What Happens If The DOJ Ends Up With Martin Shkreli's Sole Copy Of The Wu Tang Clan Album?

from the questions-questions-questions dept

So, this story has been bouncing around the internet quite a bit today, but in case you somehow missed it, the Justice Department is seeking to get its hands on the only copy of the Wu Tang Clan album Once Upon a Time in Shaolin. In case you somehow missed this story, there are a few separate background pieces that are necessary to explain. First up, as a combination business model experiment/publicity stunt, back in 2014, Wu Tang Clan announced that it would be selling just a single copy of their latest album. It was an interesting attempt to bring some sort of scarcity back to music and see how the market would respond.

A year and a half later, a totally different story dominated the news. A story about a pharmaceutical company most people hadn't heard of, named Turing Pharmaceutical, buying up the rights to a drug called Daraprim, that many AIDS and cancer patients relied on... and jacking up the price on it from $13.50 per pill to $750 per pill. Soon after that, the young CEO of Turing, named Martin Shkreli, had his smirking face plastered all over the news for his trollish "I'm a villain, but so fucking what" response to all the hatred directed his way.

What does one story have to do with the other? Well, sometime after Martin Shkreli became everyone's favorite villain, it was revealed that he was the one who had purchased Once Upon a Time in Shaolin for $2 million. While Shkreli, at times, has hinted at releasing the music, or even reselling it, nothing much has come of it. At the very end of 2015, Shkreli was arrested -- not over jacking up drug prices, but for securities fraud.

Right after the arrest, Sarah Jeong wrote a fantastic article about how the arrest might lead to the album getting out. The 4th item on the list... asset forfeiture:

If Shkreli is convicted, the direct proceeds of his crimes will now belong to the government. This is what is known as criminal asset forfeiture. (The government has not sought civil asset forfeiture here, which is a slightly different form of seizure that does not require convicting a person of a crime.)

The United States has requested the forfeiture of "any property, real or personal, which constitutes or is derived from proceeds traceable" to the crimes in the indictment against Martin Shkreli. But when the US attorney said he did not know where the funds for the purchase of the Wu-Tang album came from, he was implying that the album would not be the subject of criminal asset forfeiture.

However, in our wild and improbable hypothetical, the album is implicated in the case and ends up being seized. If Shkreli is convicted, then the album might then become the subject of criminal forfeiture. The multi-million-dollar work of art would then end up on GSA Auctions, alongside dilapidated drug-running Chevrolets and extremely questionable lab equipment.

So... it's now two years later and that "wild and improbable hypothetical" has become fact. The government has filed for criminal forfeiture of Shkreli's assets. You may recall that he was convicted earlier this year and is in jail. As a quick side note: this is different than civil asset forfeiture -- the process we regularly complain about involving law enforcement taking money and assets from people without ever charging anyone for a crime. This is criminal asset forfeiture, after the person has been convicted of the crime, and where the government seeks to disgorge them of the profits from the criminal activity.

Here, the Justice Department notes that Shkreli owes them a lot of money. And it wants to get at his assets:

The Court should hold Shkreli financially accountable for his criminal conduct by requiring him to forfeit the amounts above, which total $7,360,450.00, and enter a forfeiture money judgment against him in that total amount. As set forth herein, this total amount represents a conservative computation of the proceeds Shkreli personally obtained as a result of his three different securities fraud crimes of conviction. Furthermore, pursuant to 21 U.S.C. § 853(p) and Fed. R. Crim. P. 32.2, the government seeks forfeiture of certain substitute assets of Shkreli in order to partially satisfy the forfeiture money judgment.

Got that last part? Basically, he should cough up this money, but if he can't we're going after his other assets... including:

Specifically, the following substitute assets owned by Shkreli have, to date, been identified and now that Shkreli has been convicted, the Court should direct that they be forfeited to the United States in partial satisfaction of his forfeiture money judgment: (a) $5 million in cash that is currently held in an E*Trade brokerage account ending in the digits “0258” as security for Shkreli’s bond, pursuant to orders of the Court dated January 7, 2016, August 24, 2016 and October 19, 2017; (b) Shkreli’s interest in and the monetary value of any and all shares held in an entity called Turing Pharmaceuticals; (c) the album “Once Upon a Time in Shaolin” by the Wu Tang Clan, as well as any proceeds derived from the sale of such album; (d) the album “The Carter V” by Lil Wayne, as well as any proceeds derived from the sale of such album; (e) an Enigma machine, as well as any proceeds derived from the sale of such machine; and (f) a Picasso painting, as well as any proceeds derived from the sale of such painting.

The other album listed, the Lil Wayne one, is another one that Shkreli claims he's the sole owner of. Except, of course, that one appears to have been a leak of some sort, and not through a Wu Tang style sale.

Of course, does this mean that once the US government gets it, the Wu Tang album can be released to the public? It would be a strange world if the US government were suddenly the record label for what would likely be a hugely popular album. But... that's unlikely to be how it works. Wu Tang Clan likely still holds the copyright (there was no indication that they also transferred the copyright with the album, though it's possible?). Jeong went through some of the scenarios in her post two years ago:

The weird thing is that it's not clear what happens to the contract that Shkreli signed when he bought the album. Presumably, the contract allowed him to transfer his limited distribution rights if he ever sold the physical record to another person. But what happens if the record gets seized by the federal government as part of a criminal forfeiture?

Let's say the government seizes the record, sells it on GSA Auctions, and then I buy it and upload the whole thing onto the internet. If Shkreli had uploaded the whole album for free, Wu-Tang couldn't sue him—as per the terms of the contract. But if I do it, there's no contract preventing Wu-Tang from suing me, even though I'm now the rightful owner of the One True New Wu-Tang Album.

That is, unless the government manages to successfully seize Shkreli's intellectual property rights in the Wu-Tang album.

Seizing the actual rights to the album would certainly be an odd move, but not unprecedented. In May, the federal government tried to seize the trademarks of the Mongol Nations motorcycle club after securing criminal convictions against many of its members, and then bringing a RICO indictment against the club itself. They ultimately failed—but not because trademark seizure isn't possible.

Still, the Mongol Nations forfeiture was likely targeted at suppressing future use of the trademark, rather than setting up a government-owned Mongol Nations swag shop. "I don't think the FBI will start a Wu-Tang imprint," said Parker Higgins, copyright activist at the Electronic Frontier Foundation.

And, of course, don't expect to FOIA it away from the government either. Attempts to get other copyright-covered works via FOIA haven't worked out so well.

Still, prying it out of Shkreli's hands, at least increases the possibility that wherever else it ends up may be more likely to figure out a way to get it out into the world...

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Filed Under: asset forfeiture, copyright, criminal asset forfeiture, distribution, doj, martin shkreli, once upon a time in shaolin, wu tang clan