3LAU Sued For Over $11 million Over NFT Project

An intriguing complaint was filed last week against DJ and producer 3lau in a disagreement about a multi-million dollar NFT auction he held in early 2021 in connection with his 2018 album ‘Ultraviolet.’

3lau, real name Justin Blau, has been sued by Luna Aura, who co-wrote and performed on the single ‘Walk Away,’ which appears on ‘Ultraviolet.’

The producer’s NFT auction, which coincided with the record’s third anniversary, offered purchasers a variety of gifts and bonuses, many related to his 2018 album, and some especially to ‘Walk Away.’ The auction netted the producer more than $11 million.

Luna Aura, real name Angela Anne Flores, claims in her case 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 argues that Blau failed to properly license the inclusion of ‘Walk Away’ in his NFT CD and has failed to pay her a correct royalty.

Blau did offer Flores a one-time payment of $25,000 in connection with the NFT sale, but she does not consider it a suitable fee is given how much the producer earned from the larger NFT auction.

It’s an interesting legal battle because, despite all of the hype and chatter surrounding music NFTs in recent years, there is still no real consensus on how they should be licensed when recordings are included in the offer but the artist or label leading the NFT drop does not own all of the rights to the songs contained in those recordings. Which they frequently fail to do.

When recorded music is exploited, there are industry rules for how income should be split between the recording rights and the song rights, but those splits vary based on usage, so it’s unclear what kind of split is fair with new products.

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There is also a frequent dispute over how the splits should be. Despite the fact that streaming has been an important revenue stream for years and the song right split has increased modestly over the last decade, many songwriters and music publishers feel that the split on streams is still unjust.

In the United States, song royalty rates are fixed by law in numerous situations, including downloads and discs, and most music NFTs involve a download and/or a CD. Though the statutory rates are fixed in pennies rather than a percentage of revenue, they appear to be quite unsuitable for NFT sales that generate millions of dollars.

Of course, there are additional challenges with music NFTs. First, like with the 3lau NFT campaign, buyers of each non-fungible token receive a variety of products and advantages that must be considered.

Second, there is a discussion about how much of the value of each given token is derived from the music associated with it, and how much is derived from the artist’s brand.

With all of these unknowns and difficulties, it’s usually best to work out any bespoke licensing before embarking on a music NFT project. However, this could prevent a project from proceeding at all. And, presumably, Team 3lau was eager to cash in on the early 2021 NFT buzz, which was causing tokens to trade for exorbitant prices.

In any case, Flores believes Blau breached his legal obligations with respect to ‘Walk Away’ before issuing the ‘Ultraviolet’ NFT drop, making him and his company 3lau Entertainment liable for breach of contract and unjust enrichment.

“Luna Aura has not received any compensation from revenues produced by the NFT project, nor has Luna Aura [gotten] appropriate credit in connection with the ‘Walk Away’ and ‘Ultraviolet’ NFTs,” her attorneys wrote. Despite the marketing and financial success of the NFT auction, defendants only offered Luna Aura a one-time payment after the fact.”

Blau has already reacted to Flores’ comments. “These charges are without merit,” his manager Andrew Goldstone told reporters. “We will strongly fight the case that was simply filed yesterday without any previous notice.” There are no predefined guidelines for approaching an NFT production like this, which involves much more than simply the music. For months, Justin’s team sought in good faith to reach an agreement with Flores, but she stopped responding and instead chose to initiate a lawsuit.”

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