Blockchain is reshaping how we perceive ownership of intellectual property.
The digital world is witnessing a transformation thanks to blockchain technology, and at the centre of it all are Non-Fungible Tokens (NFTs). Unlike cryptocurrencies such as Bitcoin or Ethereum, NFTs are non-interchangeable, which makes them suitable for representing ownership of singular items such as digital artworks, music, videos, collectables, in-game items, and even virtual real estate. Digital artists are using NFTs to monetise their work directly in India. Musicians and content creators are exploring new revenue models, and the gaming companies are using NFTs to offer players true ownership of virtual goods.
This blog aims to explore the meaning and legal implications of NFTs in India, specifically in relation to copyright, trademarks, licensing, and enforcement.
What is an NFT?
An NFT – Non-Fungible Token is digital proof of ownership. It is stored on a blockchain, a secure online record-keeping system that cannot be easily changed or tampered with. This is different from cryptocurrencies like Bitcoin or Ethereum, where every coin is the same as any other. An NFT can represent ownership of various digital assets, including digital artwork, music, videos, virtual game items, or even a tweet.
Features of NFTs
- Uniqueness: Each NFT is one-of-a-kind. Even if two NFTs look similar, they have different identifying codes that make them distinct from one another.
- Indivisibility: Unlike cryptocurrencies such as Bitcoin, which can be split into smaller units, NFTs cannot be divided into parts. You either own the whole NFT or you don’t.
- Ownership: When someone buys an NFT, their name (or digital address) is saved on something called a blockchain. A blockchain is like a special online record book that can’t be changed. It keeps track of who owns what.
- Transferability: NFTs can be easily bought, sold, or traded on various online marketplaces. Ownership is transferred automatically through the blockchain, without the need for intermediaries.
- Provenance and History: Since blockchain keeps a permanent record of all transactions, anyone can trace the entire history of an NFT—who created it, who owned it before, and how its value has changed over time.
- Interoperability: NFTs created on certain blockchain standards such as Ethereum’s ERC-721 or ERC-1155, which can be used across different applications, wallets, and marketplaces that support those standards.
- Digital Scarcity: Creators can choose to mint a limited number of NFTs, making them scarce.
Where Does Indian Law Stand on NFTs?
India does not yet have a specific law governing NFTs. However, the following statutes indirectly apply to NFTs:
- Copyright Act, 1957: It protects the rights of creators over their original works of art, music, literary work, cinematographic films, and photographs. In the case of NFTs, if a digital artwork or music file is tokenised and sold, the copyright owner retains their rights unless explicitly transferred through a written agreement.
- Trade Marks Act, 1999: The act covers brand identity elements such as names, logos, and slogans.
- Information Technology Act, 2000: Since NFTs exist entirely in the digital realm, the IT Act, 2000, governs electronic records, cyber issues, and digital intermediaries.
- Indian Contract Act, 1872 – Applies to smart contracts and other NFT-related agreements.
- Consumer Protection Act, 2019: This act is invoked in cases of misleading or fraudulent NFT sales.
Copyright Issues in the NFT Space
Just creating an NFT doesn’t automatically transfer copyright. Under Indian law, the original creator remains the copyright owner unless a formal agreement says otherwise. This means buyers receive a license to use the content, not full ownership of the rights.
What can buyers legally do?
Purchasing an NFT doesn’t grant rights to reproduce, modify, or commercially exploit the work unless it is specifically allowed in the agreement.
Risks of infringement
If someone mints an NFT using copyrighted material without permission, it constitutes a violation of copyright law and can result in severe legal consequences, including fines and potential imprisonment.
Trademark Challenges with NFTs
Sometimes, people create NFTs (digital items) that use famous brand names or logos, such as Nike, Disney, or Gucci, without obtaining permission from the brand. If someone uses the trademark of the brand without obtaining permission, it can confuse buyers into thinking the NFT is official or made by the brand when it is clearly not.
In such cases, the brand can take legal action against such unauthorised use and file a suit for infringement or passing-off.
The role of moral rights
In India, even if an artist sells or licenses their work, whether in physical form or as an NFT, they still retain moral rights over their creation under the Copyright Act, 1957.
- The right to be recognised as the creator of the work (also known as the right of attribution), and
- The right to object if the work is distorted, modified, or used in a way that could damage their honour or reputation (the right of integrity).
Licensing and Smart Contracts
Many NFTs come with smart contracts that define how the token can be used or whether royalties are paid on resales. But Indian law requires written agreements, especially for exclusive licenses, to be valid. To avoid legal loopholes, creators and platforms in India should use a hybrid approach, which is a combination of a smart contract and a traditional legal agreement (which is enforceable in court if disputes arise).
Problem with enforceability
Legal enforcement in the NFT world faces several roadblocks:
- Anonymity: It is difficult to trace the real identity behind a digital wallet.
- Jurisdictional Conflicts: Many NFT platforms are based overseas.
- Regulatory Gaps: India currently lacks clear regulations specific to NFTs.
That said, courts can apply traditional legal principles to NFT disputes and may issue injunctions, block infringing content, or award damages.
Taxation of NFTs in India
The Finance Act, 2022, introduced the concept of Virtual Digital Assets (VDAs), which includes NFTs:
- A flat 30% tax applies to the income from the transfer of NFTs.
- A 1% TDS (tax deducted at source) if the transaction exceeds ₹10,000.
- Limited deductions allowed—basically only the cost of purchase.
- NFTs may also attract GST, depending on whether they’re classified as goods or services.
Tips for Creators and Buyers
- Verify IP ownership before taking any content.
- When you are creating or selling NFTs, clearly outline license terms in the agreement
- Avoid third-party trademarks or copyrighted content without permission.
- Keep written records of smart contracts and licensing agreements.
- Ensure compliance with Indian IT and tax laws.
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