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Speaker 1: This is Bloomberg Law with June Brusso from Bloomberg Radio.

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Speaker 1: It was a moment that stunned the star studied audience

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Speaker 1: and the millions of people watching the oscars around the world.

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Speaker 1: Hollywood star Will Smith slapping comedian Chris Rock after Rock

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Speaker 1: made a joke about Smith's wife Jada. I love you

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Speaker 1: g I Jane two. Can't wait to see it? All right?

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Speaker 1: That was That was a nice one. Okay, I'm out here,

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Speaker 1: Oh Richard? Oh wow? Will Smith respected out of it? Wow? Dude,

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Speaker 1: it was a g I Jangel Keep my wife. Smith

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Speaker 1: apologized to the Film Academy as he accepted his Best

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Speaker 1: Actor Oscar, but didn't apologize to Rock until the next day.

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Speaker 1: In a statement, the Academy of Motion Picture Arts and

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Speaker 1: Sciences condemned Smith's actions and said it's starting a formal

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Speaker 1: review and will explore further actions and consequences in accordance

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Speaker 1: with our by law, standards of conduct and California law.

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Speaker 1: My guest is Rachel Pez, managing partner at Suibak, Phez

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Speaker 1: and Coleman and a former attorney for the Academy. Why

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Speaker 1: wasn't Will Smith removed from his seat right after the slap.

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Speaker 1: That's a good question, and I am sure that there

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Speaker 1: was a huddle to discuss that, and I think on balance,

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Speaker 1: they decided to let him remain, possibly win his oscar,

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Speaker 1: and deal with it after. And I think that was

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Speaker 1: an approach that may have considered the backlash they might

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Speaker 1: get from removing will Smith, But I have to believe

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Speaker 1: that was a very hard call. The Academy says it's

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Speaker 1: launching a formal review. What is there really to review?

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Speaker 1: It's all on tape and millions of people saw it.

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Speaker 1: I agree with you. I don't think there is a

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Speaker 1: ton to review there. The incident is fairly simple and

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Speaker 1: well documented. But they are probably putting the facts in

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Speaker 1: line with their by laws and how they have handled

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Speaker 1: this in the past, so they will probably just review

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Speaker 1: what they have. I don't think there's a ton of

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Speaker 1: facts not known, and then they will determine what codes

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Speaker 1: of conducts that violated, and then the appropriate consequence for

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Speaker 1: that violation. What are the possible consequences. I think what

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Speaker 1: they could do, not that I'm saying they will do.

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Speaker 1: I think it's everywhere from revoking his membership to the Academy.

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Speaker 1: They could revoke his oscar they could ban him from

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Speaker 1: attending the officers for one year, or in perpetuity, they

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Speaker 1: could suspend him for some amount of time from being

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Speaker 1: a member of the Academy. I think that runs the gamut.

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Speaker 1: I would think they will also look to see if

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Speaker 1: they can find him under their by laws. Does Will

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Speaker 1: Smith's popularity and status as a mega star, well, that

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Speaker 1: stopped the Academy from doing anything drastic, from doing anything

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Speaker 1: more than a slap on the wrist. The Academy has

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Speaker 1: been conservative with its approach to superstars in the past.

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Speaker 1: I think because it is a body made up of writers, directors,

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Speaker 1: and actors that punishing others in the industry and rastic

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Speaker 1: ways is very difficult for the Academy and they have

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Speaker 1: to be very thoughtful about how they go about various

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Speaker 1: types of consequences. So I think Will Smith as a

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Speaker 1: mega superstar, that his status will affect how this investigation

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Speaker 1: and how the ultimate resolution comes out. Under California law,

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Speaker 1: was the slap an assault and battery? Yes, absolutely, that

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Speaker 1: was a crime. It was a misdemeanor under California law.

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Speaker 1: That's an unwanted touching. It doesn't rise, I think to

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Speaker 1: the level of a felony, which is a pretty bad

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Speaker 1: beating in that incident, but he could have been arrested

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Speaker 1: and charged with a misdemeanor for that act. The l

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Speaker 1: A p D says that Chris Rock refused to file

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Speaker 1: a police report. Without a police report, are they likely

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Speaker 1: to go ahead with charges? They are not. Not. In

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Speaker 1: an incident lie this where there's very little damage done

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Speaker 1: at the end of the day, the police department, the

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Speaker 1: d A. In this incident where it would be a misdemeanor,

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Speaker 1: the city attorney would likely handle it here in Los

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Speaker 1: Angeles and they are very unlikely to proceed without the

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Speaker 1: victims cooperation. The screen actors guilt it's the union that

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Speaker 1: represents film and TV performers said that it's been in

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Speaker 1: contact with the Academy and ABC regarding the incident and

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Speaker 1: is working to ensure that this behavior is appropriately addressed.

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Speaker 1: Could it institute disciplinary proceedings again, I think they would

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Speaker 1: have to go to their by laws and their code

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Speaker 1: of conduct and what they have jurisdiction over. This did

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Speaker 1: not take place at an official Screen Actors Guild event,

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Speaker 1: but perhaps there is something inside of their by laws

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Speaker 1: that would monitor conduct outside of something that would be unionized,

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Speaker 1: and there would certainly be an argument that the Academy

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Speaker 1: Awards would fall under something like that, but that would

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Speaker 1: be under their specific by laws that each actor gets

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Speaker 1: when they join. So if you had to take a guess,

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Speaker 1: what would you guess would be the consequences for will

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Speaker 1: Smith here? My guess is he gets to keep his oscar.

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Speaker 1: They're not going to take his oscar away, which is

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Speaker 1: a consequence they could implement if I were guessing, they

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Speaker 1: will either ban him for one year from attending the

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Speaker 1: oscars or suspend him for some three to six months

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Speaker 1: period of time from the academy. Rachel, tell me what

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Speaker 1: you did it at the Academy. I worked at quin

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Speaker 1: Immanual and quin Immanuel is long time counsel for the Academy,

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Speaker 1: so I worked on various Academy cases, most of that

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Speaker 1: involved copyright and trademark infringement. And then during the Academy Awards,

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Speaker 1: there is a large group of lawyers from Quinn Emmanuel

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Speaker 1: as their counsel that comes to the Academy every year

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Speaker 1: in various for various jobs. But what I did several

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Speaker 1: times was interview people that don't have tickets. So there's

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Speaker 1: a lot of ticket transferring that goes on, which is

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Speaker 1: not allowed, so then you have to eject people from

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Speaker 1: the awards so that don't have tickets. And these are

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Speaker 1: kind of illegal issues that the Academy expects on Oscar night,

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Speaker 1: which is a lot like people trying to get in

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Speaker 1: that have no business being there because it is such

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Speaker 1: a big deal. But all of those issues happened generally

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Speaker 1: before the show or at the entrance, so they're very

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Speaker 1: prepared for that. Um, they have a city attorney on site,

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Speaker 1: they deputize people to do arrest should they be necessary,

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Speaker 1: and all of acts happening before the show, so then

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Speaker 1: during the show they are not used to having this

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Speaker 1: kind of issue at all because generally all of that

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Speaker 1: has settled down and people sit in their seats and

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Speaker 1: enjoy the show from there. Obviously, never before has anyone

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Speaker 1: assaulted anyone on the stage. But is there anything close

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Speaker 1: to it that's happened. No. I think the things that

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Speaker 1: have happened at the Academy Awards show are mistakes being made.

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Speaker 1: They announced the wrong movie something like that. But this

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Speaker 1: kind of thing has not been seen at all, particularly

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Speaker 1: among the presenters. I mean, maybe there's an off color

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Speaker 1: joke that mistakes are made on any live television, but

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Speaker 1: nothing like this where there was a criminal act performed

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Speaker 1: on stage from two very well known actors. I think

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Speaker 1: the academy, you know, those in charge there were probably

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Speaker 1: just done. I couldn't mobilize fast enough to figure out

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Speaker 1: it's sunny, you're in. What is happening? How is this

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Speaker 1: happen with this plan? So there is I think a

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Speaker 1: sock factor to it. But there are police officers there too, right,

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Speaker 1: Oh yeah, there's a gazillion celebrities. The security is high.

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Speaker 1: We'll see what happens. Thanks Rachel. That's Rachel PHz of

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Speaker 1: Swayback Phase and Coleman. The latest legal battle to hit

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Speaker 1: the world of n f T S is over neon

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Speaker 1: colored digital depictions of monkeys covered with cake, frosting and candles.

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Speaker 1: A group of artists created the so called Caked Apes

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Speaker 1: in January, a spinoff series of the wildly popular and

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Speaker 1: lucrative Board Ape Yacht Club collection. Now the artists have

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Speaker 1: filed dueling lawsuits. My guest is copyright law expert Tyler

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Speaker 1: A Choa, a professor at Santa Clara University School of Law.

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Speaker 1: Tyler I don't know anything about these board apes. Can

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Speaker 1: you explain Lane what the board ap Yacht Club is about.

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Speaker 1: So the board Ape Yacht Club is a collection of

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Speaker 1: ten n f T s that are each associated with

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Speaker 1: one piece of digital art that are all based on

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Speaker 1: this graphic of a board ape face right. And each

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Speaker 1: one of the ten thousand apes is customized in some way,

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Speaker 1: with different clothing or different props, or perhaps changing the

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Speaker 1: expression a little, right. But they're all variations on the

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Speaker 1: same thing, so each would be a derivative work. So

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Speaker 1: there's a collection of ten thousand of these board apes,

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Speaker 1: and they sold n f t s ten th n

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Speaker 1: f t s, each one associated with a particular ape,

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Speaker 1: and in doing so they have promised certain rights to

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Speaker 1: the buyer that would not necessarily transfer with an n

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Speaker 1: f T, but which they have promised to transfer with

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Speaker 1: each nf to if you own it, what does it

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Speaker 1: give you the right to? So there is a set

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Speaker 1: of terms and conditions on their website, the board Ape

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Speaker 1: Yacht Club, And unfortunately this is kind of badly written.

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Speaker 1: So what it says is, quote, when you purchase an

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Speaker 1: n f T, you own the underlying board ape comma,

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Speaker 1: the art comma completely right, Well, what does that mean

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Speaker 1: does that mean you own a digital asset, doesn't mean

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Speaker 1: you own a copyright, it doesn't say. And then in

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Speaker 1: the next two paragraphs it says, well, we are granting

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Speaker 1: you a worldwide, royalty free license to use, copy and

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Speaker 1: display the purchased art for the following purposes. Right, So

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Speaker 1: that part of the license makes it look like they're

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Speaker 1: retaining ownership and they're only giving you a license to

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Speaker 1: use the work. Well, it doesn't specify whether it's an

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Speaker 1: exclusive license the right to exclude others, or whether it's

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Speaker 1: a non exclusive license. So they've definitely given you something.

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Speaker 1: They've given you some kind of license that accompanies the

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Speaker 1: n f T, and it's a license to use, copy

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Speaker 1: and display the artwork that is associated with your n

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Speaker 1: f T, But exactly however far you can go is unclear.

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Speaker 1: It does give you the right to create derivative works

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Speaker 1: based upon the art, so you can take your board

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Speaker 1: ape and you can modify your board ape in additional

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Speaker 1: ways to create new derivative works. And because of the

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Speaker 1: way copyright works, you would have a copyright in your

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Speaker 1: derivative ape, but that would not necessarily give you any

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Speaker 1: rights in the underlying ape that you've purchased that's governed

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Speaker 1: by the license on the website explain what this lawsuits about.

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Speaker 1: So this lawsuit is really just a breach of contract lawsuit,

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Speaker 1: and both parties are using copyright claims in order to

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Speaker 1: justify going to federal court rather than being in state court.

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Speaker 1: But essentially, the parties entered into some sort of joint

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Speaker 1: venture to create and market derivative works based upon the

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Speaker 1: board ape n f T s that they owned, and

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Speaker 1: they called them the caked apes because their pictures of

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Speaker 1: apes are draped with all sorts of dripping foods that

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Speaker 1: resemble cakes and other desserts. So they've created a series

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Speaker 1: of n f t s that are derivative works of

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Speaker 1: the board apes. Again, they've purchased board apes, so they

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Speaker 1: have some sort of license to do that, and they

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Speaker 1: sold out and they were quite successful. The heart of

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Speaker 1: the dispute is how much money is owed to each

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Speaker 1: of the creators for doing this. So Taylor Whitley, who

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Speaker 1: was also known as Taylor WTF, he was paid ten

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Speaker 1: of the proceeds and he claims that he's owed an

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Speaker 1: additional thirty and the other parties say no, he was

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Speaker 1: only ever entitled to ten percent. And he's been paid

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Speaker 1: is ten percent, which he doesn't seem to deny, and

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Speaker 1: we don't owe him anything else. So that's the heart

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Speaker 1: of the dispute is how much money was he owed

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Speaker 1: and whether or not he's been paid. And the parties

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Speaker 1: agreed that he was owed at least ten percent and

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Speaker 1: that he was paid ten percent, but he says he

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Speaker 1: was owed in additional and the other parties to this

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Speaker 1: venture denied that. Now, I think it's telling that the

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Speaker 1: other parties alleged that there was a contract in writing

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Speaker 1: formed by an exchange of emails, and they have quoted

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Speaker 1: those emails and their complaints, whereas quickly Taylor WTF says

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Speaker 1: that he was owed in additional but he doesn't claim

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Speaker 1: to have anything in writing that says that. So it's

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Speaker 1: going to be very difficult for him to prove that

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Speaker 1: there's some sort of oral agreement that differs from the

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Speaker 1: written terms and the emails that were exchanged between the parties.

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Speaker 1: So where does copyright come in? So copyright comes in

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Speaker 1: in two ways. Taylor WTF suit was based on the

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Speaker 1: fact that he has sort of a personal logo and

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Speaker 1: abstract image of his face, which isn't very specific but okay,

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Speaker 1: and some percentage, some small percentage of the caked apes

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Speaker 1: use Taylor WTS personal logo as part of the background

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Speaker 1: or part of the wallpaper. So he says, while he

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Speaker 1: owns a copyright in his face logo, if you will,

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Speaker 1: and because some of the cake dates have that in

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Speaker 1: the background, and because he wasn't paid the money that

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Speaker 1: he was owed, that the other defendants are somehow infringing

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Speaker 1: his copyright by continuing to promote these caked apes that

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Speaker 1: have that image in the background. I don't think that's correct,

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Speaker 1: because they are not continuing to sell any of these things, right,

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Speaker 1: they've already been sold. Somebody else now owns a n

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Speaker 1: f T associated with those particular apes. It's not clear

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Speaker 1: that the plaintiffs are continuing to do anything that would

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Speaker 1: constitute copyright infringement. On the other side, the group that's

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Speaker 1: led by Nyeguard says that Taylor WTF made a d

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Speaker 1: m C a takedown notice that when he wasn't paid

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Speaker 1: the amount of money that he thinks he was owed,

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Speaker 1: that he sent d m C a takedown notices to

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Speaker 1: online market places that we're hosting some of these n

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Speaker 1: f T s and was successful in getting some of

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Speaker 1: them taken down, at least temporarily, and they're alleging a

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Speaker 1: violation of Section five twelve F, which says that you

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Speaker 1: can't misrepresent your ownership of a copyright when sending a

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Speaker 1: d m C a takedown notice. Morellion was spent on

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Speaker 1: n f T s last year. Do you think that

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Speaker 1: most buyers know what they're getting when they buy one

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Speaker 1: of these, Well, it's it's hard to speak for most buyers.

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Speaker 1: Don't what's in the head of any individual, But my

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Speaker 1: guests would be that most buyers don't understand what they're

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Speaker 1: getting when they buy an n f T. I would

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Speaker 1: imagine a lot of people think they're buying an n

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Speaker 1: f T that they're buying a copyright of some kind,

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Speaker 1: or at least some sort of license to use the

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Speaker 1: art in some way, and that isn't necessarily true. In

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Speaker 1: the case of the board apes, there is some sort

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Speaker 1: of license to use the copyright, even though it's a

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Speaker 1: little unclear, but at least it's there in writing. With

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Speaker 1: other n f t s, there might be a written

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Speaker 1: contract that specifies which can and can't do, and there

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Speaker 1: might not be. Other people might think that they are

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Speaker 1: buying some sort of ownership of an object of some kind,

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Speaker 1: even if it's an intangible object of some kind, and

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Speaker 1: that isn't necessarily true. Right. We've seen people minting and

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Speaker 1: selling n f T s of artwork that they didn't

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Speaker 1: create and that they don't own, and that they don't

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Speaker 1: even have a copy of on a server. Right, So

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Speaker 1: there might be a promise that you're buying some sort

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Speaker 1: of copy, a digital version of this artwork that resides

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Speaker 1: on a particular server, But there's no guarantee that two years,

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Speaker 1: five years, ten years from now, that server will still exist,

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Speaker 1: or that there will be a digital copy of the

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Speaker 1: artwork on that server. It may very well be when

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Speaker 1: you buy an n f T you're buying nothing more

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Speaker 1: than the token itself. That's why I wonder, because there

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Speaker 1: are some cases where clearly they're not getting the copyright

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Speaker 1: and the artist is going to get some secondary profits.

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Speaker 1: So why are they paying so much for these n

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Speaker 1: f T s when you're not getting the copyright. So

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Speaker 1: there's two reasons I think why people buy n f

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Speaker 1: T s. One is that it's sort of a status symbol. Right,

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Speaker 1: I own an n f T. I've got this record

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Speaker 1: that says I own it, and that might be a

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Speaker 1: great bragging point among your friends, among the twitter verse,

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Speaker 1: among other celebrities, that sort of thing. The other reason

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Speaker 1: is that people think these are going to be valuable

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Speaker 1: and they're going to make money, and um, I think

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Speaker 1: that's unlikely for most n f T s. H It's

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Speaker 1: possible with some n f t s, but you know,

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Speaker 1: people who invest early in the process might be able

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Speaker 1: to flip a n f T within a few months

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Speaker 1: at a profit. But I think people who are holding

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Speaker 1: these and hoping that they will have value long term

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Speaker 1: might end up with something that will have very little

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Speaker 1: value when the initial fad sort of faith. People think

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Speaker 1: it's like owning and original work of art. So in

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Speaker 1: the real world space, if you own an original painting,

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Speaker 1: you own that tangible object, even though you don't have

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Speaker 1: own the copyright that's associated with it. And if it's

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Speaker 1: sufficiently old, the copyright might be in the public domain

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Speaker 1: and anyone can make reproductions. If it's newer and it's

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Speaker 1: still under copyright, you would have to negotiate with the

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Speaker 1: artists or the artists to stay separately to get any

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Speaker 1: sort of rights to reproduce the work. But you still

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Speaker 1: own something quite valuable by owning a single original, and

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Speaker 1: the idea behind n f t S was to provide

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Speaker 1: something unique that would have scarcity and that would therefore

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Speaker 1: have similar value to owning an original copy of a

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Speaker 1: piece of art. Right, you know, the the original that

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Speaker 1: in the real world space, that would be the tangible

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Speaker 1: original painting. Here, it would be well, you own the

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Speaker 1: original digital version of this digital art. But the problem

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Speaker 1: is that n f t S can't guarantee that that's

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Speaker 1: what you own, because you know what is the original.

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Speaker 1: It resides on a hard disk somewhere. You're not giving

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Speaker 1: somebody the hard disk, and it might or might not

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Speaker 1: be associated with a particular digital copy at a particular

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Speaker 1: digital location. But again, there's no guarantee that that digital

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Speaker 1: copy or that server will continue to exist to five

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Speaker 1: ten years from now. It's a great explanation. Thanks for

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Speaker 1: being on the show, Tyler. That's Professor Tyler o'choa of

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Speaker 1: the Santa Clara University School of Law. And that's it

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Speaker 1: for this edition of The Bloomberg Law Show. Remember you

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Speaker 1: can always get the latest lead the news Honor Bloomberg

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Speaker 1: Law Podcast. You can find them on Apple Podcasts, Spotify,

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Speaker 1: and at www dot bloomberg dot com, slash podcast Slash Law,

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Speaker 1: and remember to tune into The Bloomberg Law Show every

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Speaker 1: week night at ten pm Wall Street Time. I'm June Grossow,

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Speaker 1: and you're listening to Bloomberg