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People on the internet don't know anything about business. First, I'm not sure that allowing these guys to use that IP couldn't weaken any future attempt to take down an undesired fan project.

It's all pretty when it's a nice remake. But imagine if someone does a nice remake and them add fan made porn with your characters on a future update? It will damage your brand. I always remember of GTA San Andreas and the Hot Coffee mod. It wasn't made by Rockstar, but if you look at older news, a lot of sites reported things like "GTA has explicit sex". Parents don't know what a mod is, they just will think that the game has it and won't buy it.

The correct action is to send a cease and desist ASAP. If they insist, sue them to oblivion.

Of course, these guys aren't "innocent fans". They do that to get attention. A good game designer may launch great games that nobody will buy. But he can launch a HD remake of a famous franchise. The media will report it extensively and he will get a lot of buzz. Then he gets a C&D letter and takes it down. Next step? Do a new game, "inspired" by the game you copied: you made an HD Unreal Engine 4 Mario? So do a decent 3D platformer on Unreal with similar mechanics but with your own characters. Media will again report it like crazy: "Former Mario HD developers that got a C&D from Evil Nintendo do a new game". Free marketing. People will also be willing to support the poor developers bullied by the big corporation. You get sales, now everything is legal and maybe you even get rich.