so long as the service provider or user, as the case may be, does not exercise control over the content akin to that of the publisher or speaker. Specifically, the law says, a provider or user of an interactive computer service will not be “treated as the publisher or speaker of any information provided by another information content provider” or be liable for “any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected, or any action taken to enable or make available to information content providers or others the technical means to restrict access to [information provided by another information content provider].” Without this liability shield, operators of websites or mobile apps that contain user-generated content or facilitate communication between users will be open to civil liability for such causes of action as defamation, invasion of privacy, products liability and negligent design of the service, failing to screen users’ communications and protect them from one another, among others, for the content that they allow their millions of users to post, contribute, or transmit through their services, despite perhaps not having the resources—monetary, technological, personnel, legal, or otherwise—to police all user-generated content and communications flowing through their service.

The Executive Order on Preventing Online Censorship clarified the federal government’s interpretation of CDA Section 230 to say that “the immunity should not extend beyond its text and purpose to provide protection for those who purport to provide users a forum for free and open speech, but in reality use their power over a vital means of communication to engage in deceptive or pretextual actions stifling free and open debate by censoring certain viewpoints.”  The executive order goes on to state that the safe harbor should not extend so far as to “provide liability protection for online platforms that—far from acting in ‘good faith’ to remove objectionable content—instead engage in deceptive or pretextual actions (often contrary to their stated terms of service) to stifle viewpoints with which they disagree.” The executive order directs the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) to propose new administrative regulations to narrow the scope of immunity provided under the CDA’s safe harbor in a manner that would, among other things, draw greater scrutiny to the alleged misalignment between these companies’ stated policies and “good faith” enforcement and their algorithms for the content and users they promote or do not promote.  The administration framed this alleged discrepancy as a deceptive trade practice, again, harkening back to the notion that social media platforms disfavor conservative voices and viewpoints (despite a lack of evidence of such bias).

The executive order will surely be challenged in court and the long line of caselaw reinforcing the safe harbor in the interest of protecting freedom of expression on the Internet and service providers and their users from liability therefrom, as well as recent lawsuits alleging political bias by social media platforms, will likely render the executive order unenforceable. However, until then, the executive order has the force of law and the FCC and FTC will commence their rulemaking processes so, this policy shift is something every website or mobile app provider whose service contains user-generated content or communications—and the lawyers who represent them—should pay close attention to.

Proposed Guidelines for Resumption of Motion Picture, Television and Streaming Productions

By Amy Stein

Earlier this week, the Industry-Wide Labor-Management Safety Committee Task Force released proposed policies and guidelines for the recommencement of productions, known as the White Paper. As of June 1, the White Paper was submitted to New York Governor Andrew Cuomo and California Governor Gavin Newsom for review.

The Task Force, comprised of the Alliance of Motion Picture and Television Producers, major studios (e.g., Amazon Studios, Apple Studios, HBO, Netflix, Sony, Walt Disney, Warner Bros. Entertainment, Fox), and many guilds and unions (i.e., Director’s Guild of America, I.A.T.S.E. and its West-Coast Studio Local Unions and New York Local Unions, the International Brotherhood of Teamsters, the Basic Crafts Unions, and SAG-AFTRA), sought expert advice from the U.S. Centers for Disease Control and Prevention, the Occupational Safety and Health Administration, health care professionals, and industry professionals who know the ins and outs of production working conditions.

The White Paper is meant to be fluid and will evolve over time in conjunction with governmental suggestions and requirements. As of now, the White Paper is intended to create the initial road map to a safe return to production, which provides guidelines with respect to, for example, “regular, periodic testing of cast and crew for Covid-19,” “universal symptom monitoring, including temperature screening,” providing disposable masks which will be replaced each day, social distancing, as well as suggestions for access to mental and physical health resources.

While the White Paper will directly affect the productions produced under the studio and network system, it also provides a framework for independent films to follow (which frame work will have to comply with governmental requirements and protocols in the jurisdiction of production, and will have to be approved by the applicable guild(s)/union(s) of the production).

It should be noted that the White Paper is a set of recommendations for government authorization to commence production and has yet to be commented on by any governmental authority or department. The White Paper can be found here.

Character Exclusivity in Rights Deals

By Simon N. Pulman

In this increasingly competitive media landscape, companies are seeking to create entertainment brands that can endure, serve as the basis for dozens of hours of content on the new generation of owned-and-operated premium platforms, and extend across various forms of media. However, transmedia deals are seldom straightforward, and may create issues that one is less likely to encounter when negotiating a relatively simple deal for a book-to-film adaptation.

One such issue is character exclusivity – the idea that when an entertainment property has multiple rightsholders, certain characters (or, in hyper-complex instances, certain characteristics of certain characters) are owned exclusively by only one rightsholder. The phenomenon of character exclusivity (and the schism in a property that it tends to create) tends to arise from one of three main deal-making circumstances, as follows:

Creator Sequels

Traditionally, a purchaser in a rights deal acquired only one “installment” of a property, such as a novel. In the event that the author of that novel decided to write a sequel, the film and television rights in that sequel would typically be “held back” for a period of time (usually between three and seven years), and the purchaser of the first book would have a first negotiation right and some kind of matching right to acquire the rights in the sequel.

That structure is fine when one is acquiring a discrete novel for which a sequel is a hypothetical future possibility, and which would be (if written) a direct continuation of the original story. It works less well when a property is conceived from the ground up as a series, an anthology, or a shared universe (more on that below). However, even this relatively simple traditional structure begs the question: what happens if the original purchaser does not acquire a sequel?

Most studios include some form of the below language in their option agreements with respect to the creator’s reserved sequel rights:

“If Purchaser does not acquire any Author-Written Sequel, then Owner’s right to dispose of any rights in such Author-Written Sequel shall not include the right to produce or cause the production of any audiovisual production which contains any of the characters or incidents contained in the original Property.”

In essence, this language provides that a creator can sell sequel rights to a third party (subject to the holdback and first negotiation/matching right), but not rights to any characters that appear in the original work. So, to illustrate, the author of Bridget Jones could sell the screen rights to the second Bridget Jones book, but would not be permitted to grant rights to the character Bridget Jones (feel free to replace “Bridget Jones” with “Harry Potter,” “Harry Bosch,” “Frodo” or any other character of your choosing).

Suffice to say, this creates instant character exclusivity and in many instances makes the development of a sequel by a new buyer unworkable.

On the subject of “creator sequels,” it is also worth mentioning that contractual standards that were very simple when formulated to address the acquisition of discrete works such as novels or plays may be much less elegant in the modern world. For example, it may be difficult to discern the line between the “original property” and a “sequel” when you have an ongoing comic book series with multiple spinoffs. How about a true crime podcast anthology that presents multiple “seasons” focused on different crimes, under one united brand? Or what about a video game where updates are presented via a series of continuous downloadable updates, as opposed to individual and clearly separate releases at brick-and-mortar retailers?

These are issues that we are thinking about and addressing on a daily basis and should evidence why it is important that rightsholders and purchasers alike engage experienced rights counsel!

“Studio Created” Elements

Another provision commonly found in rights purchase agreements reads substantially as follows:

“The Reserved Rights do not include, and Owner will have no right to exploit or use, any new or changed element created by or for Purchaser and/or any new characters, new characterizations and other new elements from any production produced by Purchaser.”

Think of this as the “Daryl Dixon” clause. When AMC optioned and developed “The Walking Dead” comic books for television, they created Daryl as a new character. Daryl promptly went on to become one of the most popular characters in the series.

Because of the clause above, the comic book writer and publisher were not permitted to use Daryl in the source material – or in connection with any other reserved rights (such as video games and merchandising based on the comic book, as opposed to the TV series).

Historically, there were good reasons for this clause. It does not make sense for the author to be unjustly enriched by the studio’s creativity and investment, and the inclusion of a new character back in the original source material could trigger additional guild or contractual obligations (in essence, putting the purchaser on the hook for exploitation that it doesn’t control).

However, we are finally moving towards a paradigm where characters move fluidly across media and different forms of exploitation – where new movies are promoted in Fortnite, and where Freddy Krueger, the Demogorgon, and Michael Myers can all appear as killers in Dead by Daylight. In gaming in particular, there may be a compelling reason for a game publisher to be able to use a character in their games who initially appeared in a television series. Moreover, the expectation of audiences is increasingly that there will be some level of coordination and consistency across media, and so it may be necessary to reexamine the necessity of this clause in very specific circumstances.

Shared Universes

The concept of character exclusivity becomes particularly complicated in the instance of a “shared universe” – a vast sprawling story world that may encompass dozens of separate narratives that could be tied together by relatively obscure or minimal narrative threads. Think Brandon Sanderson’s Cosmere or, of course, the Marvel Universe.

For a shared story universe, it is possible, or even likely, that different characters or story elements will be controlled by different rightsholders. This concept has become familiar to audiences due to the X-Men and Avengers living (up to now) in completely separate story universes – or via the high profile and very public negotiations that were necessary to bring Spider-Man to the Marvel Cinematic Universe. Absent special arrangement, characters are “stuck” in one universe and cannot “cross over” – even if they did so routinely in the source material. This may lead to audience confusion and frustration.

Of course, there are exceptions to every rule and in addition to the aforementioned Spider-Man example, two characters were “shared” by Fox and Disney pre-merger – Scarlet Witch and Quicksilver (who appeared in the X-Men franchise starting with Days of Future Past, and in the MCU starting with Avengers: The Age of Ultron (after a brief post-credits appearance in Winter Soldier). However, the two iterations of the characters were played by different actors and, there were purportedly very specific contractual stipulations on how they could be characterized in each universe.

While the concept of a “shared universe” applies mostly to superhero and fantasy worlds, there are still potential repercussions for creators in other genres. For example, an author who writes crossovers between two book series (as Michael Connolly has done with the Bosch and Lincoln Lawyer books), or includes an Easter egg type cameo in their romance novel with a character from another book may be inadvertently creating rights and contractual issues that must be carefully addressed (and may be potentially headache inducing). Of course, the most successful US author of all – Stephen King – does this routinely. But creators must be careful because it is unlikely that they have the leverage that King does over his intellectual property!

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