CHALLENGES AND CRAFTING SOLUTIONS IN INDIA’S ARTISTIC NFT RENAISSANCE

In the kaleidoscopic landscape of India’s NFT Art Revolution, where pixels meet profits and blockchain transforms the canvas. In this ever-changing context, the battle between non- fungible tokens (NFTs) and copyright law has become a battleground for innovation and legal complexities. The study delves into a maze of legal complexities, combining doctrinal insights and wisdom found in current literature. It provides a clear picture of NFTs’ transformational power, challenging existing copyright standards and stretching the frontiers of intellectual property law. In the furnace of copyright problems, the study encounters the tempests of ownership ambiguity, the torrent of copyright infringement, and the lightning strikes of smart contract complexity. It’s a journey into uncharted terrain, where traditional regulation collides with the cutting-edge realm of blockchain-based art ownership. The research does more than just diagnose; it also prescribes. It advocates for regulatory clarity, standardized smart contracts, and diligent third-party oversight as a way to navigate the turbulent waters of India’s Artistic NFT Renaissance. This work serves as a call to action for artists, legislators, and enthusiasts alike to stand steady in the face of the digital storm, building a route toward the harmonious coexistence of creativity and copyright in the NFT era. In the throbbing focus of India’s NFT Art Revolution, this research not only navigates but also leads, promising a crescendo where copyrights and crypto can converge, releasing the full potential of this avant- garde artistic evolution. Welcome to the future, where the paintbrush is digital, the canvas is cryptocurrency, and copyright reigns supreme.

KEYWORDS

NFT, Ownership, Copyright Act, 1957, Copyright Infringement

INTRODUCTION

The rise of digital technology has drastically altered the ways in which we produce, consume, and trade products and services. A game-changer in recent years has been the introduction of NFTs, or non-fungible tokens. It seems that blockchain and cryptocurrencies are taking a back

seat to ‘NFTs’. The majority of goods can be classified as fungible or non-fungible. Fungible items, such as currency, gold, etc, are de facto reproducible and interchangeable. In the case of a collection, one item may be exchanged for another. In the same way that something non- fungible is unique and cannot be replicated, a video file containing a particular clip cannot be traded for another. The Mona Lisa and the Statue of Unity are examples of non-fungible commodities. Using tokens, physical or digital labour represented in a digital format can be stored on a blockchain with the help of tokens¹.

The advent of NFTs has brought a concomitant rise in novel copyright concerns. This is mostly because most digital assets that are tokenized as non-fungible tokens (NFTs) consist of artworks or music recordings, both of which are susceptible to copyright law. This has been aggravated by allegations of copyright infringement made by creators of copyrightable works against NFT vendors. On one hand, NFTs have the potential to profoundly transform the enforcement of copyright law. Conversely, the current copyright legislation appears inadequate in addressing specific intellectual property challenges NFTs raise. Therefore, it is crucial to investigate the interaction between copyright and NFTs to understand their reciprocal influence.

METHODOLOGY

This work primarily focuses on doctrinal research, a qualitative technique that involves the analysis of secondary data. This research approach emphasizes the utilization of existing legal texts, statutes, judicial decisions, and scholarly discourse, which includes the study of books, articles, journals, and commentaries, to obtain thorough doctrinal insights. The study will involve an examination of existing literature about the analysis of NFTs and its nexus with copyright law.

REVIEW OF LITERATURE

Avani Laad, Dhivya S. & Shweta Yadav, Non-Fungible Tokens and Copyright: An Intersection, 4 INDIAN J.L. & LEGAL RSCH. 1 (2022).

¹ Sharma, R. (no date) Non-fungible token (NFT): What it means and how it works, Investopedia. Available at: https://www.investopedia.com/non-fungible-tokens-nft-5115211 (Accessed: 11 January 2024).

This paper conducts a comprehensive analysis of the varied terrain to examine and assess NFTs in a specific and significant legal context – copyright law. The author emphasizes the ownership of NFTs concerning the possession of a copyright in the initial section. The text provides a comprehensive analysis of the implications of selling NFTs and the significance of the first sale doctrine. The work further addresses issues related to copyright infringement and copyfraud. The research investigates the utilization of smart contracts as a resolution to the extensively addressed difficulties. The final part of the research is dedicated to exploring the potential of NFTs in mitigating counterfeiting. The study has appropriately emphasized the significance of legislation constantly evolving in response to technical improvements, enabling it to effectively adapt to the NFT regime and regulate it efficiently, thus, helping me set an agenda for my research.

K. Parikshith Arvindan, Non-Fungible Tokens – An Overlap between Blockchain Technology and Intellectual Property Rights, 1 JUS CORPUS L.J. 357 (2021).

The paper examines the overlapping of NFTs with intellectual property rights, with a specific emphasis on copyright, trademarks, and personality rights. The text explores the increase in NFT sales and the subsequent monetization of intellectual property rights, with a focus on the legal inquiries and difficulties that arise from the utilization of NFTs. The document also discusses the interaction between NFTs and personality rights, emphasizing the necessity of regulation in non-commercial contexts. Furthermore, it scrutinizes the implementation of trademark protection measures in India and the likelihood of unauthorized use of NFTs. The study predicts the rise of new uses for NFTs, highlighting the importance of clear legal guidelines and regulations to address the changing trends in digital assets, offering valuable insights for further research in this area.

Karun Roy, Harisankar Roy & R. Gowri Parvathy, The Invisible Strings of NFTs and IP, 5 INT’l J.L. MGMT. & HUMAN. 34 (2022).

This article examines the revolutionary concept of NFTs as digital assets, thoroughly investigating their distinctive characteristics and legal ramifications. The discussion has focused on the rise of semi-fungible tokens, particularly within the context of blockchain-based games. The analysis examines the legal dimensions of NFT ownership, specifically focusing

on the involvement of smart contracts, and thoroughly examines their influence on intellectual property rights, with a particular emphasis on concerns related to copyright and trademark violation. The article emphasizes the necessity of thorough talks and possible enhancements to the platform to adapt to the changing environment of NFTs and protect intellectual property rights.

Bhavana Tewari & Mahek Panjwani, NFT and Copyright Law in India: An Analysis of the Relationship between Ownership and Intellectual Property, 5 INDIAN J.L. & LEGAL RSCH. 1 (2023).

The study delves into the complex interplay between NFTs and copyright legislation, with a specific emphasis on how they influence the production, consumption, and trade of digital assets. Examining the growing popularity in art, music, and gaming sectors, the analysis explores the potential legal consequences of NFTs in India, emphasizing the need for a dedicated legal structure. The study evaluates the benefits and drawbacks of NFTs in terms of copyright protection, highlighting their clear verification of ownership while acknowledging existing legal loopholes. The text examines potential alternatives, including the implementation of digital watermarks and the fostering of international collaborations. Ultimately, the research supports the need for customized legislation in India to safeguard the rights of NFT owners and authors. It offers a thorough examination of the dynamic connection between NFTs and copyright laws.

NON-FUNGIBLE TOKEN (NFTs)

In 2014, the concept of a non-fungible token (NFT) was first proposed as a way for artists to monetize their digital works while maintaining ownership of such creations. Digital tokens called NFTs denote ownership of certain versions or copies of digital assets like music, movies, or images². It provides a connection between the digital realm and the physical realm through the utilization of tangible assets that possess inherent value. NFTs empower artists with authority over their position, as the technology is purposefully created for creators to digitally sell their work. Each NFT encapsulates unique data, such as the identity of the owner and the

² Non-fungible token (2024) Wikipedia. Available at: https://en.wikipedia.org/wiki/Non-fungible_token (Accessed: 11 January 2024).

seller of the digital asset. This distinctiveness ensures that NFTs can be easily authenticated, as it is practically hard to counterfeit such a certification. The unique ID stores the information about the pixels of the digital artwork and the hyperlink to the location where the artwork is stored.³ NFT marketplaces facilitate the process of artists uploading their artwork, sometimes referred to as ‘minting’. Tokenization is the process of creating a digital representation of the original work, which is commonly referred to as minting the NFT. By minting the artwork, artists are provided with a token of authenticity. To tokenize something, it must be initially uploaded to a certain website or marketplace, where a token is then granted to ensure its authenticity. The token ID, an integer generated upon token creation, serves as the primary foundational element of a non-fungible token (NFT). The contract address, a blockchain address visible globally through a blockchain scanner, serves as the second essential component. The token is unique because it is the only one in the world with the specific combination of a token ID and contract address. Subsequently, the artists/creators bear the cost of the ‘gas fee’ to upload their digital art for sale as NFT. The First 5000 Days is a non-fungible token (NFT) artwork created by renowned digital artist Mike Winkelmann, popularly known as Beeple. It is a collection of 5,000 digital works that he produced daily from May 1, 2007, to January 7, 2021. This artwork was sold for a staggering sum of $69.3 million.⁴

NFTS AND IP RIGHTS

Intellectual property includes mental inventions such as names, designs, symbols, and literary/artistic works. Creative property rights also known as Intellectual Property Rights regulate and preserve the perks of creative labour. Patent, copyright, and trademark are three common categories of legally protected intellectual property. Patent law pertains to inventions that have some form of public value; copyright law applies to literary and creative works such as books and music; and trademark law is typically linked with trade and involves the process of “marking” one’s goods or services to differentiate them from others. NFTs can be owned by organizations with consumer-facing trademarks and logos, writers, singers, game developers,

³ Penner, M., Ellbogen, E. and Ellbogen, M.P. and E. (2023) NFTs, intellectual property and art: An overview in three parts (part 1 of 3), The Angle | Fasken IP. Available at: https://ip.fasken.com/nfts-intellectual-property- and-art-an-overview-in-three-parts/ (Accessed: 12 January 2024).

⁴ Martet, C. (2023) Canvassing the masterpiece: Beeple’s, Rise Art. Available at: https://www.riseart.com/article/2700/canvassing-the-masterpiece-beeple-s-everydays-the-first-5000-days (Accessed: 12 January 2024).

and artists. These owners’ rights may be violated if they share their assets with others and create an NFT. NFTs do not usually include IP rights. Owning an NFT is not the same as owning the underlying intellectual property or assets contained inside it. Owning an NFT is simply a display on a shelf. While intellectual property is protected by law, enforcing these regulations remains a challenge in the arena of blockchain-based inventions, where NFTs are occasionally generated from stolen art and disputes over creative ownership rights have resulted in ambiguous resolutions.

OWNERSHIP OF NFTS VIS-A-VIS OWNERSHIP OF COPYRIGHT

A lot of people have a muddled and incorrect idea of what it means to “own” an NFT. The vast majority of NFTs at present are works of art. Creation, nevertheless, is distinct from representation. The increasing prevalence of NFT has prompted the principal quest as to whether the purchaser of NFT possesses copyright solely in the digital replica of the artwork or also in the original work itself. In this context, “ownership” means the legal ability to own, transfer, and utilize the blockchain’s metadata. A copyright is granted to any original work of literature, art, or music under copyright laws.⁵ If the NFT’s underlying asset is protected by copyright, an issue arises regarding whether the sale of the NFT would also involve the transfer of the copyright for the underlying asset. There is often no connection between ownership and asset, despite assertions to the contrary made by some sites, such as the idea that having a token is similar to owning an actual work of art. There is an incorrect association between the token and the item’s ownership.

According to Section 2(d) of the Copyright Act of 1957⁶, the person who created a work is its “author.” Until a co-author shares the work, he is regarded as the exclusive proprietor of it. According to Section 17 of the Copyright Act 1957⁷, the person who creates a work that is eligible for copyright is considered to be the first owner of the copyright for that work. Therefore, if we assume that the person selling an NFT is also the author of the work, the original copyright will belong to that author. Nevertheless, when an author of a digital artwork sells an NFT to a purchaser, a concern emerges over the ownership of the copyright. Specifically, it is uncertain whether the copyright will remain with the author or be passed to

⁵ Copyright Act, 1957, § 13, No. 14, Acts of Parliament, 1957 (India).

⁶ Copyright Act, 1957, § 2, No. 14, Acts of Parliament, 1957 (India).

⁷ Copyright Act, 1957, § 17, No. 14, Acts of Parliament, 1957 (India).

the buyer. Regarding this subject, it has been suggested that the transfer or sale of an NFT does not automatically result in the transfer of the copyright for the underlying asset. The purchaser is simply granted the right to display the underlying asset, which is owned by the author. Section 14 of the Copyright Act⁸ grants the author a set of economic rights that can be exercised concerning the copyright. In the case of an NFT, the author of the digital asset retains the copyright and ownership of the asset. The purchaser of the NFT only has the right to display the NFT, unless the smart contract specifically states that the economic copyrights of the digital asset are transferred. Hence, the purchaser is unable to assert ownership of the item unless the owner explicitly transfers their rights. Nevertheless, the purchaser’s digital item will be safeguarded by the Copyright Act against unauthorized duplication or distribution.⁹ To transfer copyright and establish ownership, a documented sales contract explicitly assigning copyright must be in place, as stated in Section 19 of the Copyright Act of 1957.¹⁰

COPYRIGHT INFRINGEMENT

NFTs and copyright are inextricably linked since the sale and ownership of an NFT frequently involves the transfer and use of digital works protected by law. Copyright infringement typically occurs when artists or authors use work owned by someone else. This involves copying the entire work or a portion of it without their permission.¹¹ It is known as the primary infringement. When buying an NFT, the customer usually gets restricted permission to use, display, or resale the digital work, subject to the terms and limitations stated by the artist. The junction of NFTs and copyright can lead to potential legal concerns, such as infringement, when unauthorised parties make, sell, or buy NFTs related to works without the owner’s permission. This can happen when someone creates an NFT of someone else’s artwork, music, or other copyrighted content and sells it without the required permission.

⁸ Copyright Act, 1957, § 14, No. 14, Acts of Parliament, 1957 (India).

⁹ Kataria, P. (2022) NFTs in India: Legal implications, BusinessLine. Available at: https://www.thehindubusinessline.com/business-laws/nfts-in-india-legal-implications/article65636218.ece (Accessed: 14 January 2024).

¹⁰ Copyright Act, 1957, § 19, No. 14, Acts of Parliament, 1957 (India).

¹¹ Kenton, W. (no date) Copyright infringement: Definition, meaning, example and criteria, Investopedia. Available at: https://www.investopedia.com/terms/c/copyright- infringement.asp#:~:text=Copyright%20infringement%20is%20the%20use,breached%20by%20a%20third%20 party. (Accessed: 15 January 2024).

Another issue arises when people copy a third party’s work without obtaining IP rights. It would not be a problem if the copyright holder created the NFT themselves. Currently, the main concern is digital infringement. In addition to illegal copying of digital artwork, there is a growing worry of violators selling NFTs of pirated material. The decentralized, encrypted, and anonymous nature of blockchain technology makes it difficult to identify copyright holders. Artists typically share their work on social media rather than minting it. Some individuals download art and sell it on the NFT marketplace without permission from the creator or the art’s intellectual property rights. Another common occurrence is when individuals make art inspired by television series or motion pictures. Copyright law aims to encourage creativity and innovation by providing exclusive rights to holders, while also ensuring that it does not hinder public interest. The ‘fair dealing’ defence is widely used to defend against copyright infringement allegations.¹²

Numerous examples of copyright infringement have occurred in the NFT market, with artists’ works being tokenized and sold as NFTs without their approval or knowledge. This poses legal and ethical concerns, as the unlawful sale of NFTs violates the copyright holder’s exclusive rights. Artists and creators can safeguard their creations from copyright infringement in the NFT realm by registering them, adding watermarks, or utilizing digital rights management (DRM) techniques.¹³ If copyright infringement happens in the NFT market, the copyright holder may file a lawsuit against the infringer, seeking monetary damages, injunctive relief, or the removal of the infringing NFT from the market.

CHALLENGES

• Lack of clarity regarding existing copyright legislation: Current copyright rules in India are unclear and do not expressly address the issue of NFTs. Determining how existing copyright restrictions apply to NFTs may be tricky. Copyright holders may use copyright and contract law principles to protect their rights.

¹² by Surana, P. and Surana (no date) Doctrine of fair dealing in Indian copyright law, SURANA SURANA. Available at: https://suranaandsurana.com/2022/09/02/doctrine-of-fair-dealing-in-indian-copyright-law/ (Accessed: 15 January 2024).

¹³ (No date a) Blockchain for Digital Rights Management – ResearchGate. Available at: https://www.researchgate.net/publication/326567112_Blockchain_for_digital_rights_management (Accessed: 14 January 2024).

• Challenges in establishing ownership: NFTs use blockchain technology to provide a secure and tamper-proof record of ownership, making it difficult to establish ownership. However, copyright holders may struggle to prove ownership of their works when using NFTs. The original originator of a work may not be the same person who created the NFT, and several copies may circulate as NFTs.
• Challenge posed by enforcement: Compliance with copyright regulations in the context of NFTs can be challenging. Since NFTs can be purchased and sold anonymously, identifying the parties involved in the transaction is challenging.¹⁴ Additionally, it is challenging to enforce cross-border copyright regulations due to the global reach of NFT production and sale.
• Absence of Regulation Regarding Secondary Market Transactions: After an NFT has been sold, it becomes susceptible to multiple resales on the secondary market without the copyright proprietors’ consent. This lack of control over transactions on the secondary market may make it challenging for copyright holders to prohibit unauthorized use of their works.
• Smart Contracts and Licensing: Smart contracts govern NFTs, which frequently operate on blockchain platforms. There may be provisions in these contracts concerning the licensing and utilization of the corresponding digital content. There may be scrutiny regarding the legal enforceability of the smart contracts in question and their compatibility with current copyright legislation.

SUGGESTIONS

• The legislation ought to ascertain the ownership of NFTs, as well as govern the transfer of ownership and copyright protection for these digital assets. In some way, it will expose the improper use and decrease the frequency of infringement. Additionally, it will establish the requirement for the creator to be compensated for their infringed work.
• Specific criteria for the creation of NFTs, including copyright ownership and protection, should be developed. This will help to avoid the spread of plagiarism and ensure that artists are properly rewarded for their efforts.

¹⁴ (No date) KNOW YOUR NFTS: Compliance and enforcement challenges in trading of non … Available at: https://www.researchgate.net/publication/376085478_KNOW_YOUR_NFTS_COMPLIANCE_AND_ENFOR CEMENT_CHALLENGES_IN_TRADING_OF_NON-FUNGIBLE_TOKENS (Accessed: 14 January 2024).

• Create and promote common smart contract templates for NFT transactions. Clearly define the terms of use, license agreements, and any copyright-related information in these contracts. This can increase transparency and eliminate legal ambiguity.
• A third party may regulate the issue and display of unauthorized NFTs on markets. To protect customers, it is crucial to inspect the validity of minted works. An administrative agency could take on this responsibility. Additionally, an online database of certified work might be created. Copyright registration is optional for intellectual property owners, however it can help build this database.

CONCLUSION

The rise of NFTs has transformed the art and digital asset scene, giving artists unprecedented ways to monetise their work. The unique blend of blockchain technology and digital representation poses serious concerns about ownership, copyright, and enforcement. As technology advances, proactive legal measures and industry-wide collaboration will be critical in crafting a future in which NFTs’ inventive potential is seamlessly integrated with the protection of intellectual property rights. In light of the problems, the legal landscape has to evolve and adapt. Clear regulation is required to manage the ownership, transfer, and copyright protection of NFTs. As the world navigates the uncharted waters of NFTs, a fine line must be drawn between innovation and regulation. Our proposed solutions aim not just to protect authors’ rights, but also to build a dynamic digital marketplace in which authenticity, fairness, and creative expression can coexist together.