Tag: NFT

IP Rights in Virtual Fashion: Lessons Learned in 2022 and Unanswered Questions

There was a lot of talk and much hype about the “metaverse” in 2022. While some were skeptical and stayed on the sidelines to watch, many companies began offering virtual counterparts to their real-world products for use by avatars in the metaverse, including virtual clothing and accessories. For example, Tommy Hilfiger live-streamed a virtual fashion show on Roblox as part of the New York Fashion Week, and Decentraland hosted a Metaverse Fashion Week. Many companies also introduced NFTs into fashion product lines, such as Alo’s NFT offering.

The emergence of virtual goods has generated novel questions about how to protect and enforce IP rights in virtual fashion, and how those strategies might differ from IRL (meaning “in real life”) fashion. Although many questions remain unanswered, this article sets out important considerations for how companies might use various IP laws to protect virtual fashion goods in the United States.

I. DISTINCTIONS BETWEEN VIRTUAL FASHION AND IRL FASHION

Before diving into the IP discussion, it’s worth highlighting some distinctions between virtual fashion and IRL fashion outside the legal context, beyond the obvious fact that virtual fashion is worn by avatars. IRL clothing and accessories are worn primarily for protection against the elements, to conform to societal standards, to conform with a specific event’s dress requirements, to communicate via express messages on clothing or accessories, or to express oneself through the style or design of the clothing.

Virtual fashion can also serve each of those purposes for an avatar, and in some cases the person behind the avatar. But, because it is comprised of software code, the possibilities for virtual fashion utility are endless. For example, a particular piece of virtual clothing can also grant access to certain virtual spaces or events or give the avatar special powers within virtual worlds. If tied to an NFT (non-fungible token), virtual clothing can also provide benefits on and off virtual platforms, including exclusive access to sales promotions and IRL events.

Unlike IRL clothing, however, virtual fashion items currently face compatibility limitations, as the ability to use any virtual fashion item across all virtual platforms is unlikely.

To muddy the waters, as virtual and augmented reality technologies are becoming more popular, they can blur the lines between IRL and virtual fashion. For example, an IRL sweatshirt, when viewed through an appropriate lens, could feature virtual components.

II. IP PROTECTION FOR VIRTUAL FASHION

Because there are no IP laws specific to virtual fashion items, we must seek protection from laws that have traditionally applied to real-life clothing, namely, trademark, trade dress, copyright, and design patent. But the application of these laws can sometimes differ in the virtual context. Each is addressed below.

A. TRADEMARK

Trademark law protects source identifiers such as words, names, logos, and slogans. Obtaining trademark rights specifically in virtual goods, whether acquired through use in commerce or federal registration, is generally straightforward and similar to marks covering IRL fashion. This is evidenced by many marks that were registered in 2022 and specifically cover virtual goods.

That said, even if a company does not have trademark coverage specifically for its virtual goods, the owner of a trademark covering IRL fashion items should have strong arguments that such trademark rights extend to their virtual counterparts. To that point, the U.S. Patent & Trademark Office (USPTO) has refused registration of marks covering virtual goods and services based on prior registrations for the identical marks covering the corresponding IRL goods and services. See, e.g., the refusals of Application No. 97112038 for the mark GUCCI and Application No. 97112054 for the mark PRADA, each of which were filed by parties unrelated to the famous brands.

However, for purposes of enforcement outside of the USPTO context, if a defendant’s goods are virtual, it would have a stronger argument that such goods are not commercial products, but rather expressive works protected by the First Amendment. If a court accepts such an argument, it must then weigh the plaintiff’s trademark rights against the defendant’s First Amendment right of free expression, meaning it would be more challenging for a brand owner to enforce its trademark rights.

In this regard, please see our earlier alert regarding the Hermès v. Rothschild case, in which the court deemed NFTs tied to images of bags called “MetaBirkins” subject to First Amendment protection. [1] In denying Rothschild’s motion to dismiss, the court acknowledged in a footnote that virtually wearable bags (i.e., as opposed to virtual fashion that is displayable but not wearable) might not be afforded First Amendment protection. But we suspect defendants will argue even virtually wearable items should be afforded First Amendment protection, especially given that video games have received such protection. [2]

On balance, companies should consider seeking federal trademark registration specifically for virtual goods and services, for a few reasons:

More direct coverage could help a company in an enforcement action against infringing virtual goods, even if the defendant successfully argues it should be entitled to First Amendment protection. For instance, if the plaintiff has direct coverage for virtual goods, it may be easier to prove the defendant’s use of the mark was “explicitly misleading” under the Rogers test. [3]

Certain platforms featuring virtual fashion items may only honor a takedown request if the complainant company has a federal registration covering goods that are the same or nearly identical to the allegedly infringing virtual goods.

The registration will provide a presumption of valid trademark rights nationwide, and it may serve as a deterrent to third parties wishing to use confusingly similar marks in virtual worlds.

B. TRADE DRESS

U.S. trademark law also protects certain source-identifying elements of a product’s aesthetic design, configuration/shape, and packaging, often referred to as “trade dress.” To obtain trade dress protection, such elements must be (1) non-functional and (2) distinctive (either inherently or acquired through use). There are a couple of interesting nuances with respect to acquiring trade dress protection in the virtual context.

First, although we have not yet seen any case law specifically addressing this, companies will likely have stronger arguments that virtual shape or design elements (as opposed to IRL elements) are non-functional. Specifically, the non-functionality requirement means the relevant elements must not be essential to the use or purpose or affect the cost or quality of the article. For real-life fashion items, this can be difficult to meet due to the inherently functional nature of many aspects of clothing or accessories. However, because virtual fashion items are essentially software code with endless possibilities, in many instances the fashion item will not require any particular design or shape to function.

Second, some virtual fashion items could receive more favorable treatment from a distinctiveness perspective. The distinctiveness requirement has historically been a difficult barrier for protecting IRL fashion. Specifically, case law prior to 2022 established that, while packaging can sometimes be inherently distinctive, product design and configuration/shape can never be, meaning companies must prove such elements have acquired distinctiveness. Proving acquired distinctiveness is burdensome because the company must have used the elements extensively, substantially exclusively, and continuously for a period of time. Often, by the time a company can acquire distinctiveness in the design, the design is no longer in style. Or, if a design is popular and copied by third parties, it can be difficult for the company to claim it used the design substantially exclusively.

If, however, a virtual fashion item provides the user with benefits that go beyond merely outfitting the avatar, such as by providing access to other products or services, one might argue that those items should be construed as packaging, or some new category of trade dress, for such other products or services, in which case the elements could possibly be deemed inherently distinctive with respect to those other products or services.

That said, if a company already has trade dress protection for IRL fashion goods, it should have good arguments that the protection extends to any virtual counterpart. On the flipside, given the difficulties companies typically face in seeking trade dress protection in IRL fashion, to the extent they can obtain trade dress protection in a virtual counterpart more easily, perhaps it can argue the rights in any virtual goods should also extend to the physical counterpart. Or, if a company introduces a physical design and virtual design simultaneously, it could possibly acquire distinctiveness in both sooner, as the simultaneous use would presumably create greater exposure to more customers and reinforce the source-identifying significance of the alleged elements.

With respect to enforcement, like traditional marks, defendants are more likely to raise a successful First Amendment defense for any virtual products allegedly infringing trade dress. The Hermès case is again an example of this, as Hermès alleged infringement of both its BIRKIN word mark and the trade dress rights in the design of its handbags, and the court held that the defendant’s MetaBirkin NFTs were entitled to the First Amendment protection.

Finally, although obtaining trade dress protection is typically more difficult than obtaining trademark protection for traditional marks such as words and logos, companies should also consider seeking registration for trade dress in virtual goods, particularly for important designs that are likely to carry over from season to season, for the same reasons discussed in the trademark section above.

C. COPYRIGHT

Copyright protects original works of authorship that contain at least a modicum of creativity, which is a relatively low bar. However, copyright does not protect useful articles. In effect, for IRL fashion items, copyright generally extends only to those designs that would be entitled to copyright protection if they were extracted or removed from the clothing or viewed on a different medium, and not to the shape of the fashion item itself.

Like trade dress protection, copyright protection should provide companies with greater protection for virtual fashion items than would be available for IRL items, particularly because the software behind the virtual fashion can theoretically create an infinite number of clothing shapes that are creative and not necessarily “useful.” Nonetheless, if a virtual clothing item is merely shaped like its IRL counterpart that lacks originality (e.g., a virtual t-shirt shaped like a basic real-life t-shirt), it may also fail to qualify for copyright protection based on a lack of creativity.

Unlike trade dress protection, however, copyright protection arises immediately upon creation of the work and its fixation in a tangible medium of expression, so it can be a useful tool for protecting virtual fashion without having to spend the time and resources required to seek registration as trade dress and establish acquired distinctiveness.

In addition, unlike IRL fashion, a separate copyright protects the underlying source code for virtual clothing items, which could provide owners with an additional, though likely limited, claim against unauthorized source code copycats.

A copyright registration will provide owners with the ability to sue for copyright infringement, but companies should balance:

  • the benefits of seeking potentially broader copyright protection in virtual fashion items (apart from the code) than it would for IRL items with the risks of conceding that virtual fashion items are works of art entitled to First Amendment protection, which would make trademark and trade dress enforcement more difficult; and
  • the benefits of obtaining any copyright registration for source code with the benefits of keeping the source code secret (although the Copyright Office permits some redactions, significant portions are required to be deposited into the public record).

We are unaware of any 2022 case law specifically addressing copyright in virtual fashion. However, the following cases are worth watching:

  • Andy Warhol Found. for Visual Arts, Inc. v. Goldsmith[4]: In October 2022, the U.S. Supreme Court heard arguments regarding whether Andy Warhol’s “Prince Series” silk screen prints and pencil drawings based on a photograph infringed the photographer’s copyright, or whether they were sufficiently “transformative” to constitute fair use. The outcome of this case could affect a copyright owner’s ability to enforce copyrights against unauthorized digital reproductions of its work, especially if the original work is fixed in a physical medium (e.g., enforcing copyright in a physical clothing item against a third party’s digital reproduction).
  • Thaler v. Perlmutter[5]: Filed in June 2022, the plaintiff is suing the U.S. Copyright Office for refusing registration of an AI-created image because there was no human author. The outcome of this case will necessarily implicate virtual fashion incorporating any AI-generated work.

D. DESIGN PATENT

Design patents protect the ornamental appearance or look of a unique product. Specifically, they protect any new, original, and ornamental design for an article of manufacture. Traditionally, this law was interpreted to require that the article of manufacture is a physical or tangible product. Thus, in the fashion industry for example, one can file a design patent application directed to a unique shoe, handbag, or jewelry design. Historically, an image or picture would not qualify for design patent protection.

However, the USPTO is currently assessing design patents with respect to new technologies such as projections, holograms, and virtual and augmented reality. In December 2020, the USPTO issued a request for public comment regarding a potential rule change to the “article of manufacture” requirement and whether U.S. law should be revised to protect digital designs. Public opinion was mixed, and in April 2022, the USPTO issued a summary of this requested information.

Although the USPTO has not yet formally revised the rules, it has issued guidelines over the years that provide examples of non-physical products that could be protected by a design patent, suggesting changes may ultimately be coming to U.S. design patent law. For example, in 1995, the USPTO released guidelines for design patent applications claiming computer-generated icons. In general, to be eligible for protection, the computer-generated icon must be embodied in a computer screen monitor, or other display monitor. The USPTO has also issued guidance allowing type font to be protectable by design patents. However, it is still unclear whether the USPTO will set forth design patent guidance specific to digital designs or virtual fashion.

Notwithstanding the possibility of obtaining a design patent specifically on such virtual goods, courts have been reluctant to find that a virtual product infringes the design patent for an IRL product. For example, in 2014, in P.S. Products, Inc. v. Activision Blizzard, Inc.,[6] P.S. Products accused Activision of infringing its design patent directed to a stun gun by depicting a virtual weapon in its video game that P.S. Products claimed resembled its patent-protected IRL product.

The court found there was no infringement because “no ordinary observer would be deceived into purchasing a video game believing it to be plaintiffs’ patented stun gun.” This case may have come out differently if the virtual gun was sold separately from the video game and could be used across various platforms rather than being one component of a particular video game. Although there are still software compatibility restrictions for virtual goods, portability of virtual goods is likely to grow as technology evolves and companies respond to consumer demands.

While we wait for further USPTO guidance that ultimately may have application to virtual fashion, parties seeking design patent protection may consider simultaneously filing one application to protect the work as a digital design on a display screen, like a patentable computer-generated icon, and a second, traditional design patent application to protect the design as a tangible product. That said, companies should consider other options for protecting any designs created by AI, as the Federal Circuit Court of Appeals held in 2022 that AI cannot qualify as an inventor for purposes of obtaining a patent.[7]

III. Virtual Fashion in Practice

Contracts relating to virtual fashion are analogous to contracts for IRL fashion and should be structured accordingly. For instance, companies should ensure that contracts with IP contributors include an assignment of all IP rights, or at least a sufficiently broad license. In the virtual context, this includes rights to the software code itself. Likewise, downstream licensing should generally address ownership, licensee rights, and if applicable, confidentiality for any trade secrets in the source code. In addition, for both IP contributors and licensees, if AI software is used in any part of the creative process, companies should give thought to allocation of ownership.

In addition, some designers or marketing teams may prefer to encourage a brand’s customer base to copy its designs or create derivative works. Although this seems counterintuitive (especially to an IP lawyer), many players in the Web3 space encourage others to build off their own designs. For example, the Bored Ape Yacht Club (BAYC), known for issuing NFTs tied to images of apes, grants owners of its NFTs the rights to use the images of apes, including for commercial purposes.[8] For example, one purchaser of a Bored Apt NFT created a Bored Ape-themed restaurant.

In the virtual fashion context, if a marketing team wants customers to build off the brand’s virtual designs but wants to retain ownership of its own designs (and perhaps derivatives), it should implement standard licensing terms relating to ownership, customer licensee rights, and other provisions. However, it’s important to consider how the terms are presented and how customers indicate assent to maximize the prospects of enforceability.

From a business perspective, companies can also now use NFTs and smart contracts to receive automatic royalties in any downstream sales or licenses. And because NFTs use blockchain technology, which provides an immutable chain of title, third parties will be able to trace such designs to the original source. This means companies can encourage the sharing of designs and receive royalties in connection with the downstream licensing of designs tied to NFTs, and third parties can confirm that the designs are legitimate by reviewing the relevant blockchain ledger. Accordingly, although encouraging customers to use the brand’s designs may not be a model for every brand, there are some steps brands can take to protect the IP rights associated with them and reap financial benefits.

As virtual fashion items become more popular, companies are faced with uncertainties and novel questions regarding how to protect and enforce their IP rights. In 2022, some questions were answered, but many more remain open. Therefore, it is important to discuss strategies for protecting innovative virtual fashion with IP counsel.

FOOTNOTES

[1] Notably, on December 30, 2022, the Hermès court denied both parties’ motions for summary judgment, with an opinion to follow by January 20. A jury trial is scheduled to begin on January 30, 2023. Hermès International, et al. v. Mason Rothschild, 1:22-cv-00384-JSR (S.D.N.Y.).

[2] See, e.g., AM Gen. LLC v. Activision Blizzard, Inc., 450 F. Supp. 3d 467, 485 (S.D.N.Y. 2020).

[3] If a defendant’s unauthorized use of a mark is protected by the First Amendment, many courts use the Rogers test to balance the plaintiff’s trademark rights with the defendant’s First Amendment right of expression. This test looks at whether the defendant’s use of the plaintiff’s mark was artistically relevant and, if so, whether it was explicitly misleading. Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989).

[4] 11 F.4th 26 (2d Cir. 2021), cert. granted, 142 S. Ct. 1412 (2022).

[5] Case No. 1:22-cv-01564 (D.D.C.).

[6] 140 F. Supp. 3d 795, 802 (E.D. Ark. 2014).

[7] Thaler v. Vidal, 43 F.4th 1207, 1213 (Fed. Cir. 2022).

[8] We will save for another day a discussion of the recent lawsuit against BAYC and many celebrities for failing to disclose financial incentives when promoting the BAYC NFT collection, and instead focus here on IP protection. Adonis Real, et al., v. Yuga Labs, Inc., et al., 2:22-cv-08909 (C.D. Cal.). But companies should also ensure that influencers properly disclose any incentives and other material connections.

For more intellectual property legal news, click here to visit the National Law Review.

©2023 Pierce Atwood LLP. All rights reserved.

Trademark Infringement in the Metaverse: Nike Sues Online Resale Platform Alleging Infringing Use of Logo in StockX NFT

In the 3D virtual world known as the metaverse, pioneering enterprises are exploring ways to capitalize on this new frontier’s growing popularity. As expected, the use of company marks and brands is becoming an issue to watch. Take Nike’s recent lawsuit against online resale platform StockX. The suit alleges StockX NFTs that incorporate images of Nike sneakers infringe on Nike’s famous trademarks. The complaint presents novel legal issues that, once decided, have the potential to define the scope of trademark rights in the world of NFTs.

What is an NFT?

Before we get into infringement, we need to understand the landscape in play. Non-fungible tokens, or NFTs, are unique digital assets stored on the blockchain, which is a digital and non-centralized ledger that publicly discloses who owns a particular NFT. NFTs act as a digital representation of ownership of tangible and nontangible items in the real world, such as artwork, real estate, and video game skins. Each NFT has a unique address associated with its owner that enables proof of ownership. NFTs can exist in any form of digital media, ranging from images to songs. Among some of the famous examples are the Bored Ape Yacht Club NFTs, which act as both a digital avatar and a ticket to an exclusive online social club.

Bored Ape Yacht Club NFTs are represented by a digital avatar of a uniquely designed ape. The middle image is a Bored Ape owned by Tonight Show host, Jimmy Fallon, who purchased the NFT for over $200,000.

While the first NFT was minted back in May 2014, they have only recently gained mainstream attention following celebrity buy-in and reports of NFTs selling for millions of dollars. In 2021, a crypto entrepreneur purchased Twitter founder Jack Dorsey’s first-ever tweet as an NFT for $2.9 million. As pricy NFTs garnered mainstream attention, many were left wondering why someone would pay millions of dollars to purchase what appears to be a simple image or video that is readily available to view online for free. While it is possible to screengrab and download copies of digital art that someone has purchased as an NFT, the NFT purchaser still remains the owner of the original work and such ownership is recorded on the blockchain. While someone may have a print of one of Monet’s impressionist landscapes hanging in his or her living room, only one original copy of the painting exists and ownership of that original carries significant value despite the existence of copies.

Nike Swooshes In

Nike brought an action in February 2022 for trademark infringement against StockX, a large online resale marketplace. StockX is a streetwear reseller that, unlike other marketplaces, also acts as an intermediary that provides authentication services to its customers. Recently, StockX expanded this authentication service by launching its own collection of NFTs, which it claims are linked to authenticated physical goods. Many of the NFTs being minted by StockX are comprised of images of Nike sneakers. Nike alleges such use of Nike’s famous marks constitutes trademark infringement, false designation of origin, and trademark dilution, among other violations.

StockX’s Nike NFTs.

The case hinges on whether StockX’s NFTs represent proof of ownership of physical goods or whether the NFTs themselves are virtual products.

StockX contends its NFTs are simply a method to track ownership of physical Nike products sold on the StockX marketplace and held in StockX’s custody. In denying that its NFTs are virtual products, StockX points to its redemption process in which NFTs may be redeemed by an owner at any time in exchange for delivery of the physical shoes. Importantly, this novel method for tracking ownership facilitates a more efficient and sustainable resale process. Instead of physical goods that are frequently sold and traded among consumers being repeatedly shipped following each sale, users can simply sell and exchange an NFT.

Nike argues that StockX’s Nike-branded NFTs are themselves virtual products, and not simply a representation of ownership of physical Nike sneakers. While StockX touts its customers’ ability to redeem an NFT in exchange for possession of the physical product as evidence that their NFTs act simply as proof of ownership, such redemption process is currently unavailable, with no indication as to when, if ever, such service will become available. Instead of presenting a new and efficient method for trading goods, Nike alleges that StockX is minting NFTs to profit from Nike’s goodwill and reputation in the streetwear scene. Indeed, the potential profit from selling Nike-branded NFTs is significant – a physical pair of Nike Dunk Low shoes have a resale price of $282 on StockX, but the StockX NFT purportedly linked to this shoe has traded for over $3,000, an almost 1,000 percent price difference between the physical shoe and the NFT. Nike concludes that the StockX NFTs are collectible virtual products, created and distributed by StockX using Nike branding without authorization.

Nike has a particularly strong interest in avoiding brand confusion in this case, as it recently acquired RTFKT Studios (pronounced “artifact”), a digital art and collectibles creative studio engaged in the creation of NFTs, in the hopes of combining blockchain technology with sneaker culture and fashion. Through this new acquisition, Nike has released NFTs through RTFKT, including collectible digital sneakers. Notably, Nike additionally has multiple pending trademark applications before the US Patent and Trademark Office to register its sneakers as virtual goods.

The Nike case is poised to be key to the development of metaverse jurisprudence because of its potential to address the scope of a trademark owner’s right to regulate unauthorized uses of its marks in NFTs. While the outcome of this case remains to be seen, other major brands are already seeking protection of their branding in this emerging space by filing trademarks to specifically protect virtual goods and services. Given the nascent uncertainty of how our current legal framework will apply in the metaverse, seeking registration for virtual goods and services is a prudent step for brand owners as we conduct business in the fast-growing digital economy.

©2022 Katten Muchin Rosenman LLP
For more articles about copyright infringement, visit the NLR Intellectual Property Law section.

US Crypto Regulatory Enforcement Ramps Up – NFTs Now More in Focus

For the past decade the crypto space has been described as the wild west. The crypto cowboys and cowgirls have innovated and moved the industry forward, despite some regulatory certainty. Innovation always leads regulatory clarity. There’s a new sheriff in crypto town – the US government and its various regulatory agencies. They seem intent on taming the wild west.

According to a recent report, the IRS Has Sent 10,000 Letters on Taxpayer Digital Assets seeking to collect taxes on gains from crypto assets including NFTs. This is no surprise and we have cautioned on this dating back to 2017. While many people have focused on the tax issues with crypto currencies, the IRS is also focusing on NFTs as reported here.

This comes on the heels of another report this week that the SEC is now targeting certain NFT uses. According to the report, the SEC is probing whether NFTs are being utilized to raise money like traditional securities. The SEC has reportedly sent subpoenas related to the investigation and is particularly interested in information about fractional NFTs. As we discussed here, fractionalization is just one of the potential securities law concerns with certain NFT business models. NFTs that represent a right to a revenue stream and NFT presales can also presents issues in some cases.

Other recent regulatory activity relating to NFTs includes the following. The Department of the Treasury published a study on the facilitation of money laundering and terrorist financing through the art trade, including NFTs. See our report on this here.  The Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned a Latvia-based digital asset exchange and designated 57 cryptocurrency addresses (associated with digital wallets) as Specially Designated Nationals (SDNs). These designations appear to be the first time NFTs have been publicly impacted as “blocked property” – as one of the designated cryptocurrency addresses owns non-fungible tokens (NFTs). See our report on this here. A number of NFTs are also being used to facilitate illegal gambling.

In addition to the regulatory issues, the number of NFT-related lawsuits and other legal disputes continues to increase. Many of these disputes relate to IP ownership, IP infringement, failure to apply an clear or enforceable license to the NFT, among others.

Most of these issues are avoidable with proper legal counseling early on.

The use of NFT technology to tokenized and record ownership of physical and digital assets, as well as entitlements (e.g., tickets, access, etc.) is just getting started. We believe this technology will see wide scale adoption across many industries. The vast majority of the NFT business models are legal.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.
For more about cryptocurrency regulations, visit the NLR Cybersecurity, Media & FCC section.

Quentin Tarantino’s Secret NFTs

Quentin Tarantino recently announced plans to auction off seven scenes from the 1994 motion picture Pulp Fiction as non-fungible tokens or NFTs. These “Tarantino NFTs” will include a collection of high-resolution digital scans of the original handwritten Pulp Fiction screenplay. The NFTs each contain scans of the uncut screenplay pages themselves that form a single scene from the movie. They will be auctioned on the NFT marketplace OpenSea and are built on the blockchain platform Secret Network, which launched in February 2020.

Secret Network, developed by SCRT Labs, has additional data privacy & encryption features compared to other blockchain platforms that implement NFTs. These additional features are used to keep information associated with an NFT secret. For example, the buyer of an NFT is better able to hide their identity. Further, content associated with an NFT can be kept private to the buyer if they so choose.

Miramax was quick to oppose this new venture, filing suit on the heels of Tarantino’s announcement. Miramax asserts that because Tarantino assigned to Miramax in 1993 nearly all of his rights to Pulp Fiction, Tarantino’s remaining rights under the operative agreements are too narrow for him to produce, market, and sell NFTs. Tarantino’s reserved rights include “print publication” and “screenplay publication”, but Miramax contends that that is insufficient for Tarantino to produce NFTs. Miramax’s reasoning is that since each NFT is by definition unique and therefore a “one-time transaction,” distributing an NFT is not “print publication.” Miramax may find some support for that argument in the Copyright Act, which defines “publication” as “distribution of copies,” using the plural form and not the singular. Further, Miramax claims that Tarantino’s rights do not include a “future media” clause, supporting its contention that NFTs were not contemplated by the operative agreements, while Miramax’s rights specifically do. As Miramax states, “Tarantino’s conduct may mislead other creators into believing they have rights to exploit Miramax films through NFTs and other emerging technologies, when in fact Miramax holds those rights for its films.”

Ultimately, the dispute centers on these two questions:

  • Is Miramax correct that an NFT is not a “printed publication” because it is a “one-time transaction?”
  • Does the Copyright Act’s definition of “publication” as “distribution of copies” in the plural favor Miramax’s argument, since each NFT is unique by definition?

Tarantino’s announcement has generated intense interest in the cachet and bragging rights associated with owning a portion of his work. Like previous new technologies, however, NFTs may not fit neatly into existing legal structures. And since it has yet to be determined whether Tarantino has the rights to produce NFTs of the Pulp Fiction screenplay, interested buyers would do well to exercise a healthy degree of caveat emptor until the legal landscape is more certain.

This article was written by Michael R. Graif, Frank L. Gerratana and Allen Loayza of Mintz Levin law firm. For more articles about NFTs, please click here.