Non-Fungible Tokens (NFTs) are gaining rapid popularity among Indian celebrities, though legal ambiguities in blockchain ecosystems persist.
The allure of NFTs lies in their potential for substantial returns. Notably, Indian actor Amitabh Bachchan reportedly earned nearly $900,000 from NFT sales, including audio recordings of his father's famous poem Madhushala and autographed movie posters.
Understanding NFTs
NFTs are blockchain-based digital records linked to tangible assets like music videos, digital art, or photographs. Key distinctions exist between NFTs and their underlying works:
- Ownership ≠ Copyright: Purchasing an NFT rarely transfers intellectual property rights. Buyers typically receive a certified digital copy with "bragging rights."
- Non-Fungibility: Unlike cryptocurrencies, NFTs are unique and non-interchangeable, driving collector demand.
- Value Drivers: Scarcity, uniqueness, and speculative trading influence NFT prices, though future valuations remain unpredictable.
Legal Landscape in India
Current Regulations
India lacks specific NFT legislation. Key references include:
- Income Tax Act (1961): NFTs classified as "virtual digital assets" incur a 30% tax on transactions.
- Sale of Goods Act (1930): NFTs may qualify as goods, implying warranty protections.
- Consumer Protection Act (2019): Applies to digital products, offering redress for defective NFTs.
Advertising Compliance
NFT promotions must adhere to:
- ASCI Guidelines: Mandatory risk disclaimers.
- 2022 Misleading Advertisements Guidelines: Prohibits deceptive endorsements.
Cryptocurrency Hurdles
NFTs require cryptocurrency transactions, which remain legally ambiguous in India. Notable developments:
- 2018 RBI Ban: Overturned by the Supreme Court in IAMAI v. RBI, citing citizens' rights to legal transactions.
- 2021 Cryptocurrency Bill: Proposed banning private cryptocurrencies but remains pending.
Global NFT Litigation: Key Cases
| Case | Jurisdiction | Outcome |
|---|---|---|
| Shenzhen Qice v. Hangzhou Yuanyuzhou (China) | Copyright Infringement | Court ordered NFT destruction + $600 compensation |
| Juventus FC v. Blockeras (Italy) | Trademark Violation | Blockeras banned from trading unauthorized NFT |
| Nike v. StockX (USA) | Trademark Dispute | Ongoing; "first sale" doctrine debated |
| Hermès v. Rothschild (USA) | Artistic Fair Use | Court evaluating artistic vs. misleading intent |
| Miramax v. Tarantino (USA) | Copyright Settlement | Resolved out of court |
Key Takeaways for India
- Jurisdiction: Courts can adjudicate NFT cases based on plaintiffs' business locations.
Infringement Risks:
- Unauthorized NFT minting or sales may incur liability.
- Platforms face heightened duties to verify intellectual property ownership.
- Defenses: NFT marketplaces may struggle to claim "safe harbor" under IT Act Section 79 if profiting directly.
- Trademark Strategies: Brands should secure Class 9 (Nice Classification) registrations or leverage "well-known" status under Indian trademark law.
FAQs
Q: Do NFT buyers own the underlying artwork?
A: Typically no—ownership grants a certified copy, not copyright.
Q: Are NFTs taxable in India?
A: Yes, NFT transactions attract a 30% tax under the Income Tax Act.
Q: Can NFT platforms be sued for infringement?
A: Yes, if they fail to verify creators' IP rights or profit from unauthorized sales.
Q: Is cryptocurrency required for NFT purchases?
A: Currently yes, though India's crypto regulations remain unsettled.
Q: How do brands protect against NFT counterfeits?
A: Registering trademarks and monitoring NFT marketplaces for unauthorized use.
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