Quentin Tarantino, director of the 1994 Pulp Fiction movie, announced in a press release on November 2, 2021 that he was offering uncut, exclusive scenes to the movie as “secret NFTs.”1 He and his organization launched a “Tarantino NFTs” Twitter account and website, https://tarantinonfts.com/, for the sale.2
That begs the question, what are NFTs?
I. NFTs and Secret NFTs
Non-fungible tokens (referred to as “NFTs”) are digital files that can represent art, audio, video, virtual gear, video game tokens, and other creative works which are purchased by blockchain technology. NFTs can be collected, displayed, and traded. “Minting” refers to the process of converting a digital file into a digital asset on blockchain, which allows NFTs to become unchangeable and, thus, readily authenticated with a recorded chain of title no matter how many times it is traded. With a plethora of online tutorials about creating NFTs and minting tools, individuals and entities can easily convert a file into an NFT.
In this case, Tarantino is offering these exclusive Pulp Fiction movie scenes as a specific type of NFT – secret NFTs. Secret NFTs are a type of NFT with programmable privacy features that live on networks and are promoted by Secret Network. Secret Network is blockchain with data privacy by default (unlike typical public by default blockchain technology), where users can build applications with customized privacy settings. With these tokens, verifiability is not open to the public and creators can (1) choose who has full access to the content and (2) require purchase before viewing the full asset.3 Miramax, the producer of the movie that asserts ownership over the rights to the Pulp Fiction film, immediately filed suit against Tarantino, asserting claims for breach of contract, trademark infringement and unfair competition, and copyright infringement.4 According to the complaint, Tarantino granted Miramax all rights, including copyrights and trademarks to the film and stages of development and production, in exchange for valuable consideration. Tarantino reserved rights to the soundtrack album, music publishing, live performance, print publication, interactive media, theatrical and television sequel and remake rights, and television series and spinoff rights. Miramax argues that these Pulp Fiction NFTs do not count as publication (either printed or screenplay) and cannot be part of Tarantino’s reserved rights because this sale is just a single transaction. Resolution of this case ultimately hinges on the question: who owns an NFT? That is a question that the District Court for the Central District of California will have the opportunity to answer (if the parties don’t settle).
And this is likely just the first lawsuit regarding ownership over NFTs. NFTs are rising in popularity as artists are using this means to sell digital artwork. Artists like deadmau5 and Kings of Leon each released NFT packages branded under their trademarked artist names.5 Sales of NFTs exceeded $2 billion in the first quarter of 2021, compared to a total of $250 million in 2020.6 Fans are willing to pay millions of dollars for a single digital collectible. Christie’s auction house sold Beeple’s EVERYDAYS: THE FIRST 5000 DAYS for $69 million. Other examples of these in-demand, high cost purchases include the famous “Charlie Bit My Finger” YouTube video, which sold for $760,999, and the first ever tweet on Twitter, authored by Jack Dorsey, former CEO of Twitter, for $2.5 million in a charity auction.
In the future of NFT litigation, retailers may be included as defendants, particularly if a creator is asking a court to order a permanent injunction to stop the sale of an infringing NFT. Various NFT platforms such as OpenSea and Auctionity operate as commercially operated online marketplaces for tokenized goods. On platforms like OpenSea, users can set up a wallet and create a collection of NFTs to allow for the purchase, bid, and offer for sale of NFTs. Although users can buy an NFT with any blockchain currency, Ethereum (“ETH”) is currently the most popular choice, in part because purchase with it requires compliance with two standards: EIP- 721 and EIP-1155, Ethereum Improvement Proposals, created in 2018.7 There are additional protections beyond the ETH proposals that creators and sellers can employ to better retain rights to their digital assets. Smart contracts can be embedded in an NFT that will automatically execute certain actions such as royalty payments with each subsequent sale. Language explicitly contemplating NFT use can also be incorporated in license agreements.
II. Takeaways
In addition to using smart contracts and licenses with NFTs, creators can protect qualifying digital assets with a trademark registration. Brand owners in the entertainment space are starting to think proactively about this new potential revenue stream, including filing new applications for marks covering NFTs. Trademark applications for NFTs typically fall under Classes 9 and 36 with a description for the goods and services using terms such as “Downloadable electronic data files,” “non-fungible tokens,” “digital art,” and “Downloadable computer software or application software for blockchain-based platforms.” In fact, entities have already begun to file separate trademark applications for their NFTs, including Mattel, Inc.; Entertainment Weekly; Legend Pictures, LLC; Lions Gate Entertainment Corp.; The Andy Warhol Foundation for the Visual Arts, Inc.; and Saks.com. Even OpeanSea, one of the NFT marketplaces described above, registered a trademark in Classes 35 and 42 for its services with NFTs and crypto collectibles.
Protecting an NFT with a trademark registration will better enable creators to enforce their rights against users who might be copying or selling without authorization, profiting off a brand’s goodwill, and potentially weakening or diluting the marks. It also ensures that creators understand the scope of their rights before initiating a lawsuit. That way, creators can enforce their trademark against downstream traders for trademark infringement arguing that the sale or trade could deceive consumers as to the origin, source, sponsorship, or affiliation of the NFTs and cause consumers to believe that the NFTs are sold by the original creator.
For consumers of NFTs, don’t be the next to ask, “Say What Again?” when intellectual property rights are mentioned in connection to these tokens. While NFTs are a new way of experiencing content, traditional trademark principles will likely continue to apply and govern the use and sale of NFTs. Before spending any Ethereum, consumers should be extra careful to determine whether their purchase of an NFT will confer any rights to them at all.
[1] Quentin Tarantino Revealed as Iconic Artist Behind First-Ever Secret NFTs, Secret Network, https://scrt.network/blog/quentin-tarantino-revealed-as-iconic-artist-behind-first-ever-secret-nfts (last accessed Nov. 19, 2021).
[2] Miramax, LLC v. Tarantino, Compl. at 14, ¶47 (C.D. Cal. 2021), referring to @TarantinoNFTs.
[3] Secret NFTs, Secret Network, https://scrt.network/about/secret-nfts (last accessed Nov. 19, 2021).
[4] Supra note 2 at 4-5, ¶¶20-21.
[5] deadmau5 Releases Second Digital Blockchain Card Collection ‘deadmau5: Series 2 Card Collection’, GlobeNewswire, https://www.globenewswire.com/en/news-release/2021/08/30/2288106/0/en/deadmau5-Releases-Second-Digital-Blockchain-Card-Collection-deadmau5-Series-2-Card-Collection.html (Aug. 30, 2021); see also Samantha Hissong, Kings of Leon Will Be the First Band to Release an Album as an NFT, Rolling Stones, https://www.rollingstone.com/pro/news/kings-of-leon-when-you-see-yourself-album-nft-crypto-1135192/ (last accessed Nov. 19, 2021).
[6] USPTO trademarks on sale as NFTs; thousands of duplicate filings in China; Australia joins DesignView – news digest, World Trademark Review, https://www.worldtrademarkreview.com/anti-counterfeiting/uspto-trademarks-sale-nfts-thousands-of-duplicate-filings-in-china-australia-joins-designview-news-digest (Sept. 14, 2021).
[7] EIP-721: Non-Fungible Token Standard, Ethereum Improvement Proposals, https://eips.ethereum.org/EIPS/eip-721 (last accessed Nov. 19, 2021); EIP-1155: Multi Token Standard, Ethereum Improvement Proposals, https://eips.ethereum.org/EIPS/eip-1155 (last accessed Nov. 19, 2021).
