How “pulp” are NFTs? The NFT landing in the movie industry: the “Pulp Fiction” case.
On November 16th, 2021, Los Angeles-based entertainment company Miramax has sued Quentin Tarantino before the US District Court for the Central District of California, for his planned sale of NFTs (Non-Fungible Tokens) related to the 1994 movie “Pulp Fiction” associated with high-resolution scans consisting of “a single iconic scene, including personalized audio commentary” along with “a hold of secrets from the screenplay and a glimpse into the mind and the creative process of Quentin Tarantino”.
As such, Miramax has set out claims for breach of contract, copyright and trademark infringement, as well as unfair competition, seeking monetary damages and injunctive relief, presumably in order to forbid the sale of the NFTs, as well as preventing potential future attempts by Tarantino to infringe its rights over the movie.
Miramax alleges that Tarantino had previously granted ”all rights (including all copyrights and trademarks) in and to the Film… …excluding only a limited set of Tarantino’s ‘Reserved Rights’”, some of those strictly relating to the publication of the movie.
As regards the copyright claim, Miramax asserts that “Except for Tarantino’s limited set of Reserved Rights… …Miramax owns copyrights in and to Pulp Fiction (and, pursuant to the Original Rights Agreement and the Tarantino-Miramax Assignment, ‘all elements thereof in all stages of development and production’)…” conclusively arguing that the “Pulp Fiction” NFTs shall be regarded as unauthorized derivative works in violation of Section 501 of the Copyright Act, 17 U.S.C. § 501.
Furthermore, Miramax objects to Tarantino using Pulp Fiction branding and imagery, arguing that such conduct would be likely “to deceive the relevant consuming public into believing, mistakenly, that the Pulp Fiction NFTs originate from, are associated or affiliated with, or are otherwise authorized by Miramax” in the face of the company’s “broad rights” to Pulp Fiction, including “various registered and unregistered trademark rights in the name ‘PULP FICTION,’” as well as “valid and subsisting United States copyrights registered with the U.S. Copyright Office”.
Miramax contends that the alleged infringement by Tarantino could “mislead others into believing they have the rights to pursue similar deals or offerings, when in fact Miramax holds the rights needed to develop, market, and sell NFTs relating to its deep film library”.
In the case at hand, Tarantino’s counsel has represented that his planned collection consists of “7 NFTs, each containing a high-resolution digital scan of Quentin’s original handwritten screenplay pages for a single scene from his screenplay for Pulp Fiction”. Provided they do not store any digital asset, but rather be associated to the digital files, it is unlikely that Tarantino’s NFTs will thus fall within the subject matter of copyright, as opposed to the content related thereto.
Since the derivative works at issue are the screenplay scans, not the NFTs, it may be argued that the case relates to a contract dispute where the focus is on whether the rights Quentin Tarantino reserved in his agreement with Miramax include relevant “screenplay publication” rights.
On this respect, it is noteworthy that the agreement with Miramax left untouched certain “Reserved Rights” including “print publication (including without limitation screenplay publication, ‘making of’ books, comic books and novelization, in audio and electronic formats as well, as applicable)”. It follows, that Quentin Tarantino may thus be entitled to sell digital scans of the screenplay extracts as NFTs, unless the above conduct can qualify as an act of merchandising, the latter being under the scope of the assignment to Miramax.
It is precisely for this reason that Miramax argues on this point that, under the US Copyright Act, the distribution of a small number of copies to a limited number of recipients is usually not considered “publication” – unless no restrictions are imposed on further distribution of the content. However, as can be seen from Tarantino’s auction website www.tarantinonfts.com the owner of the NFTs is even granted the freedom to “share the secrets publicly with the world“, which seems to be at odds with the objections raised by Miramax.
As previously touched upon, Miramax has also challenged Tarantino’s unauthorized use of imagery on his NFT- specifically, cartoon illustrations of the characters played by John Travolta and Samuel L. Jackson. On this respect, however, the famed director has already replaced the cartoon drawings with a headless figure wearing a suit recalling those worn by the characters in the movie.
Last, as regards Miramax’s trademark infringement claims, it should be taken into consideration that, despite the huge amount of trademark registrations for “Pulp Fiction” relating to several categories of merchandise, none of these registrations would mention NFTs.
NFTs, aka Non-Fungible Tokens which implement a unique identification process of a digital asset created online, are a widely used technology in recent years in the highly lucrative media industry which has proved as an alternative revenue stream for people eager to profit from media outside the traditional licensing schemes. The Miramax v. Tarantino case is one of the most prominent examples of NFT-focused litigation that coincides with the increased demand for their use within the movie industry since the beginning of this year.
The application of IP provisions originating well before the emergence of such technologies involves several challenges for legal practitioners who are called upon to adapt, as in the present case, outdated rules to an ever-changing technological world.
Hence, the Miramax v. Tarantino dispute shows that major players in the entertainment industry are beginning to seize the opportunity to capitalize over NFT’s verging wave, with a view to judicially enforcing outdated contractual provisions which may ultimately lead to the spanning of several grey areas over such new forms of exploitation of digital assets. Against this background, IP implications are surely going to be numerous and harder to sort out in the next future before both US and Italian specialized Jurisdictions.
Virtual currencies: means of payment or financial products?
In a recent judgment, the Supreme Court (Court of Cassation, criminal section, sec. II, November 10th, 2021, no. 44337) has ruled that bitcoins as well as other virtual currencies are not per se classified as financial products however, should the sale of bitcoins integrate an investment proposal, the offeror is subject to specific duties.
More in detail the discipline provided by art. 91 et seq. of Legislative Decree no. 58 of 24th February 1998 – Consolidated Law on Finance (TUF) applies, thus implying qualification of the virtual currency as a financial product and the application of the relevant regime (art. 94 et seq. TUF) to grant the investor a more effective protection of the investment.
The ruling concerns the appeal against the order of validation of the probationary seizure relating to an Exchange platform considered to be the subject matter of the crime as: “an instrument through which are provided the advertising of the illegal activity and the offer to customers, preparatory instruments to the circulation of electronic money“. In particular, the Court decided to extend the seizure to the Exchange platform on the basis of the classification of virtual currency as a financial product by virtue of an equation between virtual currency and digital gold.
The Supreme Court begun their analysis from the text of the provisions and the relevant definitions adopted by the European and the national legislators. In fact, by Directive 2018/843/EU of May 30th, 2018 amending the Anti-Money Laundering Directive, the European legislator provides a negative definition of virtual currency with the sole purpose of regulating the relationship between virtual currency and current/common currency: “[…] a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.”.
On the other hand, the national legislator, lays down a broader discipline than the one provided by the European legislator and in line with the results of the Public Consultation launched by Consob and entitled ”Initial Coin Offerings and Crypto-Assets Exchanges “published on January 2nd 2020. In fact, art. 1, lett. qq of Legislative Decree 231/2007, as modified by Legislative Decree 125/2019, no. 125 defines virtual currency as “[…] the digital representation of value, not issued or guaranteed by a central bank or public authority, not necessarily attached to a legally established currency, used as a means of exchange for the purchase of goods and services or for investment purposes and transferred, stored and traded electronically“. According to the Supreme Court, the difference between the two definitions lies, according to the Supreme Court, in the investment purpose – subject to review in the judgement in question – expressly provided for by the national legislator among the possible uses of virtual currencies.
The legal principle expressed by the Supreme Court is as follows: “[…] where the sale of bitcoin is advertised as a real investment proposal, there is an activity subject to the requirements of art. 91 et seq. TUF (“CONSOB exercises the powers provided by this part having regard to the protection of investors and the efficiency and transparency of the market for corporate control and capital market”), the omission of which integrates the existence of the offense referred to in art. 166 paragraph 1 lett. c) TUF (which punishes whoever offers off-site, or promotes or places by means of distance communication techniques, financial products or financial instruments or investment services or activities); therefore, at present, bitcoin can be considered a financial product if purchased for investment purposes: when the virtual currency assumes the function, that is the concrete cause, of investment instrument and, therefore, of financial product, must be regulated by the rules on financial intermediation (art. 94 et seq. T.U.F.), which guarantee the protection of the investment through a unitary discipline of special law”.
The Italian Consumer Code: here are the changes for 2022.
The Italian Legislative Decree n°170/2021 has made important amendments to the Italian Consumer Code not only extending the rules in favour of the Consumer, but also dealing with age-old questions that provoked much debate in both doctrine and case law.
Chapter I of the Title III, Part IV of the Code has been completely revised.
There are many new rules that will come into force on 1st January 2022. The legal provisions will be applied to any transaction concluded after that date.
First of all, with regard to application, the law doesn’t refer to “consumer products” anymore but speaks simply of “goods in general” with specific definitions; the term “Vendor” is also extended to the suppliers of web platforms and the definition of goods now includes digital elements and live animals.
The term Manufacturer has been extended to anyone who “introduces himself applying on the good his name, his brand or trademark” [see article 128, 2, sub d) ICC].
With regard to the lack of conformity of the goods, the requirements are now set out in the new Article 129 ICC which distinguishes between the subjective requirements – i.e. those specifically requested by the Consumer – and the objective requirements (definition not previously set the law) which refer to the characteristics of every good of a certain type.
With reference to the vendor’s obligations, the law introduces some defences when the good does not conform to the publicly stated declarations (or statements made by the Manufacturer):
– Those declarations were unknown by the Vendor.
– Those declarations were corrected when the deal was concluded.
– Those declarations did not influence the decision of the Consumer to buy the good.
For digital goods, the Consumer is obliged to perform the upgrades required regularly otherwise he will be liable in case of subsequence defects.
All the rules related to the incorrect installation of goods have been changed: the Vendor will be liable only if the installation was performed in an inadequate manner or if the instructions were wrong.
However, nothing has changed with regard to the duration of the guarantee of the goods (which lasts 2 years from the delivery): this guarantee is now extended to digital goods.
Also the limitation period for claims for guarantee is unchanged (period of 26 months from the delivery of the goods) as well as the right to claim against the previous seller of the same chain of contracts (1 year).
Nevertheless, the term of 2 months, previously set to inform the seller of a lack of conformity, has now been cancelled by the law: it must be assumed that, from now on, this term will be regulated by the Italian Civil Code.
At the same time, the burden of proof has been clarified with a relevant change: the presumption of a lack of conformity of the goods is now extended from six months to one year, digital goods included.
Among the remedies available to the Consumer, the reduction of the price and the termination of the agreement have been confirmed: the Consumer is entitled to ask for a reduction of the price but proportionally to the decrease in value of the goods (the use of the good is no longer mentioned) and, if the lack of conformity is limited to certain goods returned, the agreement can be terminated only for them; in this case the Consumer is required to return the items at his expense.
In the end, the rules of the Italian Civil Code are all applicable with reference to the formation of the contract, to the validity and the effectiveness of the agreement and to the consequences of a termination of a contract and possible damages (previously damages were not explicitly considered).
All these amendments are significant because they will have a serious impact on the relationship between the Consumer and the seller: only in 2022 will it be possible to fully assess the application of the new revised Code.
RES Decree 2: are there any changes to the regulation of PPAs?
Article 28 of the so-called RES Decree 2 regulates the gradual start-up of long-term contracts for renewable energy (known as Power Purchase Agreements – PPAs), which will have to be combined with the incentive instruments for achieving the ambitious national 2030 target set by the PNIEC.
The article repeals Article 18 of the RES 1 Decree and, instead, provides that
– the GME shall set up a noticeboard to promote the encounter between parties potentially interested in entering into PPAs
– the MITE provides guidance to the GME for the development of a market platform for long-term trading (it is desirable that the GME public consultation process no. 01/2020, referred to below, is taken into account)
– Consip shall define the bidding tools for the supply of energy from renewable sources to the public administration through PPA schemes. The adherence to the agreement schemes is in addition to the purchasing procedures for the supply of electricity from renewable sources defined by Consip, as part of the national action plan on green procurement for the public administration
– ARERA shall supplement the guidelines on purchasing groups (Law No. 124 of 2017) to promote procurement through PPAs, to establish specific rules of conduct, which the purchasing groups that adhere to them shall observe with the aim of guaranteeing customers participating in such groups adequate information and assistance in all phases of the collective purchasing campaigns
In order to identify the elements that could characterise the platform, it is necessary, however, to refer to the only document on the subject, namely the proposal for the operation of the PPA Platform developed by the GME for the RES decree 1 (GME Consultation Document no. 01/2020) which had received some criticism as being too vague and therefore it was suggested to
– define the requirements of operators
– provide for additional products
– increase the duration of standard contracts
– reference to Guarantees of Origin
– detail the role of the GME
Also on this issue, it should be noted that the GSE has promoted the study “Support to elaborate the legislative and regulatory framework to promote Power Purchase Agreements (PPA) in Italy” for the development of a framework to encourage the use of PPAs. Among the proposals identified, it was suggested to evaluate the introduction of an obligation for energy-intensive consumers to certify the purchase of a minimum percentage of their annual electricity consumption through PPAs. This obligation could also become a necessary condition for energy-intensive consumers to have access to compensation mechanisms for the costs incurred (so-called “energy-intensive relief”).
As it can be seen, the market and the PPA contracts, to date, do not yet have a precise normative regulation. Currently, the contractual scheme is based on a contract for the provision of services, with professional off takers. These contracts have peculiarities and clauses that must be treated with attention. Leaving aside the analysis of the price structuring clauses, which would require a specific in-depth study, we highlight the following aspects.
– Typically, clauses are included to regulate force majeure events, including the change in law: if the change in law has a significant impact on the economic aspects of the contract, a solution could be provided by the provision of technical arbitration (Arts. 1349-1322 Civil Code) aimed at maintaining the contractual balance.
– The charges for the issue of guarantees that the operators – sellers or buyers – are called upon to bear to cover their exposures are considerable and often, also in consideration of the extended time horizon of the contracts, rolling guarantees (for fractions of the duration of the contract) are provided for. For this reason, and also for the future regulation of the GME platform, it has been suggested that rolling guarantees may be introduced.
– In any case, difficulties remain in the “bankability” of the contracts, also because banks often require a rating of the off-taker which, at present, few entities are able to meet.
Our Energy Team will continue to describe the changes introduced by the RES Decree 2 with specific in-depth analyses in the coming days.
Non-deductibility for income tax purposes of the labour costs of an employee who is also the chairman of the Board of Directors or the sole director of the employer.
With decision no. 36362 of 23rd November 2021, the Supreme Court ruled on the tax deductibility in the hands of the employer of the salaries paid to two employees who were also shareholders of the company and respectively chairman of the Board of Directors and member of the Board.
With respect to the chairman of the Board of Directors, the Supreme Court confirmed its position on the non-deductibility of the remuneration, as a direct consequence of the absence of subordination of the employee. According to the Supreme Court, in fact, “with respect to income taxes there is an absolute incompatibility between being an employee of a company and being the chairman of the board of directors or sole director of the same, as the circumstance that the same person has the powers of representation, management, control and also the disciplinary powers makes it impossible to distinguish between employer and employee, distinction that is necessary for the essential element of the subordination to be found, with the consequent non deductibility for income tax purposes of the employee cost”.
With reference to an employee who is just a member of the Board of Directors, the Supreme Court stated that though there is no absolute incompatibility, the existence of the hierarchical subordination which is the necessary prerequisite for the tax deductibility of the salary must be verified not only formally on the basis of the statute and to corporate resolutions but specifically in relation to managerial and disciplinary powers and, in particular, to the performance of duties other than those of the corporate office held.
The employee who is also a director must, therefore, be concretely subject to a disciplinary and control power exercised by the other members of the body to which he belongs; in the absence of such subordination, the observance of specific working hours and the payment of a salary are not enough to prove the existence of an employment relationship.
Unfortunately, the decision does not address the issue of the double taxation that arises as a result of the possible non-deductibility in the hands of the company of the salary already subject to tax in the hands of the employee.
DISCLAIMER: This newsletter merely provides general information and does not constitute legal advice of any kind from Macchi di Cellere Gangemi. The newsletter does not replace individual legal consultation. Macchi di Cellere Gangemi assumes no liability whatsoever for the content and correctness of the newsletter.
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