updated on 11 January 2022
QuestionAre NFTs exempt from IP restrictions placed on tangible goods?
Director Quentin Tarantino recently announced that he would be auctioning as non-fungible tokens (NFTs) excerpts from the original handwritten screenplay of the 1994 film Pulp Fiction. This has resulted in legal action by the production company Miramax, which has filed proceedings against Tarantino in California asserting copyright infringement and breach of contract on the basis that they, rather than Tarantino, own the rights to the film and Tarantino’s screenplay.
Copyright laws give the copyright holder of an original work the authority to transform it into an NFT. Miramax argue that when they contracted with Tarantino in 1993, prior to the film’s release, he signed over the rights in the film with the exception of limited ‘Reserved Rights.’ The ‘Reserved Rights’ include a clause stating that Tarantino has the rights to “print publication (including, without limitation, screenplay publication)” of the film. A key issue therefore will be whether each NFT constitutes a ‘screenplay publication’ under the ‘Reserved Rights’ as argued by Tarantino, or a one-time transaction that does not constitute publication as argued by Miramax. Also in issue will be the question of whether Tarantino’s original script, created before his contract with Miramax in 1993, retroactively falls within the scope of that contract.
This case highlights the fact that NFTs, while uniquely intangible, are not exempt from the same intellectual property restrictions placed on traditionally tangible goods. Acquiring ownership of an NFT representing a work in which copyright subsists, such as the screenplay in this case, does not in itself grant the new owner of the NFT copyright in the underlying work. The corollary of this is that acquirers or creators of NFTs risk being liable for copyright infringement if the NFT was created without due regard for the IP rights subsisting in the source material.
More instances of such disputes are likely and Miramax is unlikely to be the only high-profile production company taking legal action to prevent the sale of NFTs or indeed to create and sell NFTs themselves.
In terms of marketability, an allegation of copyright infringement or litigation surrounding a new NFT would likely cause significant harm to that NFT’s potential value. The NFT market is still in its infancy, and given NFTs are generally purchased as appreciation assets, prospective purchasers will be wary if there is a risk of legal action that could reduce the value of, or rights in, an NFT.
For more information on the IP considerations surrounding NFTs, see Norton Rose Fulbright’s publication, NFTs and Intellectual Property Rights.
Abida Chaudri is head of UK trademark prosecution at Norton Rose Fulbright.