On April 20th, Hangzhou Internet Court held a hearing on a dispute that infringed on the right of information network communication of the digital work "Pang Hu Vaccine". The court held that the defendant failed to fulfill the duty of examination and care, which constituted infringement assistance, and it was necessary to immediately delete the work and compensate the plaintiff for the losses.

The NFT concept in this case, that is, heterogeneous token, is a digital product based on blockchain and smart contract, which is unique, indivisible, unchangeable and tradable.

It is understood that NFT, as a new commercial digital product, still has a certain gap in domestic NFT transaction compliance. So, what legal framework does the court use to decide cases? How to define the trading behavior of NFT digital works? What kind of legal responsibilities and obligations does NFT trading platform undertake? These questions have been answered in this case.

1

The court made it clear that NFT transactions are controlled by the right of information network communication.

Du Nan reporter learned that the plaintiff in this case is Shenzhen Qice Diechu Cultural and Creative Co., Ltd. (hereinafter referred to as "Qice Company") and the defendant is a technology company. The NFT involved in the case "Pang Hu Vaccination" comes from a series of works "I am not Pang Hu" by cartoonist Ma Liqian (pen name "Uncle Boerma").

It is reported that the works involved belong to the series "I am not Pang Hu", and the author released a complete image on February 6, 2020. On the same day, we went to copyright registration through the platform of copyright registration.

202 1 The author involved in the case signed a copyright licensing contract with Qice Company, stipulating that Qice Company can exclusively use the works involved in the case on a global scale, and is allowed to defend rights in the name of the author. The authorization period is from February 20 17 to February 2025.

According to the case disclosed by the Hangzhou Internet Court, it was originally told that on the platform of "Meta-Universe" operated by the defendant, a user put "Pang Hu Vaccine" NFT at a price of 899 yuan. This digital work is exactly the same as the illustration published by Ma in Weibo, with the watermark of the author Weibo in the lower right corner.

Shan Diqi, the plaintiff's lawyer and lawyer of Zhejiang Kenting Law Firm, told Southern Reporter that this is the first NFT infringement case in China.

According to Southern Reporter, NFT, as a new type of digital commodity, lacks clear and direct constraints on its trading process in the existing domestic laws and regulations.

For example, in this case, the defendant argued that because the law does not expressly stipulate that it is obliged to disclose the specific blockchain and node location of the NFT corresponding to the works involved and the contents of the smart contract applicable to the NFT involved.

Single analysis, under the existing legal framework, the "Electronic Commerce Law" has made certain requirements for the information disclosure of e-commerce platforms. In practice, it is also very common to require the platform to disclose the infringer's information for litigation. However, the defendant platform in this case has not been defined as an e-commerce platform, so the e-commerce law cannot be directly applied.

It can be seen that how to define the trading behavior of NFT digital works is the key to this case. In this case, the plaintiff filed an appeal on the grounds of infringement of information network communication right, demanding the defendant to stop the infringement and compensate the loss of 6,543,800 yuan.

In this regard, the Hangzhou Internet Court held that the casting and trading of NFT digital works includes three acts: copying, selling and information network dissemination. In addition, NFT digital works are provided by casting in an open internet environment, and the transaction object is not specific to the public. Every transaction is automatically executed through smart contracts, so the public can get NFT digital works at the selected time and place.

Therefore, the court ruled that NFT digital works transactions conform to the characteristics of information network communication behavior and are controlled by information network communication rights. In the end, the court ruled that the defendant's behavior constituted the right of information network communication to help infringement. The court ruled that the defendant immediately deleted the NFT works of "Pang Hu Inoculation" published on the platform involved, and compensated Qice Company for its economic losses and reasonable expenses totaling 4,000 yuan.

The duty of examination and care of NFT trading platform 2 should not be limited to "notification-deletion", nor should the duty of care be limited to "notification-deletion"

According to the Southern Reporter, unlike the related infringement cases of I am not Pang Hu in the past, the user casting NFT in this case has clearly constituted copyright infringement. Therefore, in this case, in addition to clarifying the trading behavior of NFT, another key is to judge whether the NFT trading platform has fulfilled the prescribed review and care obligations.

The plaintiff believes that once NFT digital works are cast, it is difficult to deal with them as easily as traditional Internet information. As a professional NFT platform, the defendant should preliminarily examine the ownership of NFT digital works published on its platform. The defendant not only failed to fulfill the audit obligation, but also charged a certain percentage of transaction fees.

The defendant argued that it was the user's personal behavior to upload the works involved on the platform. The company is a third-party platform, and it only has the obligation of post-audit. The platform party has entered the address black hole and fulfilled the obligation of notification-deletion.

In this regard, the Hangzhou Internet Court held through trial that the "Meta Universe" platform operated by a technology company of the defendant, as a trading service platform for NFT digital works, failed to fulfill its duty of examination and attention and was subjectively at fault. Regarding the measures to stop infringement, Hangzhou Internet Court proposed that infringing NFT digital works can be disconnected in the blockchain and enter the address black hole to stop infringement.

It is worth noting that, judging from the trial results of the court, there are differences between the defendant and the court in their duty of care in reviewing the NFT trading platform.

Southern Reporter looked up the relevant laws and regulations and found that Article 1 197 of the Civil Code and Article 23 of the Regulations on the Protection of the Right of Network Information Dissemination clearly defined the tort liability of network service providers. If the platform fails to take necessary measures when it knows or should know that the works or users are infringing, it shall bear the corresponding tort liability.

In this case, Hangzhou Internet Court judged the censorship obligation of the platform according to the trading mode and technical characteristics of NFT digital works, and then from the perspective of the platform, with its control ability and profit model.

After verification by the court, the platform involved has the corresponding audit ability and conditions, but it has not increased its management and control costs. Secondly, because the platforms involved can directly obtain economic benefits in NFT digital works. Therefore, it should have a higher duty of care.

According to the Southern Reporter, when casting NFT works on the platform involved, users need to buy "fuel" in advance as the cost of casting NFT works. In addition, every time a work is traded (including first sale and resale), the sales platform will charge a certain percentage of commission and "fuel fee" to users who invest in NFT.

After hearing the case, Hangzhou Internet Court held that the defendant should not only fulfill the responsibility of the general network service provider, but also establish a set of intellectual property review mechanism to preliminarily review the copyright of NFT works traded on the platform, and should also take timely measures to stop the infringement afterwards.

In practice, it is pointed out that there is no completely consistent mechanical standard on whether to fulfill the duty of examination, which needs to be comprehensively considered according to the nature of the platform, the consequences of infringement, profit model, technological development and other factors.

Shan Diqi analyzed, "Take the short video infringement case that was widely concerned some time ago as an example. In some cases, the court held that with the development of technology and the nature of short video infringement, the traditional "notification-deletion" is not enough to curb the platform infringement, and the platform also has the technical ability to conduct infringement review before video uploading. Therefore, the court held that the duty of care of the platform can no longer be limited to "notification-deletion". "

"This case is the same. According to the four aspects of transaction mode, technology adoption, control ability and profit model, the court held that the defendant's platform obligation should not be limited to' notification-deletion'. " She added.