Bread & Kaya 30: 2021 Cyberlaw cases in the recovery period ..Pt 3
By Foong Cheng Leong July 23, 2022
- Leading artists, Red Hong Yi & Namewee cash in on hot 2021 NFT market
- Eye on digital banks, Grab and constitutionality of s. 233 of the CMA 1998
2021 saw the rise of Non Fungible Token (NFT) in Malaysia. Malaysian artists Red Hong Yi reported sold her NFT art, known as Doge to the Moon for 36.3 ETH which was valued at RM325,000. The successful bidder of the NFT owns both the physical (i.e. a copper plate) and digital artworks. Malaysian singer, Namewee (pic, above) also sold 100 NFTs of his song which reportedly valued at RM3.5 million. Particulars of the sale of these NFTs are not publicly known.
There is no legal definition to the term NFT in Malaysia. But it can be described as a digital token, and a digital asset. It is stored on a digital ledger, called a blockchain. It can be traded on an online marketplace such as OpenSea and Binance. In Malaysia, we have our own online marketplace such as pentas.io.
It is usually represented by an item, such as a digital art, a song or a video. However, the unique thing about NFT is that a person purchasing the NFT does not necessary own the intellectual property in the NFT. For example, you may have purchased an NFT of a digital art which the creator had issued 100 tokens. You are the owner of that particular token. The owner of the intellectual property residing in that digital work may still be the creator or the intellectual property owner.
This may sound novel but when we compare this with a real-life scenario, this is nothing new. We can see this in stamps trading or trading card such as football cards or Pokémon cards. One may trade such stamps or cards without limitation but the intellectual property rights in those artistic work will still belong to the copyright owner. The value of an item would depend on how rare it is, and the same item may differ in value depending on various circumstances such as its condition, the year of production, the number of circulating copies etc.
The United States Courts are now dealing with NFT disputes. In Roc-A-Fella Records, Inc. v. Dash, 1:21-cv-05411-JPC (S.D.N.Y. Jul. 29, 2021), the plaintiff owns all rights to the album Reasonable Doubt, including its copyright. It alleged that the defendant —a minority shareholder in the company — unlawfully stole and attempted to auction the copyright to Reasonable Doubt as an NFT.
In Miramax, LLC v Quentin Tarantino et al (US District Court, Central District of California: 2:21-cv-08979), production company Miramax sued director Quentin Tarantino after he announced that he would be auctioning off "exclusive scenes" from the 1994 motion picture Pulp Fiction in the form of NFTs. According to his website www.tarantinonfts.com, "the collection holds secrets from Pulp Fiction," and "each NFT contains one or more previously unknown secrets of a specific iconic scene from Pulp Fiction". The "privileged" purchasers "will get a hold of those secrets".
So far, there is no reported case about NFTs in our Courts. However, there are numerous complaints by copyright owners about their work being used on NFTs and sold on NFT marketplaces. Steps were also taken by companies to ensure that their trade mark protection extends to NFTs. For example, Riot Games, Inc, the brand of owner of the popular game League of Legends, have filed an application to register their trade mark which included "digital materials, namely, nonfungible tokens (NFTs)" with the Intellectual Property Corporation of Malaysia.
Public Prosecutor v Wang Jianquan  MLJU 1708;  5 LNS 109 is an interesting case about a "love scam" operation in Malaysia. The accused was one of the two (2) Chinese nationals arrested and investigated for love scam activities deceiving Chinese nationals. There were nine (9) Malaysians involved too. One of the items seized was an exercise book containing “script of conversation” used against the victims.
The investigation revealed that the phone belonged to one of the arrestees (B8), contained her semi-nude photos, which were sent to the potential victims by the rest of the arrestees (including the accused person). The arrestees would first communicate with the victims. The said arrestee (B8) would make a video call to the victims and lured them into exposing themselves (literally – by exposing their private part). The video calls were recorded and used to extort monies from the victims. Refusal to accede to their request was at the peril of the obscene videos and photos being revealed to the victim’s family members.
The accused pleaded guilty to an offence under s. 420 of the Penal Code (cheating and dishonestly inducing delivery of property) and was sentenced to a one month imprisonment and RM8,000 fine, in default of payment two months imprisonment.
The learned Magistrate was of the view that the offence concerns conspiracy to cheat. The manner the offence was committed was horrendous. The victims were lured and deceived into exposing their private parts, which was captured and used as a bargaining chip to extort money, leaving the victim with the only other option of perpetual embarrassment facing their own family members. It is inhuman, gross and short of dignity. Scaling the plea of guilty as well as being a first offender against the manner of the offence was committed does not tip the scale in favour of the accused person.
The learned Magistrate also took judicial notice of the prevalence of online scam-related activity in Malaysia. Statistics issued by CyberSecurity Malaysia show that online fraud has continued to be the highest reported incidents totalling 7,774 reports in 2019, 5123 reports in 2018, and 3,821 reports in 2017, compared to other incidents, i.e. cyber harassment, intrusion attempt, denial of service, vulnerabilities report, content-related, spam, malicious code and intrusion. In 2020, out of 8,366 online incident cases reported, 6,048 were online fraud cases.
Service of Court Documents on Facebook
Last year, I reported that the High Court allowed the service of court documents on Facebook Malaysia Sdn Bhd as the Court found that Facebook Malaysia is the agent of Facebook, Inc under Order 10 Rule 2 of the Rules of Court 2012 (Abu Jamal Bin Sulaiman & Anor v Facebook, Inc (Kuala Lumpur High Court Original Summons No. WA-24NCVC-57)).
The Court of Appeal however has overturned the decision in Civil Appeal No. W-02(IM)(NCvC)-1222-09/2020 on the grounds that, among others, there is insufficient evidence to prove that Facebook Malaysia Sdn Bhd is an agent of Facebook, Inc.
On another note, Facebook, Inc changed its name to Meta Platforms, Inc. Any legal action filed against Facebook, Inc in Malaysia should now be against Meta Platforms, Inc and served on to them with an order to serve out of jurisdiction to their office in California, United States.
Whether Grab drivers are "employees"
Last year, I reported that one Loh Guet Ching filed an action for judicial review (Loh Guet Ching v. Menteri Sumber Manusia & Ors (Kuala Lumpur High Court Judicial Review Application No. WA-25-296-10/2020) after Minister of Transport refused to refer the matter to the Industrial Court. She had earlier brought a case against Grab at the Labour Department after she was terminated as an e-hailing driver. The High Court dismissed the application for judicial review. She has now brought the matter to the Court of Appeal.
In 2022, we can expect more interesting developments in the cyberlaw and IT sphere.
- New NFT legal disputes are starting to pop in Courts beginning of 2022. It was reported OpenSea was sued by a user of its platform after the latter's "Bored Ape Yacht Club NFT – Bored Ape #3475" was stolen when OpenSea was hacked (McKimmy v. OpenSea, No. 4:22-cv-00545). The same “Bored Ape Yatch Clut NFT” was a subject matter of another dispute in the Singapore High Court where the Singapore High Court had blocked potential sale and transfer of the said NFT after an online user by the name of “chefpierre” had taken it wrongfully from him.
Meantime, local artist Fahmi Reza launched a NFT of his Monyet Istana artwork on his website monyetistana.com to raise funds for the Freedom of Expression Legal Defence Fund. The legal fund will help support fellow Malaysians who are investigated and prosecuted for exercising their right to freedom of expression. He successfully raised RM48,000 from the sale of this NFT in 48 hours. However, it was later reported that monyetistana.com was blocked from access by our local internet service providers.
Three other noteworthy developments I am going to follow this year are:
Bank Negara has awarded digital banking licences to five consortiums. Three consortiums, namely Boost Holdings Sdn Bhd and RHB Bank Bhd, GXS Bank and Kuok Brothers, and SEA and YTL Digital Capital will be licensed under the Financial Services Act 2013.
Meanwhile, a consortium comprising AEON Financial Service Co Ltd, AEON Credit Service (M) Bhd and MoneyLion Inc, and a consortium led by KAF Investment Bank will be licensed under the Islamic Financial Services Act 2013. These new banks can help individuals and businesses gain better access to more personalised solutions backed by data analytics. It will be interesting to see what cyber and electronic legal issues that may arise from this new industry.
Health news portal CodeBlue broke the news about the ownership of Malaysia’s contact tracing application, MySejahtera, which stores the personal data of millions of Malaysians and its residence.
Whilst the Government had claimed ownership of the MySejahtera application, CodeBlue revealed that one Entomo Malaysia Sdn Bhd was the owner of the intellectual property rights (except for the trade mark and date collected through MySejahtera which is owned by the Government of Malaysia) in and to MySejahtera application, and thereafter transferred it to one MySj Sdn Bhd.
This was based on the Court documents revealed in the shareholder disputes between the company behind MySejahtera (P2 Asset Management Sdn Bhd v MySj Sdn Bhd (Kuala Lumpur High Court Suit No. WA-22NCC-516-11/2021), Hasrat Budi Sdn Bhd v Entomo Malaysia Sdn Bhd (Kuala Lumpur High Court Suit No. WA-24NCC-118-02/2022)).
The Government of Malaysia later clarified that it only owned the trade mark and certain modules and their source codes. There are other rights residing in the MySejahtera application which is owned by other parties. Nevertheless, it seems that the Government of Malaysia is slowly transitioning MySejahtera to a non-Covid-19 pandemic related application.
And, to close, activist Heidy Quah Gaik Li’s challenge to the constitutionality of s. 233 of the Communications and Multimedia Act 1998 hit a wall after the High Court refused to refer the matter to the Federal Court based on the following question - Whether the provision of s. 233 of Communications and Multimedia Act 1998 is a permissible restriction under Art. 10(2)(a) Federal Constitution read together with Article 8 Federal Constitution (infringement of freedom of speech & expression).
The matter is now pending at the Court of Appeal (Heidy Quah Gaik Li v Kerajaan Malaysia (Civil Appeal No. B-01(IM)-130-03/2022)). She was earlier charged for sharing alleged content over a Facebook post that alleged mistreatment of refugees at an Immigration detention centre. The Sessions Court then granted a discharge amounting not to acquittal after the Court found that her charge was defective.
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