by Ivan Lipshitz, Adv., JMB Davis Ben-David
Non-Fungible Tokens (“NFT’s”) continue to take the digital world by storm. NFT’s were all the rage in 2021 running into the billions of dollars. With 2022 well under way, it seems that the hype over NFT’s has continued to surge ahead unabated. Celebrities, artists, musicians, performers, entertainers, sportspeople, and content creators of every shape and form are seeking to capitalize on and commercialize their creative abilities, fame and success by exploiting their unique and scarce media content and other kinds of intellectual property content. They are harnessing blockchain technology turning such intellectual property into lucrative new NFT offerings in the form of digital artworks, memorabilia, collectibles and keepsakes making NFT’s the new gateway to enduring riches, wealth, fame, and, for some, even greater fortune.
An NFT is a unique, non-fungible digital asset recorded on a blockchain (a type of distributed ledger) that can represent and certify its holder’s ownership rights and enable its owner to access specific digital content linked to or associated with the NFT.
A recent celebrity to climb onto the NFT bandwagon is the eponymous Hollywood movie director and screenwriter, Quinten Tarantino, who, as was widely reported in the media, announced on November 2,2021 that he will sell by way of auction seven “exclusive scenes” from the 1994 acclaimed blockbuster motion picture “Pulp Fiction” in the form of NFT’s. According to the official website for the sale, the collection holds “secrets” from the Pulp Fiction movie and each NFT will contain one or more previously unknown “secrets” of a specific iconic scene from the movie. These “secret” Pulp Fiction NFT’s will contain “one-of-a-kind” content that had “never been seen or heard before”. They will include Tarantino’s uncut first handwritten scripts of the “Pulp Fiction” movie and exclusive custom commentary from Tarantino himself revealing secrets about the film and its creator. In addition, Tarantino has plans to also sell “the Artifacts Collection of up to ten iconic props from Tarantino’s films,” including “one from Pulp Fiction.” The privileged person who will purchase one of these few and rare NFTs will “get a hold of those secrets and a glimpse into the mind and the creative process of Quentin Tarantino”.
But does Tarantino have the right to develop and sell, or to “mint” the “Pulp Fiction” NFT’s without the permission and consent of the award winning, global film and television studio, Miramax, LLC (“Miramax”) who partnered and collaborated with Tarantino on the critically acclaimed movie?
Miramax does not think so, contending that only it and not Tarantino or anyone else has the sole and exclusive right to “mint” the Pulp Fiction NFT’s because Tarantino granted and assigned nearly all of his rights to Pulp Fiction (and all its elements in all stages of development and production) to Miramax, including the rights necessary for the “secrets from Pulp Fiction” that he intends to sell. Miramax wasted little time in bringing legal action against Tarantino. It promptly sued Tarantino and his loan-out corporation, of which he is the founder and CEO, Visiona Romantica, Inc on 16 November 2021 for breach of contract, copyright infringement, trademark infringement and unfair competition.
In a federal lawsuit filed in the U.S. District Court in the Central District of California, Miramax claimed that in 1993 in an operative agreement (similar to a license agreement) termed the “Original Rights Agreement”, Tarantino and the movie’s non-party producer granted to Miramax in perpetuity throughout the universe, “all rights (including all copyrights and trademarks) in and to the Film (and all elements thereof in all stages of development and production) now or hereafter known including without limitation the right to distribute the Film in all media now or hereafter known (theatrical, non-theatrical, all forms of television, home video, etc.),” excluding only a limited set of “Reserved Rights” which were reserved to Tarantino as an individual. Tarantino’s “Reserved Rights” were limited to the “soundtrack album, music publishing, live performance, print publication (including without limitation screenplay publication, ‘making of’ books, comic books and novelization, in audio and electronic formats as well, as applicable), interactive media, theatrical and television sequel and remake rights, and television series and spinoff rights.” They were further “subject to restrictions set forth elsewhere” in the Original Rights Agreement, including Miramax’s rights of first negotiation and last matching rights with respect to certain deals. Thus, on the basis of Miramax’s allegations and the causes of action in its Complaint, Miramax’s rights were broad and sweeping catch-all rights, including “all rights . . . now or hereafter known . . . in all media now or hereafter known,” whereas Tarantino’s Reserved Rights, were a narrowly-drafted limited subset of reserved rights ( i.e. a static exception to Miramax’s broad rights) and do not encompass any rights or media that were not known at the time the Original Rights Agreement was entered into.
Pursuant to the Original Rights Agreement, according to Miramax’s Complaint, Tarantino’s proposed sale and auction of the Pulp Fiction NFT’s required Miramax’s consent. Tarantino did not consult Miramax regarding his sale of the Pulp Fiction NFT’s, nor did he obtain it’s consent. His conduct was therefore allegedly deemed unlawful and constituted an infringement of Miramax ‘s broad intellectual property rights which it was seeking to protect and enforce. It was furthermore alleged that Tarantino’s unlawful conduct may mislead other creators into believing they have the rights to exploit Miramax’s films through NFT’s and other emerging technologies, when in fact Miramax alone holds those rights for its films.
The Miramax – Tarantino lawsuit is not the first lawsuit to deal with NFT’s and it certainly will not be the last, but it is one of the first to deal solely with IP rights and IP content related to NFT’s. It has brought intellectual property rights in NFT’s and contractual rights related thereto under the spotlight. At the heart of this dispute are the questions: who has the right to develop, market and sell NFT’s tied or linked to existing assets, and what rights are conveyed on the sale of NFT’s? Does Tarantino have sufficient rights in the underlying works associated with his NFT’s to mint and sell the Pulp Fiction NFT’s, or are those limited “Reserved Rights “under the operative agreement far too narrow for him to unilaterally produce, market and sell the Pulp Fiction NFT’s without Miramax’s consent? Does a one-time NFT transaction or offering constitute “publication” and fall within the intended meaning of “screenplay publication” or “print publication”?
As I have pointed out in my earlier article on the subject, NFT’s and their Interplay with IP , NFT’s represent ownership of digital content and memorabilia, but what exactly their ownership entails, and their interplay with IP rights like copyrights, trademarks and patents can be extremely complex and not without significant uncertainty and difficulties; all beacuse NFT’s don’t neatly fit into existing legal structures and frameworks.
So, what are the lessons to be learnt from the Miramax -Tarantino Pulp Fiction NFT lawsuit?
Lesson # 1– Take NFT’s and Emerging New Technologies into Consideration in IP- related contracts
Perhaps the key lesson to be learnt from the Miramax -Tarantino Pulp Fiction NFT lawsuit is to endeavor to acquire the broadest IP rights possible when negotiating and drafting licenses and IP-related agreements conveying IP rights generally. Endeavor to obtain IP rights that will include all future uses, including emerging technologies like NFT’s. Clearly, NFT’s and blockchain were not in the realm of contemplation of Miramax’ legal counsel and the drafters of the Original Rights Agreement in 1993. Yet, Miramax’ legal counsel had the foresight and legal wisdom to give Miramax broad catch- all rights relating to their acquired IP rights to the Pulp Fiction movie. They used forward- thinking contractual language to describe the IP rights acquired. Miramax therefore acquired by such agreement, “all rights ……. now or hereafter known …..in all media now or hereafter known.” Tarantino’s limited “Reserved Rights”, on the other hand, including to “print publication” and “screenplay production” did not include such “now or hereafter known” language or similar type forward -thinking terminology. Since NFT ‘s are here to stay and will no doubt remain part of the commercial and creative landscape for the foreseeable future it is prudent to bear NFT offerings and other new emerging forms of media technology that may arise in the future in mind when negotiating and drafting IP -related licenses and agreements, even though at this time NFT’s and other new technologies may not fit snuggly into recognized legal boxes.
Lesson # 2– If you are a creator, developer, seller, or “minter” of NFT offerings, ensure you have the right to “mint” and the right to use associated IP rights in connection with the sale, marketing, advertising, and promotion of the NFT offering before embarking on such venture.
Ensure you have the rights to mint and the right to use and market NFT related content otherwise you may be infringing the IP rights (copyrights and trademarks) of third parties who hold such rights. If you have only residual ownership rights to the underlying asset, or are the holder of the right to use the asset by way of leasehold rights, or under license, or some other lesser title to such assets other than full ownership, you are advised to check and determine that you have the rights to exploit the underlying asset through an NFT offering and are not interfering with rights already granted to or acquired by third parties. Tarantino’s case to rebut Miramax’s claims may very well turn on figuring out the scope and limitations of his reserved rights (especially to “interactive media” and “screenplay publication”). But apart from that, invariably, an NFT drop involves marketing, advertising, press releases and the establishment of a website promoting and providing information on the proposed NFT offering. Tarantino had allegedly been marketing and promoting the NFT drop using unauthorized registered trademark images and graphics of characters from the Pulp Fiction movie and the film name “PULP FICTION®” itself. Miramax alleged that amongst its broad rights to Pulp Fiction, it owns various registered and unregistered trademark rights in the name “PULP FICTION®” which Tarantino had infringed. By doing so, Miramax alleged Tarantino sought to capitalize, unilaterally, on Miramax’s rights to its “PULP FICTION®” mark. According to Miramax’s Complaint, Tarantino’s infringing acts have caused and are likely to cause confusion, mistake, and deception among the relevant consuming public as to the source of the Pulp Fiction NFT’s and have deceived and are likely to deceive the relevant consuming public into believing, mistakenly, that the Pulp Fiction NFT’s originate from, are associated or affiliated with, or are otherwise authorized by Miramax, when such is not the case.
Lesson # 3- Interested collectors or buyers of NFT’s should be vigilant before purchasing NFT’s.
Interested collectors or buyers of NFT’s should do their due diligence that the minter holds the IP rights needed to develop, market and sell NFT’s relating to their underlying asset. Caveat emptor should be your watchword. Otherwise, the “bragging rights” to unique exclusive “one-of-a-kind” content and access to “secret” never- before- revealed content which may have been the drawcards which enticed you to acquire the NFT’s in the first place may not be worth the “paper they are written on.“ It may be found that these “bragging rights” may be worthless and valueless if they are not accompanied by the appropriate legal rights. This does mean that you should not buy NFT’s, rather that you should proceed with caution, and get your IP lawyer to closely review the NFT offering you are participating in and for him or her to establish and determine what is being licensed to you, and what rights you are acquiring and are being conveyed to you by your NFT purchase before proceeding therewith.
NFT’s represent an exciting new format for those who understand them to monetize digital assets. It opens up the possibility for millions of content creators to forge a new path to tremendous wealth and fortune by joining the digital revolution and participating in a new creative market.
Yet, NFT’s and their legal ramifications are still murky and shrouded in much legal uncertainty and complexity. This new digital marketplace should be approached with caution whether from the perspective of an NFT minter or prospective buyer. In both instances there are important IP rights that need to be considered and evaluated by your IP lawyer.
As NFT’s are becoming increasingly important, we at JMB Davis Ben-David are equipping ourselves with the knowledge and expertise to guide you through the legalities, legal challenges & obstacles associated with these digital assets. If you need any legal assistance with NFT’s and your intellectual property rights in regard to such digital assets, please email Ivan Lipshitz at Ivan.Lipshitz@jmbdavis.com or JMBmail@jmbdavis.com.