NFTs And Copyright Laws In India: Everything You Need To Know

Introduction
Non-Fungible Tokens (NFTs) are automated assets that establish the worth and ownership of an underlying digital asset, for example, an authentic image, audio or video.

At present, they are an immensely speculative market for investments. They are susceptible to rapid drops and upturns and also cyber security threats. Thus, they are intensely volatile assets to own and maintain. In India, the legality and authenticity of such assets remain a primary concern.

What Is An NFT

The word NFT denotes "non-fungible token".
According to the Copyright Act of 1957- These tokens have digital assets representing the original work. Work/s includes music, images, audio, meme, and paintings in digital form.

However, there is no limitation on what commodities or physical assets can get converted and marketed as an NFT.

NFTs are secure by algorithms and metadata that are apt to get set differently from other similar existing NFTs. For instance, if a person acquires an NFT, then he is probably the only person in the world with that exclusive token on the blockchain.

The intellectual property owner should strategize and protect his original creation from possible offences. NFTs are different from fungible tokens like cryptocurrencies which are identical to each other and, thus, capable of business dealings. NFTs are bought and sold in the market like tangible goods. NFTs are unalterable and diverse. They cannot get divided or replaced.

An important aspect of blockchain technology is anonymity, but the possessorship gets proven by blockchain. The invariable record created by the blockchain gives evidence of possession of the NFT.

Creation And Ownership Of NFT

Creating an NFT of the Work requires minting the NFT. Minting is the process of creating a digital copy of the Work, which is basically tokenization. Tokenisation consists of uploading the NFT onto a marketplace or a digital platform. Then a token is issued for that which will further guarantee its authenticity.

NFTs are metadata of the Work which gets uploaded on the blockchain. They have built-in certification as a unique identification code which serves as proof of ownership for the purchaser of NFT. Platforms like Bored Ape, Super rare, Yacht Club and Open Sea provide a marketplace for the business transactions of NFTs.

The ownership of works on which NFTs get made is different from acquiring authorship of the NFT itself. One who mints the NFT has its possessorship. That means the owner of the NFT doesn't need to be the creator of that NFT too. Also, if a person mints an NFT of a work whose owner is someone else, it will get considered to be stealing. Therefore, it will lead to copyright infringement.

So, the one minting the NFT must have the authorization to do so: either he is the author of the work, or he should acquire the specific rights or copyright over the assets.

Issues Relating To NFTs In India

The most crucial and unclear area is the legal ramifications of NFT in India. Some typical legal doubts that arise concerning the sale and purchase of NFTs in India:

• Are NFTs legal in India?
• What is the legal efficacy of a smart contract?
• Whether they fall under the Copyright Act of 1957?

Read on further to get answers to all of these questions.

The Legality Of NFTs In India

India has not yet enacted any law controlling the NFT. The task of making robust NFT laws is currently in progress. Before understanding the legality of NFTs, we should understand the legal stand of cryptocurrencies in India.

The case of Internet and Mobile Association of India v. Reserve Bank of India (2020)-

The bench was seated by Justices Rohinton Fali Nariman, S. Ravindra Bhat, and V. Ramasubramanian.

RBI directed the banks to restrain from providing services or dealing with entities trading cryptocurrencies. The Court held these guidelines as unenforceable. The judges asserted that even though a vast amount of power is vested in RBI and it plays a vital role in the upliftment of the Indian economy, in this case, it has failed to show any damage that could get suffered by using digital currency.

Internet and Mobile Association of India won the case, and the judgement came in their favour. After this judgement, the businesses dealing with cryptocurrencies returned to their usual operations. Trading in cryptocurrencies got restored. The circular issued by RBI got struck down, and its guidelines were declared illegal. However, the judges did not state anything about the legality of cryptocurrencies, and no legislation got made to regulate them.

Since both crypto and NFTs are based on blockchain technology, and just like there is no legislation yet for cryptocurrencies, NFTs remain unregulated in India.

NFTs And Copyright Laws In India

NFTs are governed by primary copyright rules, as they are trickier to manage and monitor than other digital assets. NFTs are implausible to boast copyright protection as they only depict specific works on blockchain technology. They do not get considered to be original works or imitative works under intellectual property law. However, the artwork on which the NFT gets minted may enjoy copyright protection. The rights in these works are retained by the Author, as mentioned below:

Section 2(d) of the Copyright Act of 1957 defines the 'author' of a work as the one who has created it. He gets treated as the exclusive owner of the work unless the work gets shared by a co-author.

Section 14 of the Copyrights Act of 1957 gives sole rights of ownership to the owner, which also comprises the minting right of NFT of the work. Minting implies transforming a digital asset into an NFT supported by blockchain technology.

Legal Potency Of Smart Contract

Copyrights may get acquired for works like writings, music, paintings, films, drama, music and others according to the rule of the Copyright Act of 1957. But we cannot tell from the abovementioned whether an NFT would get designated as such works that can get copyrighted in India.

Section 19(1) of the Copyright Act of 1957 provides for an assignment to be only valid if it is in writing and signed by the assignor or his authorised agent. That makes it even more difficult for sellers to assign the copyrights of the works of an NFT to the purchaser through a smart contract since it is not permissible.

Hence, to transfer the copyrights of the Works of an NFT, the parties must get a license agreement that could grant the purchasers the rights over the works or NFT. They can also get a fully executed assignment for providing copyrights of the Works.

Copyright Issues Arising From NFTs

NFTs give access to digital assets but do not provide complete ownership of those assets merely because a person possesses such NFTs. Also, it is easier for an offender to copy the NFT due to its nature. That makes it convenient for a lawbreaker to use someone else's work.

Purchasers of NFTs cannot file for Copyright infringement as they are only the owners of NFTs, not the digital content linked with NFTs. The sale and purchase of NFTs between the NFT owners and purchasers occur through Smart contracts.

Just because the person owns the NFTs doesn't mean he has complete ownership of the digital content connected with the NFTs. They only have access to view or listen to the digital asset or content, and they cannot copy or display it publicly. That means anything for selling is a digital form of the primary asset and not the original content.

NFT deals are broadly not regulated either locally or internationally. Thus, NFTs open to an international market make it easier to forge matters that occur in the domain of intellectual property. The lack of laws governing NFTs causes the owner to seek remedies under copyright law through interlocutory demands or damages.

Minting NFTs are kept anonymous from the beginning because of the blockchain. That weakens the capacity to take legal measures, making it tough to take steps even though laws give security.

Future of NFTs in India

Up to now, NFTs have no legislation in India, but soon we may have rules and regulations concerning NFTs. It will inspire enthusiasts to deal actively in NFTs. NFTs will have a tremendous future in India with emerging laws. Undoubtedly, blockchain technology provides us with much cheaper, faster and more profitable trades across the globe.

More and more enthusiasts are realizing the importance of blockchain technology and are trusting this new way. The cost-effective feature of blockchain will aid future businesses in growing. Its popularity is at its peak, whether it's the common man or a celebrity.

Prominent entities have been launching their own NFT marketplaces or collections not long ago. For instance, Salman Khan has embarked on the market of NFTs with the launch of Bollycoin.

Once the Indian government legalize the NFTs and makes specific rules and regulations for them, the momentum of the NFT community will get a boost. The market for NFT is getting enlarged, and thus the digital economy will get advanced.

End-Line
NFTs are burgeoning an emerging market for enthusiasts and authors to vend their authorized digital assets in a manner that makes anonymous copies accessible to the broad public. NFTs have been a pioneer over the past year because they are advanced, appealing, and generate impressive price tags.

Being the most recent kind of crypto asset, NFTs are crucial for the future prospectus. However, due to no specific regulations and laws in India, they hold several risks.

It is crucial for sellers and buyers of NFTs to make sure that they understand the importance of copyright and authorization in their dealings. Also, anyone who desires to use an NFT considerably must seek legal advice. Digital content requires more diligence to copyright laws.

If Smart contracts could be understood easily by the buyers of the NFTs and the agreements get clear, then it would significantly lower the risks of copyright infringements. That would lay down the scope of using that specific NFT.

Additionally, basic terms and conditions must get specified to provide that the terms of use of the NFT get clearly outlined. As per Indian Copyright Law, it is advantageous to both parties to have forethought conditions for the usage of NFTs and the associated works, in written form, either by way of a licence agreement duly signed by both parties or an assignment agreement.

Technology advancements are developing rapidly, and transgressions cannot get prevented by the present laws. It is clear that there is an absence of specific laws regulating NFTs, especially in the case of Copyrights. Thus, the legalization of NFTs is required for better development of the NFT marketplace and dealings.

Also Read:

• Rise of NFT's in India: Legal Implications
• NFT's And Its Current Scenario In India
• The Doctrine of First Sale in Indian Copyright Law

Award Winning Article Is Written By: Ms.Riddhi Chopra & Mr.Himanshu Dubey

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