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Intermediate People’s Court of Hang Zhou City, China [2022]: Yuanyuzhou Company v Qice Company

This is an informal case summary prepared for the purposes of facilitating exchange during the 2023 WIPO IP Judges Forum.

 

Session 5: Generative Artificial Intelligence, the Metaverse and Intellectual Property Infringement

 

Intermediate People’s Court of Hang Zhou City, China [2022]: Yuanyuzhou Company v Qice Company

 

Date of judgment: 2022

Issuing authority: Intermediate People’s Court of Hang Zhou City

Level of the issuing authority: Appellate Instance

Type of procedure: Judicial (Civin( �/span>

Subject matter: Copyright and Related Rights (Neighboring Rights); Enforcement of IP and Related Laws

Plaintiff/Appellee: Qice Company

Defendant/Appellant: Yuanyuzhou Company

Keywords: Non-fungible tokens, NFTs, Platform liability

 

Basic facts: Yuanyuzhou Company runs Bigverse platform, an NFT digital works trading service where users can post digital works and apply to “Cast” a proposed NFT.  After the “Casting” is completed, users can trade with other users through the platform.

 

Wang is a registered user of Bigverse platform, which uploaded the work “Fat Tiger Vaccine” and “Cast” it into NFT digital works.  On December 4, 2021, users paid 899 yuan to Wang for the work “Fat Tiger Vaccine,” which was refunded on March 4, 2022, for “Work involving handling.”

 

Qice company claims that Wang “Cast” his work on the platform and carried out the transaction with a micro blog watermark in the lower right corner, which, according to common sense, allows it to be judged that the work was copied directly from the micro blog.

 

Qice contends that Yuanyuzhou Company, as a professional platform, should have known that the work had the possibility of infringement.  Yuanyuzhou should have further verified the author and the source of the picture, but it allowed the work to be published, and its failure to conduct any search of the source of the title of the work constitutes an act of aiding infringement.

 

Based on this, Qice sued Yuanyuzhou in Hangzhou Internet Court, claiming losses totaling 100,000 yuan.

 

The Internet Court determined that the “Casting” process of NFT digital works first involved uploading works, an action that causes the digital works stored in the “Casting” terminal device to be copied to the web server.  The NFT digital works are then presented on the trading platform for sale, and the works are displayed in the platform, allowing the public to access a work at a selected time and place.  Upon paying, a registered user of the NFT platform becomes the owner of the NFT digital work.  Therefore, “Casting” transactions for NFT digital works include three aspects of behavior: copy, sale and information network dissemination of the digital works.

 

The Internet Court found that Wang, without permission, traded “Fat Tiger Vaccine” NFT digital works through the Bigverse platform, infringing the right of works of information dissemination.  The platform directly gains economic benefits in NFT digital works, and it has strong control ability and corresponding auditing ability and conditions for NFT digital works traded on the platform; therefore, it should have a higher duty of care.  Thus, the Internet Court ordered Yuanyuzhou to cease its infringement and pay 4000 yuan for the economic loss.

 

Yuanyuzhou appealed to the Intermediate People’s Court of Hang Zhou, citing the following reasons for its appeal: in the case of works’ “Casting”, Bigverse platform did not charge users “Casting” fees, and the first-instance judgment demanded too much of the platform’s auditing obligations.

 

Held: The Intermediate People’s Court of Hang Zhou rejected Yuanyuzhou’s appeal and upheld the judgment of the first instance.

 

Relevant holdings in relation to generative artificial intelligence, the Metaverse and intellectual property infringement: This case defines for the first time the obligations of the operators of NFT digital works trading platforms in China.

 

By its judgment, the Intermediate People’s Court proposes that in addition to the obligations that general internet service providers should undertake, platform operators should also establish an effective intellectual property review mechanism, to review the legitimacy of the sources of NFT digital works and confirm that the “Foundries” of NFT digital works have appropriate rights.

 

The Intermediate People’s Court held that the time for the review of reasonable measures to prevent copyright infringement should be when users “Cast” NFT digital works.

                                                                                      

Relevant legislation: