Meta Description: Non-Fungible Tokens (NFTs) are digital markers verifying ownership of online creations like art and music, operating on blockchains. They're distinct from cryptocurrencies but share blockchain technology. In India, NFT legality lacks clarity, raising sustainability concerns. NFTs are sold via specialized platforms using smart contracts, binding buyer and seller under Indian law. Copyright issues arise as NFT ownership doesn't grant copyright. Navigating copyright law complexities, especially when NFTs are based on copyrighted works, presents challenges. The space may encounter copyright disputes, though platforms act as gatekeepers. The evolving interplay between NFTs and copyright remains a complex, unresolved frontier.

Keywords: Copyright, Non-Fungible Tokens, Blockchain, India

THE RISE OF NFTs AND ITS QUANDARY WITH COPYRIGHT

Introduction

Non-Fungible Tokens (NFTs) are digital assets that can be used to establish the legitimacy and worth of an underlying digital asset, such as an original photograph, film, or piece of music. It is a special token that appears as a link and stands in for physical items or internet-based digital creations. It basically functions as a digital currency that symbolizes real-life items like artwork, films, audio files, memorabilia, game assets, etc., and is stored on a blockchain, similar to a certificate of ownership for virtual or physical goods.

Since it can be challenging to locate and identify the original owner of work on virtual platforms, NFTs are largely used to confirm ownership. This prevents work from being easily replicated, which lowers its value. Thus, the goal of NFT is to impose decentralization, ownership monitoring, and value storage.

"Anything that can be digitalized can be turned into an NFT."

Are NFTs and Cryptocurrency the same?

Sometimes people confuse NFTs with a certain kind of cryptocurrency. In reality, NFTs are digital assets that are obtainable through the use of cryptocurrencies. The only similarity between cryptocurrencies and NFTs is that they both have digital records that are kept on blockchains. Every token in an NFT is distinct and cannot be exchanged for another token of the same value. With cryptocurrencies, there is more transparency and value and it is possible to exchange one Bitcoin for another.

Copyright concerns

The legality of these digital assets is still a matter of great uncertainty. The legal legality and authenticity of NFTs have been questioned because there are no clear regulations that prohibit or limit dealing in them, especially in India.Supporters of NFT in India have consequently voiced doubts about the technology's long-term sustainability.

Only through a specially created platform that serves as a facilitator (much like an auction house) are NFTs available for purchase. It will convince buyers to either buy it outright or at a predetermined price in an auction by displaying the seller's NFT. A smart contract is used to provide the buyer with the terms and conditions of the transaction prior to any successfully completed auction or purchase. All of the conditions pertaining to the buyer's usage of this NFT are outlined in this contract, including whether copyright rights will be provided or whether he may only use it for private, non-commercial use.Once the buyer pays the consideration, the contract is legally binding and both parties are covered by the Indian Contract Act of 1872. It's crucial to remember that these smart contracts are only signed by the seller and the buyer; the platform providers are simply acting as middlemen.

Since the artwork is neither a tangible or digital item, it is exempt from copyright laws. Unless the parties have agreed differently through a smart contract, in which case the NFT functions as a distinctive and well-known replica of that same item, the copyright usually belongs to the original creator of the artwork, music, or other creative work. At present, when an NFT is bought, the owner does not receive the copyright on the underlying work of art.

There are various "rights" to take into account when it comes to copyright. Some of the benefits they offer include the following:

  • Control over the creation of exact replicas of the original piece.
  • Control over the licensing, transfer, or sale of the copyright.
  • The producers of derivatives have a right to know who can create them (new works based on the original).

According to Section 191 of the Copyright Act, a written sale contract stating an explicit assignment of copyright is required to transfer the copyright and be recognized as an owner. As per Section 142of the Act, only the owner of a work is permitted "to reproduce and distribute copies of it". Consequently, unless the buyer and seller specifically forbid the selling or copying of the NFT, such behaviour could not be protected. Therefore, the buyer cannot assert ownership of the item until the owner transfers their rights in writing. Nonetheless, the buyer's digital property cannot be unlawfully duplicated or distributed according to the Copyright Act.

It's important to take into account how copyright law applies to NFTs that are based on copyrighted works but were not generated by the legal copyright holder, even though the most, if not all, of them may be recently created works of art or produced by lawful copyright holders.A non-copyright owner may choose to create an NFT based on a work of art they find inspiring, or they may have a lawfully obtained reproduction of a copyrighted work. The production of a piece of art based on a copyrighted work may only be deemed non-infringing if it is covered by the fair use exception to copyright law or if the non-copyright owner has received a licence from the copyright owner. Therefore, the NFT may be infringing on the original work unless it has been changed to include a "new expression, meaning, or message" that would entitle it to the fair use principle.

Conclusion

It is difficult to understand from a copyright standpoint how minting an NFT, even without permission, could be considered copyright infringement. There will unavoidably be some practical interaction between NFTs and copyright, albeit the majority of disagreements will be resolved at the platform level. By promoting the existence of a place where artists may sell the tokens they have created, the market is already serving as a gatekeeper, reducing potential infringement. The NFT space may still see a significant number of copyright conflicts, though, due to the structure of the market and the motivation for high returns. It will be interesting to see how ownership claims and disputes play out in the early stages of a potentially revolutionary technology.

REFERENCES

1 The Copyright Act, 1957, §19.

2 The Copyright Act, 1957, §14.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.