While NFTs have already proven their usefulness for some brands, their growth also leads to abuses in terms of intellectual property compliance.
As in any booming industry, whenever big names and big sums of money are at stake, nefarious opportunists pour in. In an extraordinarily short period of time, counterfeit NFTs emerged, attracting many unsuspecting consumers and profiting from the intellectual property of both brands and artists.
Brands face the growing problem of counterfeit NFTs
Many companies and artists are still trying to figure out how to use NFTs to promote their brand image. However, the current dynamic of NFTs has taken big brands by surprise. As a result, it is others who benefit from their assets. Many NFT buyers are unaware of what is “genuine,” that is, in the case of a brand, what has been validated or approved by the brand.
Several companies have already filed lawsuits in an attempt to protect their brands from co-optation by the creators of NFT, and more will surely follow. However, today there is no clear case law that allows action against counterfeiters or, more generally, those who infringe the intellectual property of a brand. The only immediate remedy is to request the removal of the infringing NFTs from the markets to prevent their sale; a very difficult result to achieve as brands find themselves having to monitor hundreds or even thousands of NFTs that could infringe their intellectual property rights.
Most businesses cannot afford to monitor all NFTs created and sold on a daily basis as this represents a huge ecosystem. This is why “fake” NFTs are taking over. And when they do spread, they can have the effect of weakening a person’s or a brand’s control over their image, assets and overall value.
Types of NFT Intellectual Property Infringement
There are various ways to breach IP in the NFT landscape today. Among the most common:
- Counterfeit NFTs: If a brand makes its own NFTs, third parties are likely to try to issue other identical tokens to confuse consumers and profit from creating these fakes.
- Copyright Infringing NFTs Applicable to a Work: Even if a brand does not manufacture their own NFTs, an infringer could create a copyright infringing work, then mint an NFT and put it up for sale on a trading platform. The rights holder may possibly ask the platform to withdraw this NFT from sale, accusing it of infringement. But, even if the platform removed the NFT in question, it would still exist in the blockchain and could be traded elsewhere.
- Fake and Replicated NFT Stores: On sites that mimic legitimate NFT exchanges, shoppers can be tricked into sharing their personal information and potentially paying funds to a perfect copy of a reputable marketplace. It is a scam, which preys on unsuspecting victims who rush to purchase their first NFTs.
- Identity theft: this is the case, for example, of artists who work under the cover of anonymity or who receive little media coverage. It is therefore difficult for buyers to know whether he is the real artist or an imposter. Also if the works are offered on fake sites whose registered domain names include the artist’s name.
A practice to check
It is therefore extremely difficult to prevent one NFT creator from plagiarizing or hacking the work of another, as creating an NFT does not automatically and meaningfully protect it. As no specific legislation currently governs NFTs, until cases are tried, there will be no case law to address this issue.
There is also the question of ownership. However, the notion of copyright infringement can be vague in the world of NFTs, for which legislation is not ready. To address this problem, companies may need to change the way they do business. In the near future, expect to see the evolution of employment contracts to explicitly specify who can do what in terms of developing and selling an NFT and who owns the rights to specific digital assets and intellectual property. .
In addition to such contracts, brands can use new emerging platforms that use AI to spot fake NFTs. These systems analyze text and images to detect even the slightest similarity between copyrighted works and a digital work. These platforms give brands the ability to quickly and easily review NFT catalogs across a wide range of markets to identify those who violate their rights. With valid data, counterfeit NFTs can be removed before an overly gullible consumer attempts to acquire them.
Additionally, brands can communicate with consumers to let them know exactly where they can buy one of their NFTs. By limiting distribution to certain sites, artists and brands maintain a means of control. The problem becomes more complex if an NFT buyer later decides to sell or trade a counterfeit.
The world of NFTs is changing rapidly and, as we can see, is full of new complexities. With more regulations, guidelines and protections in place, artists, collectors and brands will be able to reap the unprecedented benefits of this new medium.