Emerging Litigation Podcast: "IP Protection, Secure Transactions, and Bored Apes: NFTs with Cameron Pick"

Host: Tom Hagy
Guest: Cameron Pick, Attorney at Marshall Gerstein
Date: December 12, 2024

Episode Overview

In this episode, host Tom Hagy explores the rapidly evolving landscape of NFTs (non-fungible tokens) and the accompanying legal challenges and opportunities. Featuring Cameron Pick—an intellectual property attorney specializing in blockchain, cryptocurrency, and NFTs—the conversation covers the basics of NFTs, IP protection, secure transactions, and high-profile NFT collections like Bored Ape Yacht Club. The discussion is both accessible for beginners and instructive for legal professionals facing emerging litigation risks in the digital asset space.

Key Discussion Points and Insights

1. Introduction to NFTs

[07:57]

• Definition: NFTs are “essentially a digital receipt or certificate of authenticity that's recorded on a blockchain...decentralized...with security and immutability benefits...protected by cryptography.” (Cameron Pick, 07:57)
• Utility Examples:
  • Digital art (unique images with verified ownership)
  • Event tickets (reducing counterfeiting)
  • Backstage passes and fan experiences
  • Video game assets (weapons, cars, castles) no longer controlled by the game creator once on blockchain
  • Real property: possible to tokenize homes/commercial real estate and sell fractionalized ownership

2. NFT Ownership and Intellectual Property Rights

[10:24]

• Default Ownership: Creator retains copyright unless contractually transferred; default for buyers is a right to own and resell, but not to reproduce or make derivative works of the art.
  • “Default is that the creator does retain the copyright and other IP rights...The default is that when you buy the NFT, you...have the right to resell...but I wouldn’t necessarily be able to reproduce that image or make derivative works off of it.” (Cameron Pick, 10:24)
• Transfer of Rights:
  • Rights (e.g., copyrights) can be transferred if specified—done in some projects.
  • Bored Ape Yacht Club: Transfer includes copyright, enabling owners to monetize or develop derivative works.

3. Blockchain Security & Provenance

[11:14]

• Provenance: All transactions recorded on a public, decentralized blockchain (popular ones: Ethereum, Solana), which acts as a public ledger.
  • “...this public ledger is maintained by thousands of computers or nodes...if each has consensus...then it’s recorded in the ledger and anybody can see.” (Cameron Pick, 11:14)
• Security:
  • While blockchains themselves (so far) are unhackable, main vulnerabilities are at the user level (key management).
    • “So far nobody’s ever been able to change what’s stored in these public blockchains…vulnerabilities aren’t really on the blockchain itself. The vulnerabilities are on the users...” (Cameron Pick, 12:12)
  • Loss/theft of private keys is a critical risk: “If someone tricks you...they can steal the NFT. There wouldn’t really be any way to get them back.” (Cameron Pick, 12:12)

4. Old-School Crime, Modern Tech

[13:05]

• Human vulnerabilities—phishing, scams, and deception—remain relevant: “The humans are the vulnerability which leads to kind of old school crime...” (Tom Hagy, 13:05)

5. IP Rights in Secondary Markets & Smart Contracts

[13:25]

• IP Transfers on Sale: Not automatic; depends on the project’s terms (e.g., Bored Apes).
• 'Can’t Be Evil' Licenses:
  • Developed by Andreessen Horowitz, modeled after Creative Commons but tailored for blockchain.
  • “...licenses hand over different rights...making derivative works...users can pick and choose...include that in...a smart contract...” (Cameron Pick, 13:25)
• Smart Contracts: Terms are coded into the NFT itself, ensuring transparent, immutable application.
  • “Having the terms in a smart contract on the blockchain keeps them on this ledger forever.” (Cameron Pick, 16:07)

6. NFT Valuation and Market Dynamics

[16:39]

• NFT value is highly speculative—“similar to trying to value physical artwork, which can be very difficult to do.” (Cameron Pick, 16:39)
• Value drivers: popularity, project excitement, potential utility (VIP access, ticketing, etc.).
• Physical asset-backed NFTs (cars, homes): expected to reflect traditional asset market pricing.

7. Size and Volatility of the NFT Market

[17:34]

• Market History:
  • 2021: Massive surge, especially in digital art.
  • Since 2022: Dramatic downturn, value drop >90%
• Current Trends/Future Outlook:
  • Market cooling, may rebound; uses likely to evolve (tickets, in-game assets, experience-based NFTs).
    • “The market’s really cooled off...but it’s very cyclical, so it might heat up again...” (Cameron Pick, 17:34)

Notable Quotes and Memorable Moments

NFT Humor and Public Perception—Host’s Observations

[06:00]

• “NFT aficionados do have a sense of humor. Their jokes come in the form, of course, of memes.” (Tom Hagy, 06:00)
• Joke referenced:
  • Meme satirizing NFT value: "Why would I pay X amount of money for this jpeg when I could just right click and save it for free?"

Legal & Regulatory Challenges

[06:30]

• SEC Investigations: NFT marketplaces (e.g., OpenSea) are under scrutiny for offering unregistered securities, subject to the Howey Test.
• Class actions: Users have sued platforms, alleging misleading statements and unregistered securities.

Bored Ape Yacht Club Case

[13:25]

• "When you transferred the Bored ape itself, you also received the copyright to do whatever you want with it. And I think actually Seth Green was gonna make a TV show off the bored ape that he bought because he had the copyrights to it..." (Cameron Pick, 13:25)

Key Advice From Cameron Pick

• On protecting rights: “[Include] the terms in the smart contract...on the blockchain...keeps them on this ledger forever.” (16:07)
• On security: “The vulnerabilities are on the users that are maintaining these...there wouldn’t really be any way to get [NFTs] back [if keys are stolen].” (12:12)

Segment Timestamps

• NFT Explainer & Use Cases: [07:57]–[10:12]
• IP Rights & Copyrights: [10:24]–[13:05]
• Blockchain Security & Fraud: [11:14]–[13:05]
• Secondary Markets & Smart Contracts: [13:25]–[16:07]
• Valuation & Market Size: [16:31]–[17:34]
• Regulatory Oversight & Market Outlook: [06:30], [17:34]

Conclusion

This episode offers a balanced, in-depth exploration into NFTs’ promises and pitfalls, especially for those exploring the intersection of law and cutting-edge technology. Cameron Pick delivers actionable insights for legal professionals on protecting IP, ensuring secure NFT transactions, understanding evolving market dynamics, and drafting airtight smart contracts. The episode underscores the need for vigilance against both old-school fraud and emerging technical vulnerabilities in the NFT space.

For additional information and resources, listeners are encouraged to review Cameron Pick's published articles, linked in the show notes.