Why settle for a movie poster when you can have a non-fungible token (an NFT)? In the entertainment industry, NFTs provide creators with new ways to interact with audiences, create awareness and even generate a significant profit. Fox Entertainment recently released NFTs tied to its reality show The Masked Singer. Warner Bros. sold out of 100,000 “Matrix Resurrections” inspired NFTs when the film was released last year. Lionsgate signed a strategic partnership with an NFT platform to create NFTs related to The Hunger Games, Mad Men, John Wick, and Dirty Dancing.
However, the creation of NFTs poses challenges under current Copyright laws. NFT creators and purchasers should carefully review existing contractual arrangements that could impact the material being minted as an NFT. Recently, director Quentin Tarantino and production company Miramax LLC settled a dispute over the sale of NFTs related to the Tarantino film Pulp Fiction.
Wait, what is an NFT?
An NFT is a digital certificate of ownership and authenticity that links to a digital or physical “work.” The certificate is recorded on a blockchain using smart contracts. The blockchain is where the NFT is stored and where ownership of the NFT can be tracked. Further, smart contracts are essentially computer programs that enable the creation (or “minting”) of the NFT on the blockchain.
Who can create an NFT?
To mint an NFT of a copyrighted-protected work, one must be the copyright holder with sufficient rights to tokenize the underlying “work” into an NFT. To avoid copyright infringement, anyone without full and complete copyright ownership of the underlying “work,” such as a copyright licensee, must evaluate whether their rights include the ability to mint an NFT.
So, what happened with Pulp Fiction?
In 2021, Tarantino announced that he would create a collection of seven NFTs based on his hand-written draft of the Pulp Fiction script. Each NFT consisted of “the original script from a single iconic scene, as well as personalized audio commentary from Tarantino himself.” The first NFT of the collection, titled the “Royale with Cheese” NFT, was purchased for US$1.1 million. Subsequently, Miramax filed a claim for copyright infringement, among other things.
Miramax’s position was that under the Tarantino-Miramax assignment agreement (the Agreement), Tarantino assigned Miramax the right to distribute Pulp Fiction “in all media now or hereafter known in perpetuity,” which includes the rights to develop and sell the NFTs. Conversely, Tarantino maintained that the creation of the NFTs, based on his hand-written draft of the Pulp Fiction script (the underlying “work”), fell within his reserved rights under the Agreement to “print publication (including, without limitation, screenplay publication… and novelization, in audio and electronic formats as well.” Ultimately, the parties settled in September 2022, and the terms of the deal were not disclosed.
Canadian legal considerations
While the dispute was never heard in front of a court, it is interesting to consider how a similar dispute could be resolved under the Canadian Copyright Act (the Act).
First, copyright in a script or screenplay subsists under Section 5(1) of the Act as a “dramatic work.” Further, “copyright” in a work under Section 3(1) includes the sole right to produce translations, make recordings, or reproduce the work or “any substantial part thereof… in any material form whatever,” among other things. While the Act, of course, does not expressly mention NFTs, the minting of an NFT may fit under an umbrella composed of the concepts of a “substantial part,” the reproduction right and the “any material form whatever” wording found in Section 3(1). In US copyright terminology, the creation of an NFT is sometimes colloquially described as involving a “derivative work.” In the US, “derivative work” is defined in Section 101 of the US Copyright Act as a work based on one or more preexisting works… or any other form in which a work may be recast, transformed, or adapted. However, unlike in the US, the Act does not use the term “derivative work” but instead uses the phrase “produce or reproduce [a] work … in any material form whatever” to establish an analogous concept. The Supreme Court of Canada in Galerie d’art du Petit Champlain inc. c. Theberge (2002 SCC 34) confirmed that this wording confers on the copyright owner the exclusive right to control the creation of what, in most circumstances, would constitute derivative works under US copyright law. Thus, it is possible that the creation of an NFT based on the Pulp Fiction script is one of the rights reserved exclusively to the owner of the copyright in the script under Section 3(1) of the Act.
The next consideration is whether the creation of the NFT based on a “single iconic scene” from the Pulp Fiction script is a “substantial part” of the underlying work (i.e., the entire script). If something less than a “substantial part” of the underlying work has been copied, then there is no copyright infringement at all. The determination of whether a “substantial part” has been copied is a question of fact, with a variety of considerations such as the quality and quantity of the work copied as well as the importance and originality of the parts of the work copied. While the Court has provided no clear spot to draw the line on what is considered a “substantial part,” recent decisions have provided some form of comparison. In Wiseau Studio et al. v. Richard Harper the Court held that copying seven minutes from a 99-minute documentary (~7%) constitutes a “substantial part” and was more than “trivial.” Alternatively, the Copyright Board in its Access Copying (Provincial and Territorial Governments) 2005-2014 Tarif reasons indicated that 1-2 pages of a literary work fall below the “substantial” threshold, so long as the pages do not constitute more than 2.5% of the work. Turning back to Miramax, LLC, v. Tarantino an NFT of a “single iconic scene” (such as the famous Royale with Cheese scene) may be short in relation to the entire script but could be akin to the chorus of a popular song and very important to the overall work. Therefore, it is plausible to conclude that the single scene captured within the NFT is a “substantial part” of the work for the purposes of this analysis. This suggests that the creation of the NFTs by Tarantino could have infringed Miramax’s rights as owner of the copyright in the script. The outcome of the Tarantino / Miramax dispute would likely have turned on whether the rights that were reserved by Tarantino in the contract (including “print publication” in “electronic formats”) were sufficient to permit Tarantino to mint the script pages as NFTs.
Going forward, to mitigate the risk of ambiguity, contracts should specify which rights to create derivative works, if any, are granted or reserved and which types of transformations are permitted or prohibited. Contract drafters intending to grant the ability to create an NFT could consider language such as “Licensed Rights shall mean the exclusive right to copy, reproduce, install, compress, decompress, encode, encrypt, decode, decrypt, display, use, cache, store, communicate and transmit the Work for the purposes of converting the Work into a Digital Non-Fungible Token.” Further, drafters should also consider if they would like to impose limitations on the number of NFTs created under a specific agreement, restrictions on resale, and notice or approval requirements.
Ultimately, while the Miramax, LLC, v. Tarantino settlement did not provide any advances by way of law, it certainly provided a reminder to review our copyright agreements in place and revise precedents for the future.
For more information, please reach out to the authors, Bob Tarantino and Anthony Berlingieri.
 R.S.C, 1985, c. C-42.
 S. 3(1) of Copyright Act.
 United States Code: Copyright Office, 17 U.S.C.
 Cinar Corporation v. Robinson, 2013 SCC 73at para. 25.
 2017 ONSC 6535.