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China Court's Ruling On NFTs and Copyrights

By Isha Marathe
August 01, 2022

The last few years have been quite a journey for nonfungible tokens (NFTs), going from niche art collectibles to global marketing tools. China, which has had an up-and-down relationship with the U.S. entertainment industry, became the latest country to offer a key regulatory framework in its first-ever case dealing with NFTs and the copyright violations they are sometimes saddled with. In its decision, the Hangzhou Internet Court in China held NFT marketplaces liable for poor vetting of copyright violations, imposing stricter burdens on the marketplaces than on e-commerce platforms that enjoy the protection of a "safe harbor rule." Shenzhen Qicedie Cultural Creativity Co. Ltd. v. Hangzhou Yuanyuzhou Technology Co. Ltd., (2022) Zhe 0192 Minchu No. 100.

For attorneys operating in the blockchain and digital asset space, it isn't too much of a surprise that a country that outlawed cryptocurrency trading last year is making a move that might discourage ambitious NFT entrepreneurs from entering the market. Regardless of which side of the opinion they may fall, however, attorneys find that the ruling highlights one of China's growing internal struggles: a longing to be on the cusp of the latest technology, all the while bearing a deep wariness about the financialization of digital assets.

Horace Lam, co-head of DLA Piper's Intellectual Property and Technology practice in Asia, said that, while he believes China's reticence around the NFT space may have "suppressed" user interest, his law firm doesn't find the recent court ruling unreasonable. "This ruling, notably, increases the burdens on NFT marketplaces and may cause them to hesitate to enter the Chinese market. However, the obligations set out by the court are, in our view, not overly unreasonable or excessive and do have their merits when considering the special technical features of NFTs," Lam said.

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