Top 4 Legal Issues for Filmmakers in Web 3.0

Julian Haffner
11 min readMay 25, 2023

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Photo by fabio on Unsplash

Web 3.0, sometimes known as “Web 3”, is the next generation of the web. Fueled by the fundamental ideas of decentralization, openness and increased consumer usefulness, Web 3 seeks to address some of the limitations and challenges of Web 2.0, such as data privacy concerns, centralized control, and lack of user ownership, and aims to create a more user-centric, and secure internet experience.

However, as the technology evolves and gains currency, new legal challenges are predictably beginning to emerge. Particularly, as the film industry moves into Web 3.0, filmmakers face a variety of legal issues that they need to be aware of. Accordingly, it is critical for businesses and individuals operating in the Web 3.0 space to stay informed about the dynamic legal challenges to ensure compliance and mitigate potential risks. As the filmmaker’s biggest fan, we at CineBlock are dedicated to ensuring creators are empowered to get the most out of Web 3. Part of that task requires a comprehensive understanding of the Web 3 landscape, and the pitfalls that await the unprepared. Accordingly, in this four part series, we highlight some of the major legal issues for filmmakers in Web 3.0 and how forward-thinkers can avoid the potential hazards while leveraging the possibilities Web 3.0 can provide.

Part One of this series delves into the intellectual property challenges Web 3 presents for IP owners generally, and filmmakers in particular, and highlights a few of the more exciting tools Web 3 provides to overcome them.

Part Two explores some of the privacy and data protection concerns for filmmakers raised by this nascent technology, and how Web 3 may boost the user experience while providing unparalleled privacy protections.

Part Three examines smart contracts and the potential pitfalls associated with their use. In this section we highlight the potential and promise of smart contract technology and how filmmakers can leverage it to unlock potential success.

Part Four looks at the securities laws issues implicated by Web 3 technology and some of the more forward-thinking solutions being presented to help filmmakers navigate these highly regulated and potentially treacherous waters.

Part 1. Intellectual Property Rights

As Web 3 ushers in the era of decentralized platforms and blockchain technology, the concept of ownership and attribution can become more complex. Web 3.0 technologies such as blockchain and NFTs undoubtedly create new opportunities for filmmakers to monetize their content. However, they also raise fundamental questions about intellectual property rights. How can content creators establish and prove ownership of their digital assets in a decentralized environment? How can they ensure proper attribution when content is shared and remixed?

The good news: in Web 3 environments, there is no central authority governing the entire system. The bad news: in Web 3 environments, there is no central authority governing the entire system. The decentralized nature of blockchain and peer-to-peer networks means that no single entity has ultimate control over verifying and enforcing IP ownership. Moreover, Web 3 technologies often allow users to interact pseudonymously or anonymously. Instead of using real-world identities, users operate under cryptographic addresses or pseudonyms making it difficult to associate specific individuals or entities with their intellectual property.

These challenges highlight the need for new approaches and solutions to address IP ownership in Web 3. Filmmakers intent on operating in this new space need to be careful to ensure that they own or have the necessary rights to use any content they distribute on blockchain or utilize through NFTs. Establishing and proving ownership of digital assets can be challenging, but the unique features of Web 3 technology are already promising to make the task a bit easier.

Content creators can use digital signatures to verify their ownership of digital assets. Digital signatures are cryptographic tools that uniquely identify the creator and provide evidence of authorship. Digital signatures ensure that a specific message or piece of information originates from a particular sender and has not been tampered with during transmission. Accordingly, by signing their content with a private key, creators are able to demonstrate their ownership and thereby ensure the integrity of their digital assets.

Timestamping services on the blockchain can be used to address IP issues by establishing the existence and ownership of digital assets at a specific point in time. Content creators can timestamp their digital creations, generating a cryptographic proof that links the asset in question to a specific time and date, which in turn can be used as evidence of ownership.

Blockchain tech can provide features for registering and storing digital assets directly on the blockchain. By registering their assets on a blockchain, content creators can establish a public record of ownership that is tamper-resistant, and able to be verified independently .

Content creators can embed metadata or digital watermarks into their digital assets, containing information about the creator, copyright notices, or unique identifiers. This metadata can serve as additional evidence of ownership and can be easily traced back to the original creator.

Although blockchain-based solutions can provide evidence of ownership, it’s still advisable for content creators to avail themselves of the decidedly old-school method of registering their copyrights with the Registrar of Copyrights. Only through copyright registration can filmmakers be armed with the legal protection and the additional evidence necessary to establish ownership in case of disputes.

It should go without saying, but content creators should always maintain proper documentation and records related to the creation and ownership of their digital assets. Such documentation can include retaining all drafts, versions, project files, communication records, and any other evidence that supports their claim of ownership.

As mentioned in more detail below, content creators can use smart contracts on the blockchain to establish licensing terms and enforce usage rights. Smart contracts can automate the process of granting permissions and collecting royalties, and provide a transparent and tamper-proof record of the agreed-upon terms.

By leveraging the power and promise of Web 3, but at the same time adhering to tried and true offline methods, content creators can strengthen their IP rights and enhance their ability to protect their creative works from unauthorized use or infringement.

Part 2. Privacy and Data Protection

Using Web 3 tools, content creators can create their own online communities, gather feedback, and interact with their audience in more personalized ways. Indeed, Web 3 technologies enable filmmakers to gather priceless audience data in a more direct and decentralized manner. However, filmmakers need to be mindful of privacy and data protection regulations when collecting and using data from their audiences. The immutability of the blockchain, the anonymity with which users can access Web 3 tools, and the decentralization of operation all present unique challenges for the unaware.

As more filmmakers adopt blockchain-based distribution models, they need to ensure that their data collection and use practices comply with local and international privacy regulations. Even as privacy and data protection in the Web 3.0 context are still evolving, there are new solutions and standards are always being developed. At its core, blockchain provides a tamper-proof and immutable ledger where data records are stored in a decentralized manner. Once data is recorded on the blockchain, it cannot be altered or deleted without consensus from the network participants. This ensures data integrity and prevents unauthorized modifications or tampering.

What’s more, blockchain’s transparent nature allows for increased visibility and accountability. All transactions and data entries are recorded and stored on the blockchain, creating a transparent audit trail enhancing trust among users and stakeholders, as they can independently verify the integrity of the data.

Web 2 data storage systems typically rely on centralized servers, making them vulnerable to single points of failure and data breaches. In contrast, blockchain operates on a decentralized network of nodes, distributing data across multiple participants. This decentralized architecture reduces the risk of unauthorized access or manipulation of data. Moreover, blockchain’s use of cryptographic techniques to secure data ensures that it remains encrypted and can only be accessed by authorized parties holding the appropriate private keys. This enables secure and private transactions, protecting sensitive data from unauthorized disclosure.

One of the more interesting uses of blockchain tech is its use of blockchain-based identity solutions also known as self-sovereign identity systems. Such systems enable individuals to manage their own digital identities, selectively disclose information, and control access to their data. This empowers users with greater privacy and reduces the reliance on centralized identity providers.

Smart contracts can also be used to ensure privacy by design, as they only reveal necessary information required for transaction execution. Self-executing smart contracts can facilitate automated and secure transactions without the need for intermediaries. Furthermore, their use of predefined rules and conditions eliminates the need to disclose sensitive information to third parties.

While blockchain technology offers enhanced data and privacy protections, it is important to note that the very characteristics that make it a boon for data privacy can also render it susceptible to breach. Web 3 is not a data privacy silver bullet solution. However, when Web 3 tools are implemented and configured thoughtfully and appropriately, they can be more reliable than anything we’ve seen before.

Part 3. Smart Contract Disputes

Smart contracts are best described as self-executing contracts with the terms of the agreement written directly into code. Operating on blockchain platforms, such as Ethereum, and using predefined conditions and rules, smart contracts provide an automated and decentralized way to facilitate, verify, and enforce the performance of a contract without the need for intermediaries and are being deployed in a variety of commercial settings.

As discussed throughout this series, Web 3 smart contracts provide filmmakers with various tools to enhance their filmmaking processes, solve a range of ownership and privacy issues, and allow for more meaningfully engagement with audiences. For example, using smart contracts, filmmakers can create tokenized voting systems that allow token holders to have a say on creative decisions or casting choices, or even participate in marketing campaigns. Moreover, as covered in Part Four of this series, smart contracts can enable fractional ownership and investment opportunities for smaller individual investors, and even govern the distribution of profits and dividends.

However, legal disputes may still arise over the interpretation of the code or the performance of those smart contracts. Smart contracts are coded by humans, and thus are susceptible to errors or vulnerabilities in the code that can lead to unintended consequences or exploitations. Moreover, despite the self-executing nature of smart contracts, there may be ambiguities or gaps in the contract terms or conditions that can also lead to disputes.

Nonetheless, the promise of smart contracts far outweighs their current limitations. A smart contract governed by a well-defined governance process can address or even prevent disputes related to contract updates or modifications. Indeed, smart contracts can be designed with certain governance mechanisms and systems that manage, update, and make decisions regarding smart contracts allowing for updates, amendments, or bug fixes when necessary to keep the smart contract up-to-date.

Smart contracts have the potential to revolutionize the independent film industry. Nonetheless, filmmakers need to be aware of the legal implications of the potential vulnerabilities of smart contracts and ensure that they are legally binding and enforceable.

4. Securities Law Issues

Web 3 technologies, such as blockchain and tokenization, present independent filmmakers with unique opportunities to raise capital, but can present serious challenges and considerations when it comes to securities laws compliance. Generally speaking, securities regulations exist at both the state and federal levels to protect investors from fraudulent practices, market manipulation, and other forms of misconduct. Accordingly, securities laws and regulations aim to protect and instill confidence in the capital markets by ensuring that investors have access to accurate and transparent information about the securities in which they invest so that they can make informed investment decisions.

In the early days of Web 3, we were introduced to the Initial Coin Offering, or “ICO”. The ICO involved the sale of tokens or digital assets to raise funds for a project or venture. While some were able to cash in, many token offerors ran afoul of the rather tight securities law because the tokens they were issuing were classified as securities, and thus subject to securities regulations.

Determining whether a token qualifies as a security involves assessing several factors under the so-called “Howey Test” (named after the landmark U.S. Supreme Court case called SEC v. W.J. Howey Co.) The Howey Test is a legal framework used to determine if a particular transaction qualifies as a security. Most simply stated, the test determines whether an investment involves an expectation of profits derived from the efforts of others, and thus should be classified as a security.

Filmmakers have always had a need to raise capital to fund the making of their projects, and the process has been notoriously difficult. However, new laws coupled with Web 3 technological advances make the capital raising process less complex and more accessible than ever. In order to stay on the right side of the law, filmmakers intent on leveraging the power and promise of Web 3 for their projects need to assess whether their offerings or activities meet the criteria set by the Howey Test and adhere to applicable securities laws.

Regulation Crowdfunding (Reg CF) is a set of regulations enacted by the SEC under Title III of the Jumpstart Our Business Startups (JOBS) Act, that aims to open up the capital markets to a wider range of potential investors than ever before. Using Reg CF, small businesses and startups can raise a meaningful amount of capital from individual investors, also known as “crowd investors.”

Specifically, Reg CF provides an exemption from the traditional securities registration requirements, making it easier and more accessible for small businesses to raise funds. Prior to Reg CF, crowdfunding was primarily used for donations or rewards-based campaigns. With Reg CF, eligible businesses can offer actual securities, such as equity or debt, in exchange for investments from both accredited and non-accredited investors.

Reg CF allows filmmakers to reach a larger audience of potential investors, including individual retail investors who may have an interest in supporting creative projects. Reg CF portals provide a platform for filmmakers to raise funds from individual investors in exchange for investment opportunities and potential returns.

We note that the overwhelming majority of these platforms primarily operate on traditional Web 2 web-based platforms and do not extensively utilize Web 3.0 technologies. Thus, they fail to leverage the potential of Web 3 and its ability to enhance transparency, and security.

CineBlock as the Web 3 Solution for Filmmakers

CineBlock is a fintech company strategically positioned at the confluence of blockchain tech and the legal developments giving rise to the funding revolution. CineBlock’ mission is to embrace Web 3 to fundamentally alter the fundraising landscape.

Utilizing blockchain technology, CineBlockFilms reduces the risk associated with traditional offline independent film investments. CineBlock offers filmmakers a transparent and immutable record of transactions. Once a transaction is recorded on the blockchain, it cannot be altered or deleted, and moreover can be viewed by anyone with access to the blockchain. What’s more, because blockchain transactions are recorded in real-time, we are able to keep accurate and up-to-date records giving investors an accurate picture of their investments and allowing issuers to manage their offerings more efficiently. What’s more, smart contracts with the terms of the agreement directly written into code, can be used to automate the reporting of securities transactions to regulators helping to streamline the regulatory reporting process and reduce the risk of errors. Overall, CineBlock’s blockchain technology provides a more efficient and secure way to keep records of securities transactions.

There are a number of legal issues that arise in Web 3 about which filmmakers should be aware. While, Web 3.0 is still in its early stages of development, and the full potential and implementation of these technologies in the filmmaking industry are yet to be realized, as the technology evolves and more platforms and tools emerge, filmmakers will have more new opportunities for creative expression, funding, distribution, and collaboration than ever before.

We at CineBlock look forward to paving new pathways in this emerging space, invite you to join us on the journey!

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Julian Haffner

Julian Haffner is a seasoned business and entertainment attorney with a particular interest in Web 3.0. Julian is the Chief Legal Officer for CineBlock Films.