Last month our founder was honored to present a 3-hour lecture on the topic of NFTs and collectibles for the EXECUTIVE MASTER IN ART MARKET STUDIES the University of Zurich. During her lecture, she spoke about a high-profile litigation involving NFTs (a discussion of the case follows). Amineddoleh & Associates LLC had been at the forefront of the NFT market, working with platforms (including Nifty Gateway), automated contract providers (Monax), and minters, artists, and collectors.

As the popularity of NFTs continues to grow, legal questions and controversies have arisen in this emerging field. Several of these disputes concern artists’ rights over the minted material that is being sold, sometimes without their knowledge or consent. However, in other cases, copyright holders (who are not the creators of the source material) are alleging infringement and filing suit to prevent the sale and distribution of NFTs.

A recent case involves celebrated director Quentin Tarantino. Early last month, he announced he seven secret NFTs of uncut, exclusive scenes from his cult film, Pulp Fiction. The film, released in 1994, was written and directed by Tarantino, produced by Lawrence Bender and starred Hollywood heavyweights John Travolta, Samuel L. Jackson, and Uma Thurman. It was Miramax’s first release after being acquired by Disney and it was completely financed by Miramax. Since its release, Pulp Fiction has earned critical acclaim. It has grossed over $213 million worldwide and Tarantino won an Academy Award for Best Original Screenplay. The highly-anticipated Pulp Fiction NFT collection will consist of seven tokens, each of which will be a single, iconic scene “from the never-before-seen, handwritten screenplay” and will contain “personalized audio commentary” from Tarantino. The NFT announcement prompted Miramax to SUE Tarantino in California for breach of contract, as well as copyright and trademark infringement.

Pulp Fiction Secret NFTs

As part of the sale process for Mr. Tarantino’s NFTs, a WEBSITE HAS BEEN CREATED which provides information about secret NFTs generally and the Pulp Fiction series. The website also offers access to an interest form and waiting list, along with instructions on how to buy the NFTs. It explains that the NFTs are part of a new asset class, called secret NFTs. Secret NFTs have enhanced privacy and access controls and live on the Secret Network.  This means that the “owner will enjoy the freedom of choosing between: 1. Keeping the secrets to themselves for all eternity. 2. Sharing the secrets with a few trusted loved ones. 3. Sharing the secrets publicly with the world.” 

Miramax’s Legal Arguments

Shortly after Tarantino’s announcement, Miramax served him with a CEASE-AND-DESIST LETTER on November 4. According to Miramax, Mr. Tarantino’s plan to sell “intensified and expanded” when @TarantinoNFTs tweeted that the Pulp Fiction NFTs will include scans of pages from Pulp Fiction script and the Artifacts Collection of iconic props from Mr. Tarantino’s major films including “one from Pulp Fiction.”

On November 16, Miramax filed a lawsuit against Tarantino in the U.S. District Court for the Central District of California. The complaint alleges breach of contract, copyright infringement, trademark infringement, and unfair competition. Miramax claims that Tarantino’s limited contractual rights over Pulp Fiction, which include interactive games, live performances, and other ancillary media, exclude NFTs linked to the screenplay. Tarantino has the right to publish portions of the screenplay, but the proposed sale of original pages or scenes in NFT format could be considered a one-time transaction rather than a publication. Moreover, the company argues that Tarantino’s use of Pulp Fiction branding and imagery will confuse buyers into thinking that the NFTs are official Miramax products. However, this has not deterred Tarantino from proceeding with the upcoming sale.

Miramax is seeking a jury trial, unspecified monetary damages, and injunctive relief, aiming to stop planned December sale, as well as frustrate any of Tarantino’s future efforts infringing on what Miramax believes to be its rights to Pulp Fiction. The company is concerned that if Tarantino prevails, this will set a PRECEDENT for other creators to “exploit Miramax films through NFTs and other emerging technologies, when in fact Miramax holds the rights for these films.” The effects of a ruling in favor of Tarantino could spill over to other film companies, placing them in direct competition with creators. For example, when a company releases and sells NFTs related to a film (as in the case of Space Jam: A New Legacy during July 2021), those profits may need to be shared.

The complaint outlined that Tarantino was subject to several agreements limiting his rights to reproduce certain content related to Pulp Fiction. This included a Rights Agreement between Tarantino, Bender, and Miramax, a transfer of rights agreement between Tarantino and B25 Productions with Miramax’s consent, an assignment agreement for the benefit of Miramax, as well as several other agreements.

Under these agreements, Miramax states that they were granted:

“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.).”

However, the contracts also reserve rights to Tarantino, including: “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.”

Given the rights granted to each party, Miramax believes that Tarantino is in breach of contract, as well as infringing on Miramax’s copyrights. The question turns on whether these NFTs are covered by the rights reserved by Tarantino.

In the complaint, Miramax distinguishes the language used to grant each party their rights. It characterizes Tarantino’s reserved right as a “narrowly-drafted, static exception to Miramax’s broad, catch-all rights” and “do[es] not contain any forward-looking language.” By contrast, the language used to describe Miramax’s rights is labeled as broad and forward looking. It grants Miramax “all rights . . . now or hereafter known . . . in all media now or hereafter known”.

Regardless of the specific forward-looking language in the contracts, the rights do not specifically address NFTs. Over three decades ago, the parties to the agreements did not contemplate the existence of NFTs. Thus, this gives either party arguments as to why the rights in the contracts may or may not allow the sale of these NFTs.

Tarantino’s Legal Argument

Tarantino’s counsel stated in an email to Miramax that he and his client believe that the NFTs are covered under Tarantino’s reserved “print publication” or “screenplay publication” right. Under copyright law, a small distribution of a protected good, to a limited pool is not considered a “publication” and the complaint argues Tarantino’s proposed sale is of a “few original script pages or scenes” and an NFT is only a “one-time transaction.”  However, given the novelty of NFTs, it is unclear whether a court would consider them a “publication.” But, since NFTs can be openly shared and produced, this may undermine Miramax’s argument.

Another legal defense that may be available to Tarantino is the Fair Use Doctrine. This allows courts to “avoid the rigid application of the Copyright Act when such application would stifle the very creativity the law was designed to foster” and can be used as an affirmative defense in copyright and trademark infringement cases. Under this doctrine, criticism, commentary, news reporting, teaching, scholarship, or research are listed as purposes for which the use of copyrighted work may be considered fair.A court may also find that the use is fair if the work is deemed transformative.

To determine fair use, courts balance four considerations: (1) the purpose and character of the use; (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used; and (4) the effect of the use upon the potential market for the copyrighted work. Cariou v. Prince, 714 F.3d 694, 705 (2d Cir. 2013). Transformative use must “communicat[e] something new and different from the original or expan[d] its utility.” Authors Guild v. Google, Inc., 804 F.3d 202, 214 (2d Cir. 2015). Simply transposing a work from one medium to another does not necessarily qualify as transformative fair use. See Andy Warhol Foundation for the Visual Arts, Inc. v. Goldsmith, 992 F.3d 99 (2021).

It is clear that NFTs are creating a new art market and reconfiguring conceptions of copyright for intangible assets. In the sale of NFTs, the Fair Use Doctrine may protect against constant copyright lawsuits. While some NFTs are parodies or commentaries on popular culture or other well-known images or videos, the Pulp Fiction NFTs are directly related to the product for which Miramax holds the copyrights. However, unlike other NFTs, Tarantino is building on and adding to the copyrighted work. By adding commentary and exclusive material, he is arguably “transforming” the stills encapsulated in the NFT series.

A work used for commercial activity, as compared to non-commercial activity, generally weighs against a finding of fair use. Tarantino’s NFT website states that he is selling the Pulp Fiction NFTs because he “is enamored with Pulp Fiction, a timeless creation, and as such wanted to give the public a new glimpse into the iconic scenes from the screenplay of the film.” Further, the website notes that Tarantino sees himself “as an artist” and these NFTs explore “new, exciting mediums to express his artistic style and ideas.” This suggests that he believes that these NFTs are his artistic expression that builds on this cult classic.

However, it could also be argued that Tarantino’s use of the copyrighted material falls within the scope of commercial use, if one considers the broader NFT market. There is a very large value that could be derived from the sale of these NFTs. The fact that people have been selling NFTs for a monetary benefit may suggest that Tarantino’s sale is commercial and it will weigh against his fair use defense. In terms of financial gain, one of Miramax’s attorneys stated that: “This one-off effort devalues the NFT rights to Pulp Fiction, which Miramax intends to maximize through a strategic, comprehensive approach.” In the company’s opinion, the NFTs are considered economic, rather than artistic, assets and Tarantino has deprived Miramax of this revenue stream.

Nonetheless, it could also be argued that the NFTs are not “simply transposing a work from one medium to another,” which supports Tarantino’s fair use defense. The NFTs will include scenes from the Miramax’s copyrighted material, but they will also include “personalized audio commentary from Quentin Tarantino”. Commentary on major scenes in a critically acclaimed movie from the man that wrote and directed the film is certainly a way of adding to the existing material in a way that could be considered transformative when compared to the original.

As the purpose of the Fair Use Doctrine states, intellectual property laws exist to allow freedom of expression. While Tarantino may have entered into a contractual agreement with Miramax, and Miramax may hold copyrights “to the Film (and all elements thereof in all stages of development and production)” as well as to the “right to distribute the Film in all media now or hereafter known (theatrical, non-theatrical, all forms of television, home video, etc.),” Tarantino is arguably creating new content and is entitled to benefit from his artistic output.

Conclusion

As the NFT market continues to boom, many lawyers are considering novel legal arguments related to digital assets, especially in connection with copyright laws. Miramax v. Pulp Fiction is a lawsuit that is receiving and will continue to attract attention.  Both sides have arguments and legal theories in their respective favor. It will certainly be interesting to follow the court’s analysis as it considers this landmark controversy, which will likely serve as a model for future claims, both in and beyond the entertainment industry. It is also possible that new regulations or guidelines will be created to address the specific legal issued posed by NFTs, given the volatility of the crypto market and increased scrutiny by legislators.

It is important for both creators and copyright holders interested in making, buying, and selling NFTs to be aware of their remedies and consult legal professionals where appropriate. Read more on NFTs and the work carried out by Amineddoleh & Associates in this field, INCLUDING a cutting-edge template agreement for Monax, on our BLOG.