Introduction
The introduction of Non-Fungible Tokens (“NFTs”) has raised new legal questions regarding ownership of rights in digital assets. NFTs are a type of digital asset recorded on blockchain that represent ownership of a unique piece of content, such as artwork, music, video clips, or even in-game items.[i] NFTs have given many independent artists and digital producers alternative ways to monetise their work. Creators can sell their work directly to buyers and even earn ongoing royalties every time the work is resold.
In recent years, NFTs have gained popularity in the business and startup ecosystem, where companies are exploring their use for digital memberships, brand engagement, and marketing strategies.[ii] This expansion has drawn considerable attention to the legal implications of NFT transactions.
A key legal concern relates to whether the purchase or minting of an NFT result in the transfer of the artwork’s copyright. In most jurisdictions, including India, the answer is not straightforward. The legal distinction between owning a token and owning the intellectual property associated with it remains poorly understood among creators, collectors, and platforms. Without proper legal safeguards, this disconnects between what buyers assume they own and what the law allows, leading to confusion, disputes, and lost commercial opportunities. This article examines how Indian copyright law currently applies to NFTs and what creators, collectors, and businesses should consider when operating in this space.
Understanding NFTs and Copyright: What’s the Difference?
To properly understand the legal issues around NFTs, it is important to separate two ideas that are often confused: the ownership of an NFT and the ownership of the copyright in the digital work linked to that NFT.
An NFT is essentially a digital certificate that verifies ownership of a unique digital item. It is stored on a blockchain and can be bought, sold, or transferred.[iii] Most NFTs do not contain the digital asset itself. Instead, NFTs store a link or hash that points to the actual file, which is often hosted off-chain on decentralized or centralized servers. Copyright, by contrast, is a legal right. It gives the original creator control over how their work is reproduced, distributed, and used.[iv] In India, copyright arises automatically when a work is created and fixed in a tangible form.[v] Under Section 13 and 14 of the Copyright Act, 1957, the creator holds the exclusive rights unless assigned.[vi] The default position is that the creator of the work holds the copyright, unless it has been expressly assigned to someone else in writing.[vii] Section 19 of the Act mandates that any assignment of copyright must be in writing and signed by the assignor.[viii]
This means that buying an NFT (or the “token”) usually gives the purchaser ownership of the token itself, but not the legal rights to reproduce, license, or commercially exploit the underlying content.[ix] Unless the seller transfers those rights, the buyer cannot legally use the work beyond what is permitted under fair use or under the terms set by the NFT platform.[x]
Clear legal terms and proper contractual agreements are essential. Without them, both buyers and sellers may find themselves exposed to legal risk, even if the technology appears to make ownership seem straightforward.
The Indian Legal Landscape: Where We Stand
Currently, there is no Indian legislation that directly addresses NFTs. This means that NFT-related transactions involving digital content must be interpreted in accordance with existing legal principles, particularly under the Copyright Act (the “Act”). While the Act outlines ownership, licensing, and transfer of copyright in detail, it does not discuss blockchain-based digital tokens or the legal implications of NFT sales.
Under Indian law, the term “copyright” refers to a bundle of exclusive rights granted to the creator of original literary, artistic, musical or dramatic works, among others.[xi] These rights exist independently of who possesses the physical or digital file. This distinction is crucial in the context of NFTs.[xii] Unless the smart contract or platform terms explicitly contain a valid copyright assignment or license, the copyright remains with the original creator.
Indian courts have yet to rule on the copyright implications of NFT ownership. This lack of judicial interpretation creates a degree of uncertainty, particularly for NFT buyers who intend to commercialise the underlying digital content. Beyond the Copyright Act, other laws such as the Information Technology Act 2000 may indirectly apply. However, no current statute in India provides a dedicated legal framework for NFTs or their intersection with intellectual property. In this legal vacuum, it’s essential for artists, collectors, and platforms to put proper agreements in place.
The Risks: What Artists and Buyers Often Overlook
The excitement surrounding NFTs has often overshadowed the legal details. One common misconception is the assumption that buying an NFT means buying the copyright to the digital artwork or file. Most of the time, this is not true. They may own a record on the blockchain, but they do not automatically acquire the right to reproduce, distribute, or commercialise the work.[xiii]
This misunderstanding has already led to disputes in other jurisdictions. For example, in the United States, several lawsuits have arisen where NFT buyers tried to use the digital content in ways not authorised by the creator.[xiv] Another risk relates to infringement. Digital files linked to NFTs can be copied without the original creator’s consent. In such cases, artists may find their work circulating on NFT marketplaces under someone else’s name. This type of unauthorised use can amount to copyright infringement.
There is also the issue of unclear platform terms. Many NFT marketplaces have general terms of service, but few clearly specify what rights are being transferred when an NFT is sold. Some platforms allow creators to set their own licence terms, while others rely on default provisions.
For artists, this lack of clarity can mean losing control over their work. For buyers, it may mean unintentionally violating someone else’s rights. In both cases, the absence of legal due diligence can result in financial loss, reputational damage, or even litigation. Traders of NFTs must recognise that NFTs are not just digital assets, but also legal instruments.
Comparative Snapshot: Global Legal Trends
As India navigates the legal challenges posed by NFTs, it is beneficial to consider how other jurisdictions are addressing the issue. In the United States, copyright law has been at the centre of several NFT-related disputes. A key example is the Hermès v. Rothschild case, where the luxury brand successfully sued an artist for creating and selling “Meta Birkin” NFTs that resembled Hermès handbags.[xv] The court found that the NFTs infringed Hermès’ trademark rights and rejected the defence of artistic expression.[xvi]
In the United Kingdom, the legal system recognises NFTs as property under existing rules. However, copyright in the underlying asset is treated separately.[xvii] Unless copyright is explicitly assigned, the purchaser of the NFT owns the token but not the legal rights to the content.[xviii] Courts have also shown a willingness to grant injunctions in NFT-related matters, especially in cases involving fraud or misappropriation of digital assets.[xix]
The global picture suggests that while NFTs are gaining legal recognition as property or digital assets, the copyright and licensing aspects still depend heavily on the terms of the transaction. Most legal systems distinguish between owning the NFT and owning the rights to the content it points to. This principle is consistent with Indian law.
What Clients Can Do: Legal Best Practices
As NFTs gain popularity in India, the need for legal clarity is growing rapidly. Many stakeholders enter into NFT transactions assuming they understand what they are buying or selling. In reality, these transactions often involve complex intellectual property rights.
For creators, the most important step is to define what rights are being transferred when they mint or sell an NFT. Unless there is an express copyright assignment or licence, the buyer does not automatically acquire the legal right to reproduce, distribute, or commercially exploit the work.[xx] Creators should also consider adding licensing terms directly to the NFT’s metadata or to the platform listing, as a way to publicly clarify what the buyer is entitled to do with the work.[xxi]
Buyers need to approach NFTs with the same caution as any other investment involving intellectual property. Suppose the transaction does not specify the rights being transferred. In that case, the buyer should assume they are acquiring only the token and not the underlying IP.[xxii] Reviewing platform terms and, where needed, entering into a separate agreement with the seller can help ensure the buyer’s expectations align with the law.[xxiii]
Startups and NFT platforms face additional legal challenges. They must ensure that their terms of use are not only user-friendly but also enforceable under Indian law. According to Section 79 of the Information Technology Act, 2000, intermediaries such as NFT platforms may be protected from liability under the safe harbour provisions, provided they observe due diligence, publish necessary rules and policies, and act expeditiously upon receiving actual knowledge or notification of unlawful content, such as copyright infringement.[xxiv] Many platforms allow users to mint NFTs without verifying the originality or ownership of the content being uploaded. This exposes the platform to potential liability, especially if infringing content is sold through its services.[xxv]
In all of these scenarios, having clear, written documentation is key. Standard contracts, user agreements, and platform policies should reflect both Indian copyright law and the specific nature of NFT-based transactions.[xxvi] International platforms may offer templates or boilerplate terms, but those rarely suffice when a dispute arises or a transaction involves cross-border elements.[xxvii] Artists, collectors, and tech companies operating in the NFT space should treat legal due diligence as part of their basic process, not an afterthought.[xxviii]
Conclusion
NFTs have opened up exciting new possibilities for creators, collectors, and businesses. They offer a fresh approach to sharing, selling, and investing in digital content. However, with that opportunity comes a degree of legal uncertainty, particularly regarding copyright and ownership. Until those answers arrive, the safest approach is to stay informed and legally prepared. Whether you’re an artist minting your first NFT or a startup building a platform, having the right contracts and legal support can make all the difference.
References:
[i] Primavera De Filippi, ‘What are NFTs?’ (Harvard Law School, 2021)
[ii] Forbes Business Council, ‘The Evolution Of NFTs And Their Role In The Future Of Business’ (Forbes, 26 February 2024)
[iii] “NFTs and the Law: What Do You Actually Own?” (Norton Rose Fulbright, 3 August 2021)
[iv] Copyright Act 1957 (India), s 14.
[v] Copyright Act 1957 (India), s 13; see also Ministry of Commerce and Industry (India), ‘Copyright Registration’ (Copyright Office, Government of India)
[vi] Copyright Act 1957 (India), s 13; Copyright Act 1957 (India), s 14.
[vii] Copyright Act 1957 (India), s 19.
[viii] Copyright Act 1957 (India), s 19.
[xi] ‘NFTs and the Law: What Do You Actually Own?’ (Norton Rose Fulbright, 3 August 2021)
[x] Andres Guadamuz, ‘The Treachery of Images: How NFTs Create Copyright Confusion’ (WIPO Magazine, December 2021)
[xi] Copyright Act 1957 (India), s 13.
[xii] Copyright Act 1957 (India), s 19(1).
[xiii] Andres Guadamuz, ‘The Treachery of Images: How NFTs Create Copyright Confusion’ (WIPO Magazine, December 2021)
[xiv] Patrick McGeehan, ‘Hermès Wins Lawsuit Over “MetaBirkin” NFTs’ (The New York Times, 8 February 2023)
[xv] Hermès International v Mason Rothschild, No 1:22-cv-00384 (SDNY 2023); see also Patrick McGeehan, ‘Hermès Wins Lawsuit Over “MetaBirkin” NFTs’ (The New York Times, 8 February 2023)
[xvi] Ibid.
[xvii] Law Commission of England and Wales, ‘Digital Assets: Final Report’ (2023)
[xviii] Ibid.
[xix] Lavinia Carey, ‘UK Court Allows Injunction over Stolen NFTs’ (Law Society Gazette, 6 May 2022)
[xx] Copyright Act 1957 (India), s 19.
[xxi] Andres Guadamuz, ‘The Treachery of Images: How NFTs Create Copyright Confusion’ (WIPO Magazine, December 2021)
[xxii] Ibid.
[xxiii] Harvard Law School Cyberlaw Clinic, ‘NFTs and the Law: A Primer’ (2021)
[xxiv] Information Technology Act 2000, s 79.
[xxv] Harvard Law School Cyberlaw Clinic, ‘NFTs and the Law: A Primer’ (2021)
[xxvi] Ibid.
[xxvii] ‘NFTs and the Law: What Do You Actually Own?’ (Norton Rose Fulbright, 3 August 2021)
[xxviii] Ibid.
