Chinese court recognises digital collections as virtual property

In a sales contract dispute caused by a digital collectible transaction, a Chinese court in the city of Hangzhou recognised non-fungible token (NFT) collections as online virtual property that should be protected under Chinese law.

According to a review of the verdict published by the Hangzhou Internet Court, the case involved an individual who sued a company over its limited edition “NFT digital collection mystery box”. The plaintiff, who demanded a larger refund after the company gave him a refund for failing to provide personal details during the purchase, eventually lost the case on the basis that the terms of sale had been clarified and that the digital work was the legal virtual property of the company.

The Hangzhou Court of China pointed out that NFT digital collections possess characteristics such as value, scarcity, controllability and tradability. Moreover, the “visual artwork” expresses the creator’s original expression and should be treated as relevant intellectual property rights.

“It’s a unique digital asset formed on the blockchain, based on the trust and consensus mechanism among the blockchain nodes,” the court stated. “Therefore, NFT digital collections belong to the virtual property category.”

The court ruling follows a recent Hangzhou court case in April 2022 regarding a property rights dispute between an NFT platform and a user. The same court ruled in favour of a cartoonist who sued a local tech company for uploading their work for sale in the metaverse without authorisation.

Given that there is no clear regulation on the legal attributes of digital collectibles in China, the recent verdict paves the way for future favourable measures regarding virtual assets.


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