NFT-Tethered Sound Recordings and Digital Resale

If consumers are buying ownership interests in Non-Fungible Token (“NFT”)-tethered sound recordings, can they lawfully resell those interests under the Copyright Act? What exactly is the consumer buying—a digital sound recording, or a phonorecord? I argue that NFT consumers are purchasing fractionalized interests in a phonorecord from the copyright owner in addition to any interests they may acquire in the digital sound recording.<br><br>NFTs are not art and do not create copyrights. Rather, NFT sound recordings are a decentralized Digital Rights Management (“DRM”) tech- nology that tethers a unique phonorecord to a unique digital sound record- ing. NFTs have captured the attention of artists and public alike, with many musicians, like Calvin Cordozar Broadus Jr. (known professionally as “Snoop Dogg”), paying serious attention. Sales of Snoop’s NFT-tethered album, Bacc on Death Row (“B.O.D.R.”), totaled $44.3 million in five days, and the industry predicts that the NFT marketplace for sound recordings will be- come a multibillion-dollar one as early as 2025.<br><br>I explore this emerging marketplace and the economic implications of NFTs as a decentralized distribution channel. Distribution of copyrighted works invites potential copyright misuse, raising unresolved issues under the venerable first sale doctrine. Congressional resistance to codification of digital first sale protections has resulted in increasing copyright misuse, made more apparent with this nascent technology. I weigh the advantages and disadvantages of three responses: (1) relying on Section 115’s compulsory license scheme to check ongoing copyright misuse; (2) calling on Congress to extend Section 109’s first sale protections to digital sound recordings; and (3) recognizing the NFT purchaser’s acquired ownership interest to include both the digital sound recording and a fractionalized interest in the hard drive to which the NFT is tethered. Under the third response, Section 109’s first sale doctrine covers the existing resale marketplace.