In 2014, artist Kevin McCoy created a digital artwork called Quantum and recorded its provenance on the Namecoin blockchain, making it the first-ever non-fungible token (NFT). Little did McCoy know that this act would lead to a legal dispute over ownership rights years later.
Namecoin is an early blockchain that allows users to register and manage domain names ending with the “.bit” top-level domain. Each registered name is associated with a unique token that represents ownership and control over the domain. McCoy’s Namecoin name expired in 2015 and remained unclaimed for six years.
In May 2021, McCoy minted a new NFT of Quantum on the Ethereum blockchain, preserving the original on-chain information. Sotheby’s auction house then marketed the NFT for sale. In April 2021, Free Holdings re-registered McCoy’s expired Namecoin token and claimed ownership of the Namecoin-Quantum NFT. They attempted to contact McCoy but received no response.
Sotheby’s eventually sold McCoy’s reminted Quantum NFT for $1.5 million. Free Holdings filed a lawsuit in February 2022, alleging that the Defendants misrepresented the status of the Namecoin-Quantum and caused them financial harm.
The court dismissed the lawsuit, stating that Free Holdings lacked standing and failed to support its claim to ownership of Quantum based on re-registering the Namecoin-Quantum NFT. The court found no evidence of actual or imminent harm to the value of the Namecoin-Quantum and rejected claims of false statements by the Defendants during the sale.
This dispute raises interesting issues surrounding NFTs. The existence of identical copies on different blockchains and the question of ownership and rights associated with these copies can create complexities. Different marketplaces may handle these issues differently, and the unique features of Namecoin further complicate matters.
Overall, this case demonstrates the evolving nature of NFTs and the legal challenges that can arise in this space. As the NFT market continues to grow and develop, it is likely that more disputes over ownership and rights will arise, requiring careful consideration and legal analysis.