NFT and Foundation Models: Exploring the Changing Landscape

NFT and Foundation Models: Exploring the Changing Landscape

Introduction:
The recent case of the "NFT第一案" has sparked discussions and debates regarding the implications of non-fungible tokens (NFTs) in the art world and beyond. This article aims to delve into the key points raised in the case, exploring the requirements for stopping infringement, the obligations of platforms, the rights of NFT buyers, and the relationship between NFT transactions and information network dissemination rights. Additionally, we will touch upon the opportunities and risks associated with foundation models.

1. Stopping Infringement: The Disconnect between Works and NFT Codes
   In the case, it was argued that simply disconnecting the infringing work from the NFT code is not sufficient to stop infringement. It was suggested that the NFT code should be sent to a black hole address to ensure complete cessation of infringement. However, it is important to consider alternative approaches to stopping infringement. One such approach could be implementing stricter scrutiny during the minting process, where platforms charge a fee. By imposing higher scrutiny and ensuring that platforms do not profit directly from the infringement, it becomes possible to address the issue effectively.

Actionable Advice:

• Platforms should adopt robust scrutiny mechanisms during the minting process to prevent infringing works from being associated with NFT codes.
• Implement a fee structure that discourages the platform from directly benefiting from the infringement.

2. Platform Obligations and Examination Duties
   In the case, the court emphasized that platforms have a higher duty of care and examination obligations. However, it is crucial to differentiate between the uploading and circulation of works. According to legal provisions, platforms cannot be deemed to have directly benefited economically from the dissemination of infringing works unless there is a specific economic interest directly related to the infringement. This distinction is important to avoid moral risks, such as cases where the plaintiff induces infringement through the purchase of NFTs and then holds the platform responsible.

Actionable Advice:

• Platforms should be diligent in examining the uploaded works to ensure they are free from infringement.
• Clear guidelines and criteria should be established to determine the economic interests of platforms in cases of infringement.

3. User Rights and Ownership of NFTs
   The court in the case stated that NFT transactions essentially involve the transfer of ownership of digital goods. However, it is important to note that the current civil code in China does not explicitly define digital assets on the blockchain. Therefore, the concept of ownership of NFTs should be approached with caution. Granting users complete ownership of NFTs may contradict the country's financial regulatory direction and potentially lead to speculative risks. Additionally, users are not provided with private keys, limiting their ability to control and dispose of NFTs freely.

Actionable Advice:

• Clearly define the legal status and rights associated with NFT ownership to ensure regulatory compliance and mitigate speculative risks.
• Enable users to have greater control over their NFTs by providing them with private keys and the ability to freely dispose of their digital assets.

4. NFT Transactions: Information Network Dissemination Rights or Issuance Rights?
   The court in the case determined that the minting of NFTs falls under information network dissemination rights, while subsequent transactions are related to the sale of rights or vouchers and are not governed by copyright. It is crucial to recognize that NFTs, as a whole, do not fit the criteria of being accessible to the general public at any given time and place, as required by information network dissemination rights. NFT transactions resemble controlled book releases, with the NFTs' content being made publicly available on platforms by the copyright holders. The absence of tangible carriers does not negate the applicability of the exhaustion principle.

Actionable Advice:

• Clarify the legal framework surrounding NFT transactions to distinguish between information network dissemination rights and issuance rights.
• Establish guidelines to prevent copyright infringement cases arising from the nature of NFT transactions.

Conclusion:
The "NFT第一案" has undoubtedly shed light on various aspects of NFTs, from stopping infringement to platform obligations, user rights, and the legal framework surrounding NFT transactions. By implementing stricter scrutiny during the minting process, defining ownership rights, and clarifying the legal status of NFT transactions, the NFT industry can establish a clear path towards stopping infringement and ensuring compliance with existing laws and regulations. It is essential to strike a balance between innovation, protection of rights, and the prevention of potential risks associated with NFTs.