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An interesting lawsuit was filed last week against DJ and producer 3lau in a dispute over a mega-bucks NFT auction that he staged in early 2021 linked to his 2018 album ‘Ultraviolet’.
3lau – real name Justin Blau – has been sued by Luna Aura, who co-wrote and appeared on ‘Walk Away’, a track that appeared on ‘Ultraviolet’.
The producer’s NFT auction that coincided with the third anniversary of the record offered buyers various products and perks, all linked to his 2018 record, and some specifically to ‘Walk Away’. The auction generated more than $11 million for the producer.
In her lawsuit Luna Aura – real name Angela Anne Flores – says that, while Blau owns the copyright in the recording of ‘Walk Away’, she has a stake in the song copyright, and is also due an artist royalty under contract from the exploitation of the recording. She then claims that Blau did not properly license the inclusion of ‘Walk Away’ in his NFT release and has not paid her a proper royalty.
Blau did offer Flores a one-off payment of $25,000 in relation to the NFT sale, but she doesn’t consider that the be an appropriate fee given how much the wider NFT auction generated for the producer.
It’s an interesting legal battle because, despite all the hype and chatter around music NFTs in the last couple of years, there remains no real consensus on how they should be licensed when recordings are part of the offer, but the artist or label leading on the NFT drop does not control all the rights in the songs contained in those recordings. Which they frequently won’t.
There are industry conventions for how revenues should be split between the recording rights and the song rights whenever recorded music is exploited, but those splits differ depending on the usage, meaning that with new products it’s not clear what kind of split is fair.
There is also often much disagreement as to what the splits should be. Plenty of songwriters and music publishers argue that the split on streams is still unfair, despite streaming having been a key revenue streams for years now, and the song right split having increased slightly over the last decade.
In the US, song royalty rates are actually set in law in many circumstances, including with downloads and discs, and most music NFTs usually involve a download and/or a disc. Though those statutory rates are set in cents not a percentage of revenue, which makes them seem very inappropriate for NFT sales that generate millions.
Then of course, with music NFTs, there are extra complications. First, as with the 3lau NFT campaign, buyers of each non-fungible token get various different products and perks that need to be taken into account.
And second, there is a debate to be had regarding the extent to which the value of any one token comes from the music connected to it, and the extent to which it’s really all about the artist’s brand.
With all these uncertainties and complexities, it’s probably wise to sort out any licensing bespoke before going ahead with a music NFT project. But that could stop a project from going ahead at all. And presumably Team 3lau were keen to cash in on all the early 2021 NFT hype which was leading to tokens going for super silly money.
Either way, Flores reckons that Blau failed to fulfil his legal obligations in relation to ‘Walk Away’ before launching the ‘Ultraviolet’ NFT drop, meaning he and his company 3lau Entertainment are liable for breach of contract and unjust enrichment.
Her lawyers write: “Luna Aura has not received any compensation from revenues generated from the NFT project, nor has Luna Aura [received] appropriate credit in connection with the ‘Walk Away’ and ‘Ultraviolet’ NFTs. Despite the commercial and financial success of the NFT auction, defendants only offered Luna Aura an after-the-fact, one-time payment”.
Blau has already hit back at Flores’s claims. His manager Andrew Goldstone told reporters: “These claims are without merit, and we will vigorously defend the lawsuit that was just filed yesterday without any prior notice. There are no set standards for how to approach an NFT project like this, which involved much more than just the music. Justin’s team tried for months to reach a deal with Flores in good faith, but she stopped responding and instead chose to file a lawsuit”.
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