Rights and Royalties Management in Collaborative Storytelling: A New Frontier with Genevieve Thiers

All you cool cats and kittens, come on in and sit down if you're coming for our talk on Rights and Royalties Management and Web 3. I am Genevie Fierce with entertainment.com. Uh you can see us back here. We are a collaborative storytelling platform on the Ethereum chain.

Uh we're really excited uh to sell tickets for our creators into the making of their work. So, with our interactive tickets, you can do things like cast your NFT in an animated series as the best friend and name them and dress them and, you know, help figure out what their uh, you know, challenge is going to be. With our NFTTS, you can get a live pep talk from a wrestler in Catalyst Wrestling uh before they go in the ring to fight. You can be an animated storyteller, a haunted portrait. So, we're really excited to be here today.

Uh, and what we want to talk about is rights and royalties management in web 3. With me, I have the inestable Josh Lawler of Zuber Lawler. Do you want to introduce yourself, Josh? Yeah, thanks, Jen. Uh, so I'm Josh Lawler.

I am a partner at the law firm Zuber Lawler where I practice transactional law, M&A finance, a lot of technology, transactions, intellectual property and notably I spend a lot of time working in distributed ledger technology, blockchain, web 3, NFTTS and uh I'll be writing a book which hopefully releasing in Q3 called surviving the migration a legal guide to evolving your business using NFTTS. So I I feel like you you really do want to write down Josh's book name because that NF that metaverse book that just hit and really was a made a big splash. I feel like you've got a similar kind of flow here because everyone wants to know how do I handle rights and royalties transfer particularly rights transfer in the area of NFTts. So the first thing I'll say is there is no way we are going to give the depth of knowledge that builders like you require in this talk. So we've written you a really in detail report.

So, if you scan this QR code, you will go to a 65page report that will tell you everything you could ever want to know about rights and royalties transfer in web 3, including a breakdown of the top 20 NFT collections and how some of them like World of Women did it really right and how some of them like Doodles Yuga are a little bit of a mess because they're dealing with some SEC stuff right now around it potentially being a security. So Josh, let's talk about that. Um, Yugal Labs got hit, you know, uh, recently with this idea that their NFTs are a security. We have a lot of builders in the audience. When you're making an NFT collection or using an NFT collection or asking your users to use their NFTs, what do you need to know about how to set that up on the back end to make sure this is done right and you don't have the SEC on your tail?

Okay, that was like a full law school course question. Um but um you know in general not not to comment on Yugo Labs specifically I haven't deep dived that but what I can comment on is the decision that came out of Southern District of New York with respect to NBA Topsh Shot and Dapper Labs. Uh and it's a really super important and illustrative decision because what they identified correctly is that an NFT that is for an art, a collectible or really anything else can also be a security if it is sold the wrong way and messaging counts. So in that particular case, Dapper Labs was saying, "Oh, these are basketball moments, but by the way, emojis for moneybags, rocket going to the moon, and like a big financial chart going up up up." And the court said, "Yeah, well, you guys, there's definitely enough facts there to support the idea that you might have been selling an investment."

And so that case will continue to go on. Um, that's a great illustration. Yeah. And um we've actually also had like a royalties kurfuffle happening right now. We just came out of NFT Paris last week.

It's all like all anyone could talk about was Blur and OpenC and about that issue. And um you tend to really you you seemed like you saw real value in the blur approach, right? Yeah. Well, I mean the the secondary sale royalty needs to be preserved. Um, you know, that's a fundamental original kind of tenant of web 3 and creator protection.

Um, and you know, historically there's something called the first sale doctrine that comes out of copyright. It's, you know, north of a hundred years old. And the idea is that if I write a book and you buy the book, that copy of the book is yours and you can now sell it to whoever you want and I don't get another thing from it. I get a sale on one copy. NFTs changed that because we've got this kind of technical way to work around the first sale doctrine by, you know, wiring in a secondary sale royalty as part of a smart contract.

And that allows creators to continually earn, you know, funds off of their works, whatever it might be. Um, and it's it's a really it's a revolutionary concept and we want to protect that and make sure that you can't have a workaround. Yeah. And um I I don't want to put you on the spot here. I forgot to ask you if I could ask you this beforehand, but is of all the NFT collections that are out there, um, who has done it really right and and like if somebody has not done it right, what have they done?

Like what's the mistake that you really need to avoid in this area when building out your NFT collection or your platform for NFTTS like ours? Sure. Well, I'm not going to speak ill of anyone. Thank you very much. Um, but no trash talk, Josh.

No, there's no there's no trash talk. Um, but what I will say is a few examples of things that maybe you don't want to do. Um, recognize your terms and conditions are a contract. So, if you're an NFT project and you are telling the people who are purchasing the NFTs that they have commercial exploitation rights of some type, then you can't subsequently decide that everything needs to go to Collective Commons. And no, just kidding.

That's a breach of contract. So, we won't say who did that, but somebody did that and that was not a great thing to do. Another area that we need to kind of think about is that giving people commercial rights to an NFT is not really all that easy because it isn't copyright. Copyright when it was created isn't designed to protect things like name, image, and likeness is really what you see with athletes. They're personal rights, but there's no personal rights in a board ape.

So there's a real issue from a legal perspective as to whether any of those assignments are actually legal in the first place. And we're wrestling with that right now. We'll need legislation of some type. Right now there's like an implied license concept, but it's very very messy. Um but that's the story.

Well, the implied license. So um we've talked through this. Josh and I are going to take this show on the road because everybody wants to know what's going on in this area. But the implied license comes from the fact that it's theoretically not nothing in the NFT space has theoretically yet been legal based on the lack of a signature. Is that correct?

Can you talk about that for a minute? Oh, sure. So, I mean, the copyright is a little funky and that's coming out. In order to sell something that is a copyright or to exclusively license it, you need to actually have a written document and it needs to be executed as Jen is mentioning. So, you know, from the NFT perspective, that's just not how NFTs transfer.

You know, if you go into OpenC, there's no signature, and in fact, you may not even know who you're buying or selling to, which is its own kind of set of issues. So, those copyrights don't necessarily move legally speaking, but at the same time, I don't think anybody's arguing that the rights didn't transfer over. Yeah. And let's throw it to the audience now because I really want to hear a little more about like what you all are working on. Who here has a platform?

Who's the platform builders? Okay. And who here is more of an NFT enthusiast? Right. And and you how show of hands who would like to be able to take your NFT and jam it in the middle of a graphic novel with a whole bunch of other NFTts and have a lot of fun like where it's an avatar or a character.

You want to use it, right? We want to use our NFT. It's like an avatar. something that represents us. So at entertainment, one of the things that we've been struggling with since the beginning is how do we do this without triggering the securities law?

So if you if you check out entertainment.com, which has got the.com, we're very 2.5 play. We're trying to bring people like into web 3, you'll you'll see that our our base level model is very similar to like a Netflix meets OpenC meets Kickstarter.

So you'll see that we have TV shows and we are helping those TV shows sell tickets into the making of the show. Uh our creators raise in USC and Ethereum. But what's interesting is we're about to start on Twitter spaces a series of co-c collaboration parties and you can bring your NFT and what you're going to be doing is in 90 minutes with our partner Macroverse. You're going to be putting together an episode of like an episode being two pages. is you're going to put together a short cartoon which is a mashup of 12 NFTts and this is like a 50 buck ticket.

This isn't much, right? So, you know, would you pay 50 bucks to bring your NFT, put it in a cartoon with a bunch of other fun characters and then be able to split the revenues on a compendium graphic novel published? Yes, you probably would. But on on our back end, that's actually kind of a nightmare. So, Josh and I were talking through what does this require exactly?

And it requires quite a bit. So So talk us through like some of the stuff we were talking about before this. What would this require? Well, the the funny thing is that legally speaking, it's a heck of a lot harder to give money to people than it is to get money from them. Um so you know there are two principal areas that you know really are problematic from the NFT royalties distribution perspective.

One of them is tax. The other one is you know currency control, homeland security, those Patriot Act, those types of things. From a tax perspective, you've got reporting issues. Uh so, you know, generally speaking, if you're paying somebody, you have to give them a 1090. You need to have their tax ID information.

None of that stuff typically comes with, you know, an NFT. And obviously, if you are talking about the first person that you issue the NFT to, fine, great. You might have that information as part of the sale process. But when they transfer it to somebody else, um kind of good luck. uh and then if the other area if they happen to transfer it to somebody who's in you know North Korea or Iran or Somalia, you can't make those payments even if you don't know that that's where they're going.

So there's two areas that we really focus on there and the solution to that or at least the one that we've been working with our clients on um is semi-entralized. There's no real way around it which is that you know the money flows into your central entity and you basically keep accounts for each NFT and when somebody wants to cash out if you will there's a two-factor off you have to have the NFT so it's token gated and you have to provide you know your tax information if you're in the United States or wherever else you might be because there's certainly international tax laws that come into play as well and this can be a really massive kind of undertaking which thankfully I believe will be automated in the relatively near future. So, somebody's got to be building a tool for that. I certainly hope. Yeah.

I feel like we don't have the answer yet. We're testing this now, but but we we will have it next year. So, hopefully we'll be back on the stage next year having figured this one out and we'll be on to the next challenge. But Josh, when we were when we were and we're getting the signal, we're almost out of time. When we were talking earlier about this, we were prepping for another talk with Diffuse Ventures in Chicago.

One of the things you said was it was so interesting from the dawn of time. There's always been a ledger. Somebody has always in the cave counted up the beans and fruits and berries from the forest and the, you know, the amount of bears that you killed that week and had a centralized ledger. And really, although it sounds very grand, I don't want to make this bigger than it is, but it it really is that problem. The fact that decentralization really clashes in a very bad way with rights and royalties.

It can be cleaned up, which we're doing right now, but it's quite complex, isn't it? Yeah. Well, I mean, as Jen was saying, I mean, we're we're really dealing with a paradigm shift that goes back pretty much as far as you can go back, uh, in terms of decentralization in a ledger where the information is open and immutable and everybody can see it. Um, and then you can build on top of that the NFT paradigm, which is really kind of amazing when you think of it. You have this little snippet of software code that comes off of, you know, an execution off of a smart contract that everybody can see and that can represent absolutely anything or any part of anything and have several different use cases at the same time.

That's insanity. And you package that with the fact that it travels at extremely high velocity across borders and you realize that that's just contradictory to the whole idea of geographic sovereign boundaries and sovereignty. So yeah, it's a mess and we're going to have to kind of work through that in a nice peaceable way to make sure that the powers that be are able to see it and maintain really sovereign rights. That's really what we're talking about. And part of that is taxation.

Part of that is rights management. Well, in the meantime, if anyone's interested how we're going to be using KYC procedures with distributed NFTTS, I mean, that's the headache that we're dealing with right now. But the thing is, once a process is made here, once we crack this code, which we've been working for a year on, I I do think we're on to something where it's possible to build like this but not be considered a security. You'll notice when if and when you can go to entertainmint.com that we actually have a very 2.

5 process. We've used paper.xyz and magic.io so that it's really easy to sign up on the site. You can use your email, you can buy with a credit card, but I feel like that's translating through to our rights processes as well.

So, I mean, we're we're using the simplest tools out there. I mean, because you have control over who's a speaker in Twitter spaces and you can have up to 13 speakers in a Twitter space at any given time. You can sell that like a ticket. So once you sell that like a ticket, it becomes a co-creation ticket. We consider ourselves both an IP marketplace and a ticketing platform, which I think a lot of us in NFTTS realize now.

That's what they are. They're tickets. But there's a lot of power in what they will clean up with rights and royalty transfer. Somebody earlier today was asking me like what rights whatever rights and royalties what do they have to do with NFTs really from a CEO perspective I've been doing this for 20 years my first marketplace was sitterc city.com I am totally aware we serve 10 million users totally aware of how many departments need how much amounts of money to do x y and z and x y and z things being able to remove the legal and accounting around rights is insanely valuable it might not seem like a big appeal to anyone.

It's like a builder, but like when you're staring at it from a cost perspective, it's absolutely massive. So, I know we're down to one minute. Josh, talk to us about just what's your takeaway. What's your leave behind other than everyone this 65page report? I mean, it it's really awesome.

Go get this report that we've written for you about not only the evolution of the web uh three space with entertainment, but about rights and royalties. So, please click through to this. It's quite valuable. We would never be able to get it all in 20 minutes. But what's your takeaway for everyone here that's just looking at this area?

The world is changing very, very fast. And, you know, it's great to see everybody here because obviously we're all at the forefront in it. We all believe in it. Um, we're in something of a hearts and minds phase right now with the general population and you'll hear a lot of people talking about things like ease of use and mainstream adoption. That stuff is super important because we can make a lot of positive changes in much more serious areas, much more kind of governing and infrastructure types of places that could help a lot of people.

And in my personal opinion, the first step to it is really entertainment. Well, thank you. We think so, too. So, that's our talk. Please get the report.

Josh Lawler with Zuber Lawler, Genevie Fears at Entertainment. Follow us on Twitter at entertainment co. Thank you guys.