Legal issues related to casting NFT based on physical art works

The digitization of traditional art combined with NFT has set off an upsurge in China. There are many legal issues in the process of casting NFT based on physical art works. The author combines the recent practical cases and relevant legal regulations to share the legal issues involved as follows, for digital Collection trading platform, reference for digital collection lovers.

One of the legislative purposes of my country's "Copyright Law" is to protect the author's "copyright" and "rights" related to copyright. The carrier of copyright and rights is the work itself.

According to Article 3 of my country's "Copyright Law", the so-called "works" refer to intellectual achievements that are original and can be expressed in a certain form in the fields of literature, art and science. The scope of works includes written works, oral works, fine arts, architectural works, etc.

According to my country's "Copyright Law Implementation Regulations", the so-called works of art refer to paintings, calligraphy, sculptures, etc., which are two-dimensional or three-dimensional plastic art works with aesthetic significance composed of lines, colors or other methods.

According to the provisions of Article 2 of the "Copyright Law" of our country, the works of Chinese citizens, legal persons or unincorporated organizations, whether published or not, enjoy copyright in accordance with this Law.

Article 6 of the "Regulations for the Implementation of the Copyright Law" stipulates that the copyright shall be generated from the date when the creation of the work is completed. That is to say, the author of the artistic work enjoys the copyright after the creation is completed.

The above-mentioned copyrights, including the "moral rights of copyrights" and "property rights of copyrights", are stipulated in Article 10 of the "Copyright Law". Among them, "author's personal rights" refer to the rights closely related to personal interests enjoyed by the author, including the right to publish, authorship, modification and protection of the integrity of the work.

"Copyright property rights" mainly refers to the various powers enjoyed by copyright owners to obtain benefits from works, including twelve specific rights. That is, reproduction rights, distribution rights, rental rights, exhibition rights, performance rights, screening rights, broadcasting rights, information network dissemination rights, filming rights, adaptation rights, translation rights, and compilation rights.

The important reason for this distinction is that there are obvious differences between the personal rights and property rights of copyright in terms of the specific content of the rights, the term of protection, and whether they can be transferred.

Moral rights are usually related to the author's spiritual interests and personality interests, and are exclusive to the author himself, and the protection has no time limit, and generally cannot be transferred or inherited.

The property right in copyright refers to the right of the obligee to benefit from the work, and can authorize others to use it; the protection of the property right of a natural person's work has a time limit, that is, the author's life and 50 years after his death.

That is, the author of a physical art work obtains the copyright after the creation of the work is completed.

Usually, the process of casting NFT based on physical art works is as follows:

First, digital collection of physical art works, that is, through the use of modern computer technology (ultra-high-precision photography and image processing technology, etc.), to create digital avatars and digital twins of physical art works, which are essentially digital copies of physical art works , and its form of expression is generally "picture".

Second, convert the digital copy of the above-mentioned physical art works into a specific hash value through the hash algorithm, and record the relevant information such as the hash value on the chain using blockchain technology, complete the casting of NFT, and carry out sales behavior.

From the perspective of the NFT casting process:

First of all, there is an "act of duplication" of physical art works.

Referring to the legislative interpretation of the Copyright Law, the so-called reproduction right refers to the right to make one or more copies of a work. The reproduction right is the most basic function in the property use right of copyright. Simply put, the right of reproduction is the right to make tangible copies of a work. It is obvious that NFT is not a tangible copy in the legal sense.

Based on theoretical discussions, some people believe that the elements of copying behavior roughly include:

a. The reproduction of the act of copying should be able to basically present the content reflected by the original;
b. The content of the original that can be presented by the copy can be effectively distinguished from the content of the newly added expression;
c. The copy should be relatively stable.

In addition, the "Berne Convention for the Protection of Literary and Artistic Works" also defines the right of reproduction, that is, "reproduction by any means and in any form", and reproduction should not be limited to flat reproduction in a narrow sense.

The transformation of physical art works from physical objects to digital forms is the transformation from material form to digital form, including the act of copying.

Secondly, does the NFTization of physical art works involve the issue of distribution rights?

The "Copyright Law" defines "distribution rights" as the right to provide the original or copies of works to the public by way of sale or donation.

Referring to legislative materials, the constituent elements of issuance mainly include three aspects:

a. The original or copy of the work to be provided must be physically tangible in principle.
b. The method of provision is clearly limited to "sale or gift", that is, to transfer the ownership of the physical carrier of the original or copy of the work to an unspecified public. Rental and lending do not belong to the scope of distribution stipulated in the Copyright Law.
c. The object of distribution must be an unspecified public, that is, only the behavior of selling or giving the original or copy of the work to the unspecified public constitutes distribution.

The original intention of the legislation requires that issuance be limited to physical tangible objects in principle. NFT obviously does not meet this requirement. This requirement also distinguishes distribution rights from information network dissemination, performance, broadcasting and other behaviors.

Finally, the casting and sales of NFT involve the issue of information network dissemination rights.

The "Copyright Law" defines "information network dissemination right" as the right to provide the public with wired or wireless means, so that the public can obtain the right of works at the time and place they choose.

From the perspective of legislative history, when the 24th meeting of the Standing Committee of the Ninth National People's Congress made a decision on amending the Copyright Law on October 27, 2001, it clearly stipulated the author's right to disseminate information on the network. On February 26, 2010, the thirteenth meeting of the Standing Committee of the Eleventh National People's Congress made a decision on amending the Copyright Law and continued this provision.

The current copyright law defines the right of information network dissemination directly from the provisions of the "World Intellectual Property Organization Copyright Convention".

Article 8 of the Convention states that, without prejudice to the relevant provisions of the Berne Convention for the Protection of Literary and Artistic Works, "authors of literary and artistic works shall enjoy the exclusive right to authorize the transmission of their works to Public communication consists of making his works available to members of the public at places and times of their own choosing.

The above definition does not clarify what is an "information network".

The "Provisions of the Supreme People's Court Concerning Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Infringing the Right to Disseminate Information on Information Networks" (Fa Shi [2012] No. 20) (amended in 2020, but the The definition has not been changed) Article 2, the information network referred to in these regulations includes the computer Internet, radio and television network, fixed communication network, mobile communication network, etc. Internet and other information networks, as well as local area networks open to the public.

The process of NFT casting and selling involves dissemination on the information network, which should be listed above.

It should be noted that in the understanding and application of the "Provisions on Several Issues Concerning the Application of Law in the Trial of Civil Dispute Cases Infringing the Right of Information Network Communication", the information network communication behavior is divided into "works provision behavior" and "network service provision behavior". The reason for this distinction lies in the characteristics of information network dissemination behavior in the network environment.

Based on the above distinction, there are direct infringement liability and indirect infringement liability. The direct infringement liability corresponds to the act of providing works, while the indirect infringement liability corresponds to the act of providing network services. (Digital collection distribution platforms should pay special attention.)

Therefore, the judicial interpretation stipulates that without permission, network users and network service providers place works, performances, and audio and video recordings on the information network for which the obligee has the right to disseminate information on the network, so that the public can If the information and location are obtained by downloading, browsing or other means, it is an act of providing content, which directly violates the rights holder's right of information network dissemination.

The Hangzhou Internet Court held that in its NFT information network dissemination right infringement case, the purpose of copying in casting NFT is to provide works to the public through the Internet, so the damage caused by the copying has been transferred to the obligee by the information network dissemination right. There is no need to evaluate the damage caused by the damage caused by it, so the act of trading NFT through the digital collection platform infringes the original author's right of information network dissemination.

In practice, when the digital collection trading platform cooperates with partners to cast and issue NFT, there is a type of situation that establishes cooperation with the holder of physical art works to obtain the so-called "authorization" or "permission" to cast and issue NFT, but this includes There are huge legal risks.

Article 20 of the "Copyright Law" stipulates that the transfer of the original ownership of the work does not change the ownership of the copyright of the work, but the exhibition rights of the original works of art and photography are enjoyed by the original owner. The author transfers the original ownership of the unpublished art and photographic works to others, and the transferee's exhibition of the original does not constitute a violation of the author's right of publication.

That is to say, the ownership of original works such as fine arts and copyright are separated.

The ownership of the work and the copyright of the work are not the same concept. The copyright of works such as fine arts is generated on the date of completion of the work, and its content includes personal rights such as the right of publication and signature, and property rights such as the right of reproduction and the right of information network dissemination.

The ownership of works is the physical carrier for the existence of works such as fine arts, which can be transferred between different subjects through sales, donations, etc.

That is to say, the ownership of original works such as fine arts and copyright are two completely different forms of rights. The transfer of the ownership of the original work is not regarded as the transfer of the copyright of the work. Obtaining the ownership of the original work does not mean obtaining the copyright of the work.

In addition, the second paragraph of Article 20 of the Copyright Law is an exception to the separation of ownership and copyright. That is to say, the right to exhibit the original works of art is enjoyed by the original owner.

This is because giving the owner of a work of art the right to exhibit the original will generally not harm the rights and interests of the author, and is conducive to the appreciation of the work of art by the society. Of course, the right to exhibit the original works of the owner is limited to works of art. Generally speaking, the right to exhibit is only important for works of art.

In view of the above, when the digital collection trading platform establishes cooperation with the holder of the physical art work (not the original author) to jointly issue the digital collection, it should pay special attention to whether the owner has the copyright property right of the information network dissemination right, otherwise it will face the legal risk of infringement.When the digital collection trading platform casts and sells NFTs based on physical art works, it should obtain the rights of reproduction of physical art works, information network dissemination rights and other rights in accordance with the law.

In fact, for NFT, in addition to the separation of ownership and copyright (which may also include other intellectual property rights), there is also the separation of the original physical work from the digital copy and the separation of the underlying work from the NFT. For NFT investors and collectors, purchasing an NFT does not make the purchaser the owner of any specific media file that the NFT may represent or point to. These issues will be discussed in detail in future articles.