What are some ways to avoid IP infringement in the NFT space?

While non-fungible tokens (NFTs) have gained traction since the beginning of the year, the hype element is now disappearing. More digital artists and creators worldwide are using NFTs to monetize their work with minimal investment, transforming the digital art space. Still, the blurred lines between artistic expression, plagiarism and trademark infringement have caused legal challenges, as regulations surrounding cryptocurrencies and digital collectibles are not yet set in stone.

Hermes vs. For example, the Rothschild lawsuit raised critical issues of trademark infringement and NFTs. In this case, popular French luxury design house Hermes sued 28-year-old creator Mason Rothschild over his MetaBirkins collection, which included 100 NFTs of digital, fur-covered bags resembling Hermes’ iconic Birkin line. On 8 February 2023, a nine-member jury reached a verdict in Hermes’ favour. The court found Rothschild liable for trademark infringement, trademark dilution and “cybersquatting” and awarded the company $133,000 in damages.

This legal battle underscored the importance of digital artists and major brands drawing clear lines between their work and trademarks to prevent a negative impact on both parties – at least until the regulations are clarified. For users, explicit rules are of great importance, as they can prevent them from investing in fraud and counterfeits.

NFT analysis firm discovers another case of IP infringement

In a potentially similar case of IP infringement, NFT analytics firm bitsCrunch discovered that the popular NFT collection Coodles appears to incorporate the McDonald’s logo into an attribute labeled “McCoodles.” This special feature showcases the McDonald’s logo on hoodies in the collection. Out of 8,884 NFTs in the series, 434 of them have the McDonald’s logo as an attribute.

Source: OpenSea

At the time of writing, these 434 NFTs have generated over $500,000 in total volume, and 398 different owners hold these McDonald’s themed NFTs. The collection has collected 3,373 Ether (ETH) in total volume, with a floor price of 0.0059 ETH since its inception.

According to OpenSea’s description of the project, Coodles is a “community-rewarding collectibles project with 8,888 randomly generated NFTs on Ethereum.”

In the recent Hermes vs. In the Rothschild case, the court stated that the rights of artists, critics and commentators do not extend to the point where they create confusion among consumers as to the origin of the content. So far, there is no public information about any collaboration or agreement between McDonald’s and Coodles.

According to Kantar, McDonald’s is the sixth most valuable global brand and the fifth in the United States. The brand’s value rose 27% in 2022 to nearly $200 billion.

The case is relevant to McDonald’s, as the company has been actively expanding into the Metaverse, filing several trademark applications to establish virtual restaurants last year.

As established by the Hermes IP infringement case, displaying a brand’s logo in an unrelated NFT collection could potentially mislead consumers and damage the brand’s reputation. In addition, NFT buyers receive limited rights, which increases the risk of inadvertent copyright infringement.

Anyone can detect IP infringement in NFTs

In Hermes vs. Rothschild case, NFT marketplaces OpenSea, Rarible and Zora agreed to remove the MetaBirkins collection. This means that the owners of these NFTs have limited exposure to secondary markets to sell their assets. To avoid similar situations, investors should monitor NFTs and check for any IP violations before making a purchase.

BitsCrunch has developed APIs that help brands determine whether their logos have been used in NFT collections, thereby helping them protect their intellectual property rights. Thanks to the NFT Forgery Detection API, the blockchain analytics firm identified the connection between the Coodles collection and the McDonald’s logo.

Source: bitsCrunch

Besides brands, this API allows anyone to track whether an NFT collection contains a brand name and as a result may be liable for IP infringement.

The AI-powered API can detect partially or fully counterfeit NFTs, fabricated logos and brand identities of well-known brands, as well as new or existing NFTs, to protect users from investing in potential frauds and counterfeits.

Guardians of the NFT ecosystem

In the blockchain space, NFTs have had the most widespread adoption compared to cryptocurrencies, which have had more than 10 years to get to where they are today. Like all innovations, this adoption brings both good and bad, such as when online sellers promote well-known brand names and products in the Metaverse as virtual goods or NFTs without permission. With this new virtual marketplace comes new questions for brands: How do real-world intellectual property rights apply to products in the Metaverse? How can brands protect their intellectual property rights?

Although bitsCrunch cannot fully answer these questions and completely prevent all shady projects, the team can fight them and do their best to help brands remove these counterfeit NFTs from the NFT marketplaces and enforce their rights.

Going forward, bitsCrunch plans to strengthen cooperation with authorities and financial institutions in the fight against crypto-fraud and laundering, and actively support a wide range of users – from beginners to professionals – in the NFT and blockchain space, to detect and eliminate fraudulent activity across NFT – the ecosystem.