OPINION AND ORDER Free Holdings, Inc. has brought this action involving the digital artwork, Quantum, and the first non-fungible token (“NFT”) ever created. It has sued Quantum’s creator, artist Kevin McCoy, and auction house Sotheby’s Inc. (collectively, “defendants”). Free Holdings alleges multiple claims stemming from statements made by defendants in promotional material for an auction of Quantum and its digital record. Defendants have each moved to dismiss the amended complaint. For the reasons set forth below, the motions are granted. I. BACKGROUND A. Factual Background The following facts, drawn from the amended complaint (“AC”), Dkt. No. 47, sources cited therein, exhibits attached by Free Holdings to its motion papers, and judicially noticeable matters, are assumed true for the purposes of this motion. See, e.g., Ebomwonyi v. Sea Shipping Line, 473 F. Supp. 3d 338, 344-45 (S.D.N.Y. 2020), aff’d, 2022 WL 274507 (2d Cir. Jan. 31, 2022). In evaluating whether the claims are cognizable, the Court also considers Natively Digital: A Curated NFT Sale, “the challenged publication” cited in the amended complaint. See, e.g., Biro v. Condé Nast, No. 11-CV-4442 (JPO), 2014 WL 4851901, at *4 (S.D.N.Y. Sept. 30, 2014) (“In a defamation case, [documents incorporated by reference or considered integral to the complaint] may include the entirety of a challenged publication that is excerpted in the complaint.”), aff’d in part, 807 F.3d 541 (2d Cir. 2015), aff’d, 622 F. App’x 67 (2d Cir. 2015). 1. NFTs and Namecoin As alleged in the amended complaint, an NFT is a unique identifier that “authenticate[s] digital content” on the blockchain, which is “a digital public ledger maintained on a decentralized computer system and consisting of records called blocks.” AC
27, 29. “The blockchain’s record-keeping and authentication technology serves to provide public certificates of authenticity or proof of ownership of NFTs.” Id. 31. “[C]ontent linked to NFTs can take the form of digital images of physical objects, music, text, and more.” Id. 32. Namecoin, an early blockchain, is a system of “names” — unique combinations of numbers and letters — that can be claimed and traded by users. See id. 35; see also Monolithbrah.eth, et al., Defining “NFT” in Historical Context (“Defining NFT”) (Jun. 27, 2022) https://mirror.xyz/chainleft.eth/MzPWRsesC9mQflxlLo-N29oF4iwCgX3lacrvaG9Kjko.1 Ownership of every name periodically expires, at which point any user “may freely claim [it] on the Namecoin blockchain” by reregistering the expired name. AC 4; Defining NFT. In the community of blockchain users, “there is an ongoing debate” about the status of names that expire and are then re-registered: namely, whether re-registered names become new NFTs or are the same NFTs that were previously claimed. The debate is summarized in the Defining NFT article as follows: Namecoin is designed around domain names, but when a domain name gets registered the first time, it is represented by a particular identifier (UTXO design) to allow its trading. The chain of these identifiers (UTXOs) can be considered a special coin, which we will call a “colored coin” in this article…. When a Namecoin domain expires, the colored coin becomes unspendable. In practice, it can be called “burnt”, because when the domain name is re-registered later, a new UTXO chain starts. This would mean that when a domain name expires, the chain of events where that domain was represented breaks. During the reregistration, the Namecoin protocol does not make a distinction between a never-used domain name and a previously expired domain name. This fact may support the argument that the expiration is philosophically burning the original token. On the other hand, as mentioned before, Namecoin is designed around names. Names are unique identifiers themselves and they function that way immutably in a cryptographically secured blockchain. The history of the unique name, previous updates and transactions remain on-chain, as is the case with blockchains. The aforementioned “UTXO chains” are actually formed of individual UTXO stations. Each UTXO has an address and domain names are attached to these UTXOs. When Bob makes a standard domain name transfer to Alice, a 0.01NMC is spent on Bob’s side where the domain name is attached, and a new 0.01NMC is created on Alice’s side where the domain name is attached. The thing that physically (for lack of a better term) moves from one address to another during a typical transfer is the domain name, not UTXOs. The design choice of a typical domain name transfer supports the argument that the domain name is the unique identifier and the token, and it never burns even after expiration. This domain-first design can be seen not only in block explorers but also in functions to utilize the domain names. There’s a built-in [remote procedure call ("RPC"), a software communication protocol] method since the beginning of Namecoin called name_show which returns the information about the domain name even during the expired period. This function does not return anything for never-registered domains. In fact, an expired domain can still be functional. When expired, Namecoin Core will still have the name and return its local state with name_show (just indicating the expired status). If the resolver setup accepts it, the domain will still work. Similarly, expired “id/” names in Namecoin still work as logins, which indicates the usefulness of the name_show function. Consequently, as the article explains, there are three different interpretations of the significance of ownership of a re-registered name on Namecoin: Interpretation 1: The token is the colored coin, and that is the asset. Names may be unique but they are cryptographically represented by tokens and only that representation matters. Since a re-registered name is assigned to an entirely new colored coin, the provenance from the earlier UTXO chain is broken, therefore this is a new asset and cannot claim historical value. Interpretation 2: The token is the name, and that is the asset. Namecoin is designed around names where names are the main unique identifiers. This is supported by the technical design when you do a typical name transfer or assign a value field to the name. These are all visible onchain. Further, when the name expires, the data of the name remains on the blockchain. If the blockchain is designed around names and their whole history is onchain, when the name is re-registered you are simply reactivating the old token, therefore provenance is not broken. Interpretation 3: The token is the colored coin because it is a cryptographic representation of the name. But the main collectible asset is the name itself and these names have their own provenance because Namecoin is designed around names as unique identifiers. A name’s history and UTXO assignments are all visible on-chain. This is further proven by the existence of name_show and name_history RPC methods. Therefore when the name is re-registered, the new colored coin (UTXO chain) can be assumed as a new NFT, but it represents the old decentralized collectible asset which was intact and ownable since its birth. Id. (emphasis added). To summarize, as the Defining NFT article makes clear, some believe that when a new user re-registers an available name previously claimed by someone else, it has claimed the same NFT claimed by the previous user. Others, who believe that the NFT is the UTXO chain, not the name, believe that when a new user re-registers an expired name, the new UTXO chain it creates signifies a new NFT. A third group ascribes to a combination of the two theories: that the UTXO chain becomes a new NFT that retains the entire history of the name. 2. Mccoy’s Creation and Preservation of Quantum In 2014, digital artist Kevin McCoy created Quantum (viewable at https://static.mccoyspace.com/gifs/quantum.gif). AC
