China's First Case of NFT Litigation: A Surprising Impact

Summary 

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• NFTs have recently become a talking point around the world
• Hangzhou Internet Court has handed down China's first court decision relating to NFTs
• In the decision, the court found that an NFT platform had failed to discharge its high duty of care to check the copyright ownership of a work
• The court also clarified the nature of digital works, and how the current copyright law in China applies to such works, and their trading online

On April 22, 2022, Hangzhou Internet Court issued a decision affirming copyright infringement and awarding compensation of RMB 4,000 to the plaintiff. Despite the low value, the case received a lot of attention in both the commercial and legal worlds as it resulted from China's first ever litigation relating to non-fungible tokens (NFTs).

Hangzhou Internet Court, established on August 18, 2017, is the first pilot court in China to focus on the trial of internet-related cases. It implements the principle of "online trial of online cases", separating cases involving the internet from the existing trial system, and fully relying on internet technology to complete the entire process of prosecution, case filing, evidence production, court hearing, adjudication, and execution online. Its jurisdiction includes internet-related cases, such as internet shopping, services, microfinance loans and other contract disputes; internet copyright ownership and infringement disputes; using the internet to infringe on the personality rights of others; online shopping product liability infringement disputes; domain name disputes; and disputes arising from internet administration.