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How brands can approach NFT IP infringement

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Nike is another example of a brand that is confronting the issue of NFT forgeries. Last week, Nike sued online reseller StockX for allegedly selling unauthorized NFTs of its shoes. StockX sold more than 500 Nike-branded tokens, per the complaint.

Meanwhile, the marketplace OpenSea recently fessed up to rampant IP violations on its platform, admitting that more than 80% of tokens were created through “lazy-minting”—a free method of selling NFTs that puts transaction fees (known as “gas” fees) on the buyers. Those NFTs were plagiarized works, fake collections and spam.

So-called lazy-minting is a preferred method for schemers to “mint” NFTs— the process by which the tokens are created on digital marketplaces—because the cost associated with the virtual product is foisted on the buyer. The original creator avoids paying to list their NFTs, eliminating a key hurdle that would otherwise prevent fraudsters from putting up as much unauthorized content as they want. 

OpenSea did propose restrictions on lazy-minting, but it was met with a backlash among its users and backed off.

Advertising experts expect that counterfeit NFTs will continue to plague this new market. It’s just a reality for brands that have to protect their intellectual property. “I think you’re always going to be open to [infringement], especially in an area where there’s money to be made and it is a hotbed of speculation,” said Luke Hurd, director of experience design at VLMY&R.

What can brands do?

The short answer: Not a lot. Cryptocurrency, and thus NFTs, aren’t yet subject to government regulation. Nike may have sued StockX, but lawsuits are expensive and time-consuming, and therefore don’t make sense for smaller brands.

A more feasible option is for brands to heavily monitor NFT platforms for unauthorized IP—perhaps even through a third-party monitoring service—and request those platforms to scrub any instances of copyright violations they discover, said Gordon, the attorney from Reed Smith.

“[Platforms] are going to take it down because they don’t want the aggravation of potentially being branded a vicarious or contributory copyright infringer,” Gordon said.

Takedown policies aren’t required by law, but most of the popular NFT marketplaces have them. Bitski, an NFT startup that builds digital storefronts for brands and creators, will honor takedown requests, but in order to reduce their frequency, it prioritizes projects in which the IP is either new or the original creator is involved.

“Opt-in and clarity are the two keywords that we think about when we think about IP,” said Mike Gubman, Bitski’s VP of business development.

OpenSea also has a takedown policy. Speaking about its “Mic Drop” collection, Pepsi said, “We are confident in OpenSea’s ability to remove unverified NFTs across their platform and will continue to monitor and report fakes to their team.”

The brand also acknowledged it was aware of the fake “Pepsi Mic Drop Pepsi Mic Drop Pepsi Mic Drop” NFTs, which could explain why that collection has since been delisted from OpenSea and the owner account no longer exists on the platform.

But even this method is not a cure-all. Two more fake “Mic Drop” collections were available for purchase on OpenSea at the time of writing: PepsiDropsMic, which contains 603 items whose Token IDs match those of the real collection, and PepsiTheMicDrop11, whose 37 items had no bearing to the real IDs whatsoever.


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