A recent dispute over a one-of-a-kind Wu-Tang Clan album highlights some of the potential challenges inherent in ownership of digital art.  The suit was initiated by PleasrDAO, an international entity that collects important works of digital media, against disgraced former American pharmaceutical executive Martin Shkreli.
 
Factual Background
 
Over the six-year period from 2007 to 2013, the legendary hip hop group Wu-Tang Clan recorded “Once Upon a Time in Shaolin.”  The album includes 31 tracks with many appearances from notable celebrities.  Wu-Tang Clan only created one copy; this, they say, was because they felt that digital technology was leading to the devaluation of music.  The album was sold to Martin Shkreli in 2015 for $2,000,000 under a strict purchase agreement, which prohibited Shkreli from duplicating, replicating, or exploiting the album for eighty-eight years following the sale (other than a limited number of “Permitted Uses”).  The contract also stipulated that if Shkreli were to sell the album, it must be under the same conditions, and the album may only be owned by one individual at a time.
 
Shkreli, who was involved with multiple financial and pharmaceutical companies during his business career, gained notoriety in 2015 for hiking the price of a lifesaving drug.  In 2017, Martin Shkreli was convicted of committing securities fraud in connection with a hedge fund he had founded; Shkreli was sentenced to seven years in prison, and his sentence also included a $7.4 million forfeiture order.  One of the forfeited assets was his interest in the Wu-Tang album.  The order further provided that Shkreli could not take “any action that would have the effect of diminishing, damaging and/or dissipating” the value of the forfeited assets, or affect their availability, marketability or value.
 
PleasrDAO bought the album, through the U.S. Marshals Service, over the course of two transactions in 2021 and 2024, for a total of $4,750,000.  The album was supposed to constitute the sole existing copy of the record, music, data and files, and packaging; and PleasrDAO also purchased the copyrights, the exclusive right to play the audio tracks, and the exclusive right to exploit the recordings.  But PleasrDAO soon came to realize that they were not the only ones with a copy of the album. When Shkreli was released from prison in May 2022, he began participating in livestreams, on which he would stream the Wu-Tang album, admit to having made and kept multiple MP3 copies, and admit he had sent the album to many people. Thus, PleasrDAO argues, Shkreli violated not only his original purchase agreement but also the provisions of his criminal forfeiture order.
 
Legal Proceedings
 
PleasrDAO filed a complaint on June 10 seeking injunctive relief against Shkreli, including a restraining order, preliminary injunction, and permanent injunction preventing Shkreli from using and possessing the album in hopes of stopping further damage to the album’s value.  They also requested an order to seize all of Shkreli’s remaining copies of the album, along with the ones he distributed, and an award of monetary damages.  They alleged that Shkreli’s actions not only breached the forfeiture order, but violated the federal Defend Trade Secrets Act (18 U.S.C. § 1836), arguing that the album itself constitutes a trade secret which Shkreli has misappropriated.  Other counts in the complaint include tortious interference with prospective economic advantage, unjust enrichment, and recovery of chattel.
 
Only a day after the complaint was filed, the court granted the proposed temporary restraining order, forbidding Shkreli from using, disseminating, streaming, or selling any interests in the album, including its data and files, or in any way causing further damage to PleasrDAO with respect to the album.  In its ruling on the TRO, the court found that the plaintiff is likely to succeed on all counts.  It also found that, without a TRO, PleasrDAO stands to suffer “immediate and irreparable injury—namely, erosion of the album’s uniqueness as a work of art—and that a balancing of the hardships faced by the parties, as well as the interests of the public at large, make a TRO appropriate.
 
The court has ordered the parties to file briefs regarding whether a broader preliminary injunction is needed.  Shkreli’s legal team argues that Shkreli made the copies of the album while he was the uncontested owner, and that he had the right to do so under the terms of his original purchase agreement.  They also argue that Shkreli did not cause irreparable damage to the album’s “uniqueness” because when it was bought by PleasrDAO it already was not unique.  In particular, they cite a portion of the original purchase agreement which states “the Work is the only existing copy of the Work in the world up until the transfer of the work from the Sellers to the Buyer.”  PleasrDAO’s brief in response is due August 19. 
 
Insights on Unique Digital Assets
 
Regardless of the outcome of this particular case, the dispute provides insights for collectors looking into purchasing rare and unique artworks, especially ones capable of exact digital reproduction.  The disagreement between Shkreli and PleasrDAO highlights how crucial it is to have precise and binding purchase agreements that outline the restrictions on and duties of ownership, especially when it comes to the rights of distribution and duplication of digital works.  Relatedly, the case will likely need to analyze the transaction through which the forfeited album assets were sold through the U.S. Marshal Service; the case illustrates how the criminal forfeiture process (by which the government can seize some of a convicted criminal’s assets, often in order to provide restitution to victims) can take on special complications when the forfeited assets are not simply bank accounts or stocks, but unique artworks.  (See here and here for a glimpse of some of our firm’s work involving artworks entangled in forfeiture proceedings.)
 
Furthermore, the case shows how the value of any original artwork can be seriously threatened by the increased ease and accessibility of digital replication.  (Indeed, NFTs evolved, in part, as a way to trade unique digital artworks.)  A work’s uniqueness and exclusivity can be quickly undermined by digital copies, as evidenced by Shkreli’s reproduction and distribution of the record—and there are limits to how effective the law and the courts can really be in “putting the toothpaste back in the tube.”  One of the issues this court will likely address as the case continues is whether PleasrDAO is entitled to court-ordered injunctive relief to try to remedy the situation, or whether PleasrDAO will instead need to content itself with monetary damages (which can be difficult to calculate and prove with certainty).  We’ll continue to monitor the case, which will likely provide further insights about how to mitigate risks and preserve the value of rare and exclusive digital artwork in this evolving marketplace.
 
Note: This blog post was co-authored by Laurel Caruso and Kate Lucas.  Laurel is currently an undergraduate on a pre-law track at the University of Pennsylvania, where she is majoring in art history with a minor in statistics, and we are pleased to have Laurel as a legal intern at Grossman LLP this summer.