In one of the first court cases in the United States to test the application of blockchain technology to artists’ rights, a New York court has dismissed a lawsuit over the ownership of the “world’s first NFT”.
Quantum was created by Kevin McCoy in May 2014, before the launch of Ethereum or the introduction of the term NFT (non-fungible token). The NFT was then sold at Sotheby’s for $1.5 million in June 2021. Last February, McCoy and the auction house were sued by a Canadian company called Free Holdings, which claimed to be the rightful owner of Quantum. The company claimed it secured the rights to the work seven years after it was created after McCoy let his ownership expire.
The problem came to a head because McCoy hit Quantum using NameCoin, a blockchain software modeled after the code of Bitcoin that required the artist to renew his ownership approximately every 250 days. But McCoy failed to do so, and the NFT lay dormant until the media announced the Sotheby’s auction. Prior to the sale, Free Holdings created a new NFT, using the same namespace McCoy had used seven years earlier and duplicating McCoy’s original metadata. Free Holdings then alleged that it was the owner of the “first ever NFT” and attempted to contact McCoy in a series of tweets, which escalated into hostility.
After the June 10, 2021 auction, in which the NFT was purchased by an individual named Alex Amsel, Free Holdings contacted Sotheby’s to say the catalog entry for Quantum was “inaccurate and misleading because the Namecoin record had not been ‘burnt,’ but was still active and controlled by Free Holdings”. In its complaint, Free Holdings accused Sotheby’s and McCoy of defamation and commercial disparagement.
However, dismissing the case, James Cott, a U.S. District Court magistrate for the Southern District of New York, found that Free Holdings had failed to establish its property and injury claims. Cott concluded, “Free Holdings has demonstrated nothing more than an attempt to exploit open questions of ownership in the still-developing NFT realm to claim the benefits of a legitimate performer.”
