Intellectual Property in the Metaverse. Episode II: Trade Marks.

Due to their role in the Metaverse, trade marks may be the Intellectual Property Right that attract the most interest, namely due to the protection they confer to the goods and services that are being commercialised there, and also due to recent infringement cases as some trade mark disputes already took place.

We will analyse whether the current trade mark system grants the same protection to the goods and services commercialised in the Metaverse and if it is sufficient to rely on the current classification system. 

What is happening with trade mark law in the Metaverse?

As our readers might know, the function of a trade mark is to serve as an indicator of origin, allowing consumers to distinguish the goods and services of a company from the ones of its competitors in the market. Therefore, trade mark law grants an exclusive right to the right holder and confers protection to a sign or logo in relation to the goods and services designated in the application. The classification of the goods and services is performed in accordance with the Nice Classification of Goods and Services. Notwithstanding, here arises one of the concerns as regards trade marks in the Metaverse. 

Until now, when filing a trade mark application, only the physical products that the owner intended to effectively commercialise were designated in the application. E.g. a company that sought to register a trade mark for shoes, would obviously apply for footwear in class 25 of the Nice Agreement. 

However, as a consequence of the growth experienced by the Metaverse and the disputes that have taken place in there, the whole system has been put under discussion. Namely, if the protection given by the current law and the classification system would apply to the Metaverse.

What happens to the existing trade marks that only include goods and services focused on the real world? Will the same protection be applicable to the Metaverse?

Actually, the products existing in the Metaverse, like clothing or objects, are just the virtual appearance of the real product. They are represented by means of an NFT which, as explained in the previous episode, is an essential technology for the virtual assets to be purchased. Following the example mentioned above, if a popular brand commercialises shoes, which are registered under class 25 as footwear, and wants to expand its commerce to the Metaverse, could this protection be extended to an NFT of those shoes?  In other words, is the protection given by class 25 to “normal” footwear also applicable to an NFT? If not, how could companies obtain protection for their products and prevent the infringement of their rights in the Metaverse? 

Apparently, these virtual representations should be considered for classification purposes as computer software, capable of representing those products in a digital environment. 

For this reason, big companies are filing new trade mark applications in an attempt to adapt their rights to this new digital environment. In order to secure their assets or to enforce their rights against very similar or identical representations of their products in the Metaverse, they cannot simply rely on their existing registered trade marks, if they do not own rights in classes covering computer software. 

As a consequence, there has been an increasing trend to designate new classes including the mention of “virtual” for the goods and services at stake. Companies are resorting to classes 9, 35 and 41 - for goods and services respectively - to extend the protection to the Metaverse. 

Therefore, it seems that generally speaking, the current trade mark law and the goods and services classification system are applicable to the Metaverse, as long as the goods and services are correctly classified as virtual products. 

Indeed, it might be useful to adapt the trade mark legislation and to include specific references to the Metaverse in the law and in the classification system. In a near future, some companies will only have their commercial interests in the digital world and therefore they might seek protection for their goods/ services only there. 

Besides that, right holders should check their trade mark portfolios to make sure that the goods and services designated in their trade mark applications are classified correctly, namely as virtual products. 

One case that has been in the spotlight recently, is the one involving the luxury brand Hermès and its popular bag “Hermès Birkin”. The French company recently sued the American artist, Mason Rothschild, for creating and commercialising in the Metaverse around 100 NFTs extremely similar to the notorious “Birkin”. Rothschild’s NFTs, called “MetaBirkins”, turned out to be very successful in the Metaverse and have been sold for the equivalent of thousands of euros each. As a consequence, Hermès sued the artist for trade mark infringement, on the grounds that he registered and used the domain name “MetaBirkins.com”, obtaining an economic revenue and taking unfair advantage from the reputation of the luxury brand.  

From his side, the artist claimed that his work cannot be considered as trade mark infringement, since the NFTs are artistic representations of imaginary “Birkins”, not real ones. 

Indeed, this case shows the legal uncertainty around the unauthorised use of trade marks in NFTs. 

Another concern arises with regard to the services offered, in the sense that it is becoming more and more common to have companies selling their products in the Metaverse, which can be purchased both for the avatars, but at the same time for real life. An example of this is McDonald’s, that is developing a system to offer real-life delivery with an order placed in the Metaverse. 

However, this system can lead to disputes if a third party is commercialising them, without the right holder’s authorisation. As shown below, it can be misleading for consumers to think that the digital product and the real one have the same commercial origin.  

As a recent case, the company Nike sued StockX, a marketplace located in the Metaverse, for commercialising Nike’s footwear as NFTs. These virtual assets reproduced in their entirety existing Nike shoes, but they were tied to the physical sample. Therefore, when consumers purchased the NFT, they automatically acquired the real version of the authentic physical footwear. The physical shoes could be obtained upon the purchaser’s request, in exchange for its NFT. However, StockX granted exclusive advantages and benefits to consumers in order to persuade them to keep these NFTs, instead of exchanging them for the real shoes. Consumers were supposed to be able to perform the exchange between the NFT and the physical shoes at any moment, but in that case, they would have lost their exclusive advantages. Nike argued that this practice could be misleading for consumers, since they really believed they were purchasing authentic Nike NFT products. Nike considered this practice harmful to its reputation, and that it could obstruct its entry into the Metaverse, since consumers could associate StockX as the authorised NFT retailer. 

As a matter of fact, in preparation for its entry in the Metaverse, in December 2021 Nike acquired RTFKT, a company which is engaged in creating collectables. 

In addition to this, the company updated its trade mark portfolio by filing 7 trade mark applications within the United States Trademarks and Patent Office (USPTO), to register its mark for virtual shoes and clothing. 

The dispute is still ongoing, and it will be interesting to see the outcome of it.

The above-mentioned cases reflect an emerging issue that popular brands are facing, which is the unauthorised use of register trade marks in the Metaverse, concretely as NFTs. This constitutes a real concern for right holders, since the inclusion of a trade mark would definitely increase the value of an NFT. Obviously, this constitutes an act of unfair advantage against famous reputation brands. 

For this reason, right holders are being forced either to create their own NFTs or just keep intensively monitoring and taking enforcement actions against infringers. 

Nevertheless, the presence of trade marks in the Metaverse is not always subject to disputes. Actually, brands are adopting a different strategy and there is an increasing trend of interactions between brands and platforms placed in the Metaverse, like collaborations between clothing brands and virtual reality companies such as:

- The luxury fashion brand Balenciaga launched a collection inspired in its iconic models, to dress characters of Fortnite. In this way, players can purchase and wear the digital replica of the brand’s outfits to express themselves. 

- The fashion brand Zara, in collaboration with the south Korean brand Ader Error, launched in Zepeto, its “AZ” collection. The clothing was available for the avatars, but it also allowed users to buy real clothes for their daily life. 

- Another example can be found in the collaboration between Dolce & Gabbana and UNXD, which created the Collezione Genesi. The luxury brand auctioned for the equivalent of 5 million euros, 2 copies of “Dress from a Dream” (which are both NFTs and real tailored-made dresses), the Glass Suit (an emerald green suit) and the NFT “The Impossible Tiara”, a solely digital piece. Apart from these unique pieces, benefits were granted to NFT purchasers, like the chance to assist to D&G fashion shows or even visit its atelier.  

 

This article may be quite relevant for SMEs, as a first approach to the Metaverse. To sum up, if you have the intention to start a commercial activity in the Metaverse, it would be advisable to take it into account when filing a trade mark application and make sure to include the specific classes for virtual goods and services! 

In case there are already registered trade marks, it is important to update our portfolios, ensuring the legal protection of the trade mark in relation to virtual products.  

Moreover, it is just as important to monitor closely third party activities in order to prevent unauthorised uses and trade mark  infringements. 

As seen before, collaborations between brands - mainly fashion brands- and digital companies, turned out to be very successful in terms of economic revenues. Collaborations with these digital companies – that can provide the necessary technology - could be a winning choice for SMEs that wish to start their endeavour in the virtual world. 

 

Stay tuned for the next episodes!

 

Picture by Efe Kurnaz on Unsplash