The boundaries between physical reality and virtual reality are set for an overhaul as the metaverse continues its gradual entry into our daily lives. While the Metaverse is still in its infancy, industry-leading developers have already empowered users to work, learn, socialize, play, and do business in this exciting new digital world, well only slightly mystifying.
Whether or not you intend to merge your business activities with NFTs and/or the Metaverse, it is important to be aware of the threats and opportunities facing brand promotion and protection that arise with the evolution of the digital arena.
Brand Protection in the Metaverse
You may have heard when Nike Inc. recently applied for registration of a number of trademarks worldwide, which included claims in Class 9 for “Downloadable Virtual Goods” and Class 35 for “Retail Store Services featuring Virtual Goods” . Since, Nike Inc. has become much less solitary in its exploration of NFTs (non-fungible tokens) and the opportunities that exist in the metaverse, with many other well-known companies showing interest in joining the evolving digital arena. A recent and exciting addition to this business category is McDonalds, as early reports indicate that McDonalds may be opening “virtual restaurants,” as well as developing NFTs and selling virtual goods.
Amid this growing trend, it is worth considering whether trademark abuse protection strategies and procedures will also need to adapt to the new market. The answer, of course, will vary.
For marks used in connection with virtual goods or services, protection may begin by filing a registration of the mark in Class 9 (computer and scientific apparatus and software), Class 35 (retail services , commercial and advertising), Class 41 (entertainment services) and/or Class 42 (scientific and technological services).
However, merchants of goods and services only in the physical world could also consider depositing in these classes. In theory, anyone can make a virtual product, which underscores the need to be prepared to respond if someone else is found to be making virtual copies of your products or applying your brand to digital material. without your permission. If you provide services such as entertainment, education, business or legal services, it may be less necessary to tailor your claims to specify that they are also provided virtually, but this may depend on the exact nature of your services.
In Australia, a trade mark provides protection against similar or identical marks claimed for the same or similar goods or services. Generally, virtual goods would not be considered similar to physical goods such as clothing or jewelry. The rating system in Australia has yet to fully adapt to the changing consumer landscape and there is currently no clear timeline for when this will take place. Pending clarification, many trademark owners have adopted the strategy of including protection on virtual renderings of their products, as evidenced by the large number of pending or recently registered Australian trademarks that include claims for “digital materials” Where “downloadable virtual goods”.
A possible showcase of the value of this approach arose from the ongoing dispute between luxury goods company Hermès and Mason Rothschild, which recently created and sold 100 “MetaBirkin” handbags in the form of NFTs. While Hermes holds US registrations for BIRKIN covering physical bags, the registrations do not cover virtual goods or bag design. Hermès is now suing Mason Rothschild, alleging that NFT handbags created and sold by Mason Rothschild under the name “MetaBirkin” infringe the BIRKIN trademark. The merits of the allegations have yet to be assessed, but the U.S. District Court for the Southern District of New York denied Mason Rothschild’s motion to dismiss the lawsuit, which is a promising outcome for Hermès.
A similar dispute arose between Nike Inc and StockX LLC, an online shoe retailer, alleging that StockX created NFTs using the Nike trademark, without permission. In defense of their actions, StockX claimed that its NFTS are, in essence, a “key” to access a stored physical item rather than “virtual goods” themselves.
These disputes have so far offered valuable lessons to trademark holders. First, and most obviously, registering your trademark also for virtual goods could reduce the complexity of litigation and/or the strength of any trademark infringement claims. Second, alleging intellectual property infringement against the maker of an NFT may not be straightforward, as an NFT is simply a digital token that conveys ownership of a digital asset. It can be thought of as a receipt proving ownership of an asset (e.g. digital artwork) rather than the asset itself. Further clarification from legislators on the effect of this distinction is undoubtedly welcome.
Territoriality and metaverse
Another key issue facing trademark protection in the Metaverse is that registering a trademark only grants protection in the territory where the trademark was registered. Conversely, metaverse worlds may not have the same respect for territorial boundaries that we recognize in the physical world. Therefore, it will not always be clear which laws and in which jurisdiction disputes arising in the metaverse should be considered.
Until a clear regulatory framework is in place to address this issue, trademark owners will need to be particularly vigilant when it comes to detecting infringements and enforcing their rights against other parties. As possible protection, it may be useful at this stage to register trademarks in several jurisdictions.
In summary, there will be a lot of uncertainty for brand owners in the years to come as the metaverse and utility of NFTs continues to grow. To manage this uncertainty, you can consider:
- Register your trademark in classes 9, 35, 41 and/or 42 to cover digital representations of your goods and services or specify that your services are also provided in virtual media or relate to virtual goods.
- Expand the scope of your territorial coverage to ensure that all major markets are captured.
The metaverse phenomenon is said to be a new take on the internet, empowered by immersive online engagement through VR technology and augmented reality. But how does intellectual property work in this emerging online world?