China’s first non-fungible token (NFT) legal case indicates how serious courts in the country take their intellectual property (IP) supervision roles for existing platform operators to note, a Beijing-based tech media lawyer has pointed out in a perspective on the matter. 

Justina Zhang, the Senior Partner at TransAsia Lawyers, analyzed the suit filed by a Shenzhen-based NFT platform called Qice against another NFT platform, Bigverse which operates a marketplace called NFTCN, for supposedly violating its licensed right of dissemination over the internet.

Qice’s exclusively copyrighted “Fat Tiger ” series of digital images were found reproducible on Bigverse’s platform having been created and posted by a user. In late April, a court in China’s eastern city of Hangzhou found Bigverse guilty and ordered it to pay Qice a statutory compensation of RMB 4,000 (about US$570) and to desist from further circulating the work. 

Zhang assessed that the court’s ruling is focused on Bigverse’s obligations as the platform operator the responsibility to prevent any right violation. She says the court determined that Bigverse could have controlled the transaction process in question which it profited from even though it should have known that the work was directly copied. 

“In China, content platform operators are liable for certain copyright and other intellectual property right violations that occur on their platforms,” she states in her post on a global legal practitioners’ alliance platform. “Like other platforms, NFT platforms are expected to take effective measures to fulfill the duty of care and prevent intellectual property infringements.” 

She added that expectations may even be higher in the case of NFTs given their traceability and identification as sellable objects.

The resultant outcome of the matter is the court blaming Bigverse for aiding the NFT creator’s violation of Qice’s right on its operated platform hence the verdict. She also notes that another case against the user for infringement and illegal profit is still possible in the future since Qice requested Bigverse to disclose details of the NFT creator. 

NFTs are known as digital collectibles in China (or Decentralized Digital Certificate (DDC) as is the case with the Blockchain-based Service Network (BSN)) to keep interest in the industry growing considering that the Chinese market seeks to set a clear line between the technology and its link with cryptocurrencies which have been banned in the country.

Unlike elsewhere, the technologies behind China’s NFT market are connected to existing large Chinese companies such as AliBaba’s Antchain and therefore allow transactions only in fiat currency (yuan or digital yuan) with no cryptocurrencies. This is to avoid speculation and somewhat restrict access to collectibles within the China market. 

Two parallel ownership regimes have since developed for NFTs along the line. There is the Chinese model with collectibles not being sellable in the secondary market and the global versions which are accessible in decentralized markets with no control or government oversight. 

With China mainland’s NFT market projected to grow by 150% to reach US$4.64 billion by 2026, some parts of the country have been showing their readiness to incorporate and manage NFT within the blockchain technology and IP fold. This is the case in Sichuan where NFTs are considered to have opened up new creative possibilities for artists and increase their engagement level with other stakeholders.