Could the various Non Fungible Token (NFT) controversies in Hollywood become a redux of the infamous fight between Universal Studios and Sony Betamax? In 1984, the U.S. Supreme Court ruled that the making of individual copies of complete television shows for purposes of time-shifting does not constitute copyright infringement, but is fair use. Ultimately, the ruling led to a home video goldmine for Universal and other studios.

Now, 38 years later, there is the Tarantino vs. Miramax controversy over NFTs. Movie director Quentin Tarantino wants to auction off digital script pages (with private content) from the 1994 film Pulp Fiction (which he directed), and Hollywood studio Miramax (which produced it) insists that he doesn’t have the rights.

The way the dispute plays out will determine the outcome of another lucrative new business for the studios. “The studios are sitting on a goldmine, and they will not dilute the value of their assets,” said one Hollywood insider who wished to remain anonymous. And to think that NFTs are not even physical properties, but audiovisual digital assets that are issued in “authenticated” editions!

Another controversy erupted when the host of The Tonight Show on NBC, Jimmy Fallon, recently showed his own NFT on the air. It was reportedly purchased for $216,000, and sources are speculating that he shared it with his viewers so as to boost its asking price if he ever tries to resell it. Such practices are against NBC’s ethics policy.

The ability to validate their authenticity allows NFTs to be sold and bought, especially by auction houses like OpenSea, GFT, Sotheby’s and SCRT (Secret Network), the latter of which is representing Tarantino’s NFT effort. In addition to being auctioned, tokens can also have fixed prices.

Indeed, way back in May 2018, 20th Century Fox released limited-edition Deadpool 2 digital posters to promote the film. They were available from the OpenSea and GFT exchanges.

Now, we at VideoAge don’t want to label the Tarantino-Miramax controversy as simply a matter of dollars and “sense” (because the matter is as complex as the academic dissertation of the Godfather movie), but as something much thornier.

To start with, the process of authentication is very complicated, and involves blockchain companies like Tezos, Polygon, Klatyn, and Ethereum, which use cryptography technology for security. Ethereum is credited with the creation of the most used common standard (the ERC721) to create unique tokens. Even the term Non Fungible (hyphenated or not) Tokens has obscure origins. The Latin-derived “fungible” means “useful,” and, while fungible goods are interchangeable (e.g., a $10 bill can be swapped with another $10 bill), “non-fungible” means that goods (or tokens) are unique and their uniqueness is authenticated, and cannot be copied. To further muddy the waters, the definition of “unique” makes a distinction between something “similar” and not the same. In the world of NFTs there might be two similar artworks on sale, but each can be authenticated as unique therefore not the same.

Concert tickets, for example, are non-fungible. Even if tickets have the same price, they aren’t directly exchangeable. Each represents a specific seat and a specific date — no other ticket will have those exact characteristics.

Some online reports state that the term NFTs was coined by the Art On Internet (AOI) Foundation, and that the first known NFT was created in New York City in 2014. To make the matter even more confusing, there is the fact that acquired NFTs don’t sit on a buyers’ computer, but exist only as web links. In addition, a buyer can own an NFT, yet not own the copyright to the underlying work, and can resell the NFTs, but cannot make a physical rendition (like a printed copy). The NFT buyer acquires only the digital token.

In March 2021, Schuyler M. Moore, a Hollywood expert in tax and corporate law, explained in a Forbes‘ article that the sale of NFTs in the previous month totaled $180 million. Moore stated that Hollywood “might be interested in million of dollars by converting audiovisual clips to NFTs.”

He went on to say that the “owner of the NFT does not own any rights to the content on the NFT, just as the owner of a DVD is not permitted sell copies of it.” Plus, that the use of the NFT content is constrained to the limits of “fair use,” similar to the ruling in the 1984 Betamax case.

Reached by VideoAge via e-mail, Moore further explained that, in the case of Tarantino, “NFTs come within his retained right to publish his screenplay.”

In a January 14, 2022 Wall Street Journal article it was pointed out that “contracts between a creator and a producer contain a forward-looking language that takes into account new technologies.” The question is where NFTs, as new entities, fall into the mix, and whether or not they are considered ancillary rights.

In his Forbes‘ article, Moore wrote that “there is a bit of a legal maze to work through,” but to VideoAge he said that NFTs are “completely covered by copyright law already.”

However, despite the fact that NFTs are a worldwide phenomenon, Moore admitted that he considers them “a passing fad, like crypto currency (which has crashed [in value] in the last two months).”  Nonetheless, he said that “hard negotiations are taking place” between the studios and the creative community.

In addition, Moore thinks that the NFT version of a physical artwork won’t diminish the market value of the original hard copy, and that the value of an NFT sale could be enhanced if, for example, a page of a script that is already on the physical marketplace would be signed by the IP owner for the NFT sale.

Finally, since the “fair use” principle also allows TV news to show up to three minutes of a movie (or a sports game) for news coverage, meaning that those clips will then be online (as part of the news program), VideoAge asked Moore why someone would possibly pay for something that is already online. Moore answered: “That is why NFTs are a passing fad.”

by Dom Serafini

Audio Version (a DV Works service)

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