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China copyright infringement case: China issues first court ruling on NFTs
On 20 April, the Hangzhou Internet Court in East China held a public hearing to resolve a dispute over the copyright infringement of an NFT digital collection listed on a Chinese NFT marketplace, BigVerse. IP lawyer Xuemin Lu explains the implications of the ruling.
The artwork at the center of the China copyright infringement dispute illustrates a cartoon picture of a fat tiger receiving a vaccine shot (pictured below). It was created by well-known artist Ma Qianli who authorized Shenzhen Qice Diechu Cultural and Creative Co., Ltd. (the plaintiff) the exclusive global copyright to the work.
Source: Wechat account of the Hangzhou Internet Court
The defendant in the case had allowed its user to mint the “fat tiger” artwork into an NFT, which was sold for RMB 899 (€129) with the defendant receiving a commission from the transactions.
The plaintiff held that the defendant’s behavior infringed its right of information network dissemination under the Chinese Copyright Law and sued the defendant before the Hangzhou Internet Court, requesting compensation of RMB 100,000.
China copyright infringement and NFTs
The court ruled that there was a subjective fault by BigVerse in its failure to perform a preliminary review of the digital collection. Accordingly, its behavior was ruled to constitute assistance to the infringing act, despite the fact the platform had carried out its “notice-delete” obligation.
Although China is not a case law country and the judgment is not final, this first NFT-related ruling undoubtedly has a significant value of reference for future cases. In particular, the court made it clear that:
- The act of trading NFT digital collections is subject to the information network dissemination right.
- NFT digital collection marketplaces have a higher obligation of preliminary review than general internet service providers and should establish a complete mechanism for reviewing IP ownership of IP.
- Because the trade of NFT digital collections involves blockchain and smart contract technologies, it is nearly impossible to delete infringing NFTs from all blockchains. However, an innovative and effective method of ceasing infringement on NFT marketplaces has been adopted by the court, namely disconnecting the infringing NFT from the blockchain and then adding it to an eater address, also known as “burning”.
- The legal effectiveness of digital blockchain evidence was both acknowledged and used as primary evidence in the hearing by the court.