How to achieve compliance with NFT collection sales?

Recently, the domestic NFT market has become more and more active, and many well-known companies have stopped selling photography, online variety show audio (audiovisual works) and song NFTs: Well-known company A sells NFTs of multiple paintings through its e-commerce platform, and A number of skins for NFT digital photography works are sold in limited quantities, and these skins can be displayed as the background of payment scenes; B has sold a limited number of audio NFTs of a well-known humanistic talk show; well-known music platform C has announced that it will sell a commemorative version of a song in limited quantities NFT digital collections, and the reservation channel has been opened.

Sister Sa’s team has previously analyzed the legal risks of relevant entities in multiple different application scenarios of NFT in many articles. Today, in response to several existing attempts in China, let’s talk about the legal risks of the NFT digital work sales platform (NFT casting). Objects such as art works, photographic works, musical works, audio-visual works, etc.).

Civil legal risk

Copyright infringement risk

Article 3 of the Copyright Law stipulates that “the work referred to in this law refers to the original intellectual achievements in the fields of literature, art, and science that can be expressed in a certain form, including: written works; oral works; music, drama , Quyi, dance, acrobatic art works; fine arts, architectural works; photographic works; audio-visual works; engineering design drawings, product design drawings, maps, schematic diagrams and other graphic works and model works; computer software; other intellectual achievements that meet the characteristics of the work.” Accordingly, the corresponding skins, songs, and talk show audio in a certain payment code skin NFT, a certain song commemorative vinyl NFT, and an Internet talk show audio NFT are all works , and the types of works are art works/photographic works, music, audio-visual works , Its copyright owner enjoys the corresponding signature rights, distribution rights, exhibition rights, reproduction rights, and information network dissemination rights that the copyright owner should have .

If a digital work NFT seller copies, distributes, and disseminates the corresponding work through the Internet platform without the permission of the copyright owner, it may infringe the corresponding copyright of the copyright owner. According to Article 52 and Article 53 of the Copyright Law It should bear civil liabilities such as stopping the infringement, eliminating the impact, making an apology, and compensating for losses.

Custody and storage risks

In view of the fact that NFT digital collections and the digital works they represent are generally stored separately (because the original files are usually large and it is expensive to store on the blockchain), the former is stored on Ethereum and connected to the latter through a link. However, if digital works are deleted from the server or the server storing them is hacked or malfunctions, the link between the two will be severed, causing the NFT held by the purchaser to no longer be associated with these digital works. correspond. Coupled with the uniqueness and irreplaceability of NFT, the collection value of NFT may vanish . For example, the purchaser of a payment code skin only obtains the right of appreciation and display according to the service agreement, which is mainly used in social scenes and has more symbols and symbolic attributes. If this correspondence no longer exists, how can the purchaser enjoy it? What about symbolic value? In this case, the NFT sales contract may be deemed to be unable to achieve the purpose of the contract. Therefore, if the NFT seller provides custody or storage services for digital works at the same time, it may constitute a breach of contract for the copyright owner of the digital works and the NFT purchaser .

Unfair competition risk

At present, most of the domestic NFT digital collection operators are well-known large companies and have a strong sense of compliance. However, it is foreseeable that a large number of small and medium-sized enterprises may enter the market in the future. Many business operators have misunderstandings about unfair competition, and mistakenly believe that unfair competition can only be constituted if the competitor is at least a potential competitor . actually not. According to the “Anti-Unfair Competition Law”, “Unfair competition behavior refers to the conduct of a business operator that violates the provisions of this law in production and business activities, disrupts the order of market competition, and harms the lawful rights and interests of other business operators or consumers.” ( Article 2) In other words , it may violate the law if it harms the interests of consumers. Article 8 of the “Anti-Unfair Competition Law” stipulates that “operators shall not make false or misleading commercial publicity on the performance, function, quality, sales status, user evaluation, honors, etc. of their products, deceive or mislead consumption. “NFT digital artwork is unfamiliar to most consumers, and even those who intend to speculate may not know what rights they will enjoy after purchasing an NFT. Therefore, if a digital artwork NFT seller makes false or misleading statements about the nature of the NFT, the rights enjoyed by the buyer, etc., it may violate the Anti-Unfair Competition Law .

Administrative legal risk

Blockchain information services

According to the definition of “Regulations on the Management of Blockchain Information Services”, blockchain information services refer to “based on blockchain technology or systems, through Internet sites, applications, etc., to provide information services to the public”; blockchain information Service provider refers to “the main body or node that provides blockchain information service to the public, and the institution or organization that provides technical support for the main body of blockchain information service”. Accordingly, the platform that uses blockchain technology to issue and sell digital artwork NFT is obviously a blockchain information service provider. (Article 2)

According to “block chain information service regulations,” block chain information service provider shall, within ten working days from the date of service of the filing procedures, through the National Information Office network carried out block chain information service record management system record ( Article 11). It is especially worth noting that if the NFT issuance and sales services of digital collections are new businesses and have not been filed before, they should be reported to the national and provincial cyberspace administrations for security assessment in accordance with relevant regulations (“Blockchain Information Service Management Regulations” Article Nine). So how to evaluate it? The method is also clearer, you can entrust a qualified evaluation agency or conduct it yourself, and submit a security self-assessment report through the “National Internet Security Management Service Platform” (www.beian.gov.cn) . (“Announcement of the State Internet Information Office on the “Regulations on the Management of Blockchain Information Services” on the Description of Security Assessment Clauses”)

At the same time, for information content prohibited by laws and administrative regulations, there should be immediate and emergency response capabilities for its release, recording, storage, and dissemination, and technical solutions should comply with relevant national standards and regulations. (Article 6)

In addition, I need to remind you old friends that Article 18 of the “Regulations on the Management of Blockchain Information Services” stipulates that the NFT issuance and sales platform should set up a convenient complaint and report portal to handle public complaints and reports in a timely manner.

Violation of the aforementioned regulations on filing, security assessment, legal content, and setting up complaint channels will be warned by the National and Provincial Cyberspace Administration and ordered to suspend business and rectify within a time limit. Those who refuse to make corrections or if the circumstances are serious will be punished by 5,000 yuan or more and 30,000 yuan. Fines below RMB yuan; if a crime is constituted, criminal responsibility shall be investigated in accordance with the law. (Article 21)

Online publishing, Internet audio-visual works services

Article 2 of the “Regulations on the Administration of Online Publishing Services” (State Administration of Press, Publication, Radio, Film and Television, Ministry of Industry and Information Technology Order No. 5) clearly states that online publishing services refer to “providing online publications to the public through information networks.” Refers to “digital works with editing, production, processing and other publishing features provided to the public through information networks. The scope mainly includes: (1) Knowledgeable and ideological texts, pictures, maps, etc. in the fields of literature, art, science, etc. games, animation, audio and video and other books of original digital works ; (b) from published books, newspapers, periodicals, audio-visual products, electronic publications consistent with the content of the digital work ; …… “obviously, mentioned at the outset a In the scenario where the NFT of the company selling paintings and photographic works is used as the payment code skin, these paintings and photographs are original digital works or digital works consistent with the content of published electronic publications (assuming that the works before the chain are original , Infringing on the copyright of others), while selling NFT, it showed the pictures to unspecified network users browsing the interface, so that the users can browse the pictures at a certain time and place. Therefore, this behavior belongs to The public provides online publications”, which can be evaluated as online publishing services .

Then, according to the “Regulations on the Administration of Online Publishing Services,” operators who sell NFTs must be endorsed by the publication administrative department and obtain the “Online Publishing Service Permit” in accordance with the law . (Article 7) Anyone who engages in online publishing services without approval shall be banned by the corresponding competent authority, and ordered to close the platform, delete all online publications, confiscate illegal income and related equipment and tools, and impose a fine of up to 10 times the illegal income (Article 51). According to statistics, up to now, there have been 97 cases of administrative punishment for engaging in online publishing services for violating this provision, that is, not obtaining the “Internet Publishing Service License” (source: Wolters Kluwer Database).

The specific audio-visual works pointed to by NFT may also belong to Internet audio-visual programs . Article 2 of the Regulations on the Administration of Internet Audiovisual Program Services stipulates that Internet audiovisual program services refer to “production, editing, integration and provision of audiovisual programs to the public via the Internet, and the provision of uploading and disseminating audiovisual program services for others.” According to the “Internet Audiovisual Program Service Category (Trial)”, “services for aggregating online audiovisual programs” and “services for forwarding Internet users to upload audiovisual programs” all belong to Internet audiovisual program services. (“3. The third type of Internet audio-visual program services (1) The service of aggregating online audio-visual programs refers to the business activities of editing and arranging the information of audio-visual programs on the Internet on the same website, and providing the public with services of searching and watching programs. (2) The service of forwarding the audiovisual programs uploaded by netizens refers to the services that provide netizens with special programs or information upload channels for netizens to pass their own or others’ program sources to the public through the information broadcasting system or viewing interface of the website for public on-demand services. Including: (1) Program upload service, which refers to the service that netizens upload programs to the server of the website for the public to watch and listen (including downloading); (2) Information upload and distribution service, which refers to the program name, link address and other information provided by netizens Upload to the server of the website for the public to browse, choose and link to other players to watch and listen to (including downloading) programs.”)

For example, the audio NFT of a certain online variety show sold by company B mentioned at the beginning of this article, and provide the audio to the buyer, the buyer can play the audio through the Internet, the audio belongs to the Internet audiovisual program, and the sale of the audio NFT constitutes the provision Internet audio-visual program service. According to the “Internet Audiovisual Program Service Management Regulations”, NFT sellers should obtain the “Information Network Dissemination of Audiovisual Program License” issued by the competent department of radio, film and television or perform the filing procedures . Those who have not obtained the license or filing shall not be allowed to engage in Internet audio-visual program services. (Article 7)

Art management

Article 2 of the Measures for the Management and Administration of Artworks (Order No. 56 of the Ministry of Culture, effective March 15th, 2016) stipulates that “artwork referred to in these Measures refers to paintings, calligraphy and seal carvings, sculptures and sculptures, artistic photography, Installation art works, arts and crafts works, etc. and limited copies of the above works. The artworks mentioned in these Measures do not include cultural relics.” That is, works and limited copies in the sense of copyright law are all “art works.” The three digital NFTs mentioned at the beginning of this article are sold on the network platform and belong to art business activities. According to Article V of this approach, engage in business activities art platform, the date business license within 15 days, should go to the people’s government administrative departments of culture with their domicile above the county level for the record .

In addition, because these digital NFTs are distributed and sold through the Internet platform, according to the “E-Commerce Law”, the issuing and selling party should obtain a value-added telecommunications business license and complete ICP filing (Article 7).

Advertising

The relevant provisions of the “Advertising Law” should pay particular attention to not publishing false advertisements, and not to deceive or mislead consumers (Article 4) , “The performance, function, origin, purpose, quality, composition, price, producer, and expiry date of the product , Promises, etc., or express the content, provider, form, quality, price, promise, etc. of the service, shall be accurate, clear and understandable.” (Article 8) Do not use the “best” and “superior” limits Terminology (Article 9), etc.

Criminal legal risks

China’s “Criminal Law” regulates copyright infringement crimes mainly including the crime of copyright infringement (Article 217) and the crime of selling infringing copies (Article 218) . According to the official website of the Supreme People’s Procuratorate, in 2020, the procuratorial organs prosecuted 12,000 intellectual property infringement crimes, a year-on-year increase of 10.4%; a total of 3,918 intellectual property infringement crimes were arrested, 7,155 people were prosecuted, 5,847 cases were prosecuted, and 12,163 were prosecuted, of which copyright infringement cases accounted for 5.3% of the total (about 310 people). At the legislative level, the “Criminal Law Amendment (11)” implemented on March 1 this year increased penalties for copyright infringement crimes . Both crimes not only abolished criminal detention, but also raised the maximum sentence . The crime of copyright infringement was 7 years. Increased to 10 years, and the crime of selling infringing copies rose from 3 years to 5 years.

According to the provisions of Article 217 of the Criminal Law, for the purpose of making profit , “reproduction, distribution, and dissemination of written works, music, fine arts, audiovisual works, computer software, and laws and administrative regulations to the public through information networks without the permission of the copyright owner “Other works”; or “copying, distributing, and disseminating the audio and video produced by him through the information network to the public without the permission of the producer of the audio or video”; or “making or selling fine art works that counterfeit the signature of another person”, the amount of illegal income Larger or other serious circumstances can constitute the crime of copyright infringement . According to Article 218 of the Criminal Law, for the purpose of making profit , the sale of infringing copies as stipulated in Article 217 of the Criminal Law, and the amount of illegal gains is huge or there are other serious circumstances, constitutes the crime of selling infringing copies .

NFT sellers of digital works, although their sales objects are NFTs, buyers’ rights are generally limited to the display of NFTs and their corresponding digital collections, and cannot be sold or used for other commercial purposes. The process of digital works corresponding to NFT may itself be the display and dissemination of these works or their copies, so that unspecified objects can watch and play these works or their copies through their platforms . For example, the NFT promotion and sales page of a painting (which may be a photographic work or a work of art) spreads the painting to the public through an information network. Therefore, if the seller of a digital work NFT is not the original copyright owner of the corresponding work, nor does it have the permission or authorization of the copyright owner, sells the NFT of the work through the Internet platform; or for the purpose of profit (no actual acquisition is required) ), the sale of copies of the aforementioned unauthorized work may constitute the crime of copyright infringement or the crime of selling infringing copies .

 

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-to-achieve-compliance-with-nft-collection-sales/
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