Trademark law in the metaverse
The metaverse offers trademark owners new opportunities – and also exposes them to new risks. But whether you plan to use your trademarks in the virtual arena or simply want to avert potential trademark infringements, the metaverse must be part of your trademark strategy.
Virtual goods: what’s the hype?
Fashion brands such as Nike, Gucci, and Balenciaga have all opened flagship stores in the metaverse and are offering so-called NFTs for digital wearables – apparel, shoes and accessories – for avatars. Other branded goods manufacturers, such as Hermès, have however deliberately decided not to virtualise their products and are taking legal action against third parties who use their trademarks in the metaverse.
EUIPO statement of 23 June 2022
As a recently published statement by the European Union Intellectual Property Office (EUIPO) shows, trademark offices are also receiving increasing numbers of applications to protect virtual goods and NFTs (Virtual goods, non-fungible tokens and the metaverse (europa.eu)).
According to the EUIPO, virtual goods – for example, a designer evening dress that exists only in virtual form and can be worn by an avatar – are proper to Class 9 because they are ultimately treated as digital content or images. When drafting a list of goods, it is nevertheless not sufficient to simply use the term “virtual goods”, as this is not precise enough. The trademark application must instead state the specific type of virtual goods for which protection is sought. For example, the virtual goods registered in Class 9 for the word mark of the TOMMY HILFIGER fashion label include – similar to the physical goods offered under that trademark – perfumes, clothing, footwear, headgear and bags.
So-called NFTs are to be distinguished from virtual goods. The EUIPO defines NFTs as unique digital certificates registered in a blockchain, which authenticate digital items but are distinct from those digital items. Digital goods – for example, a pair of virtual shoes – can be duplicated an unlimited number of times. An NFT, however, makes it possible to purchase an exclusive certificate of authenticity for a specific digital object. Also with regard to NFTs, the term “Non-Fungible Token” is not sufficient for a trademark registration according to the EUIPO; rather, it is necessary to specify the type of digital item authenticated by the NFT – which must also be registered in Class 9. The forthcoming 12th Edition of the Nice Classification will accordingly incorporate the term “downloadable digital files authenticated by non-fungible tokens” into Class 9.
The EUIPO concludes by saying that services relating to virtual goods and NFTs will continue to be classified in the corresponding Nice Classification service classes in line with the established principles. For example, EU trademarks have already been registered in Class 35 for “computerised online wholesale and retail services for buyers and sellers of downloadable digital videos, clothing, hats, glasses, bags authenticated by non-fungible tokens [NFTs]".
Is a virtual handbag a handbag?
Virtual environments also harbour new risks. Fashion house Hermès, for example, faced a situation where a third party was selling over 100 virtual MetaBirkins – inspired by its famous Birkin bag – on metaverse marketplace OpenSea. Because Hermès had decided not to have their trademark protection extended to virtual goods, the question is whether a trademark registered for handbags is infringed by offering virtual handbags.
Under EU law, a trademark is generally infringed if there is a likelihood of confusion (section 14(2) Trademark Act (Markengesetz), Article 9(2) European Union Trade Mark Regulation). This requires the use of a similar or identical sign for similar or identical goods or services – making comparison between the physical and virtual goods the key factor. Only if the courts assume a similarity between virtual and physical goods can trademark owners defend themselves against the use of their trademarks for virtual goods even without virtual goods protection on the basis of their protected trademark. However, it is not yet possible to say what position trademark offices and courts will take. According to the principle of territoriality under trademark law, the trademark infringement must take place in-country. It is not yet clear when that is the case where virtual trademarks are used in the metaverse.
Owners of trademarks with a reputation are in a better position in this regard, as trademark protection is not restricted to the use of the sign for similar goods. However, it can be very burdensome to prove the reputation of a trademark in infringement proceedings. Given the uncertainties about the scope of trademark protection, it is advisable to extend this protection to virtual goods also as part of an initial defensive trademark strategy. At the same time, this will make it easier to ward off trademark applications that third parties file in bad faith for virtual versions of trademarked goods. Owners of German and EU trademarks benefit from the five-year grace period for use, providing enough time after filing the trademark application for virtual goods to actually launch these goods in the metaverse before the trademark in question becomes ready for cancellation due to non-use. Where the lines between countries and markets are blurred, a trademark strategy geared solely towards national markets is unlikely to offer sufficient protection against trademark infringements in the metaverse. It also remains to be seen how cease-and-desist orders will be enforced in the metaverse.
Just as our universe continues to expand, so too does the metaverse – with new players and applications emerging on a daily basis. But the metaverse does not exist in a legal vacuum. Whether you want to offer goods or services in the metaverse, or first focus on protecting your trademarks from infringement, you should make sure you have the best possible trademark strategy for the virtual realm. This includes:
- Expanding your trademark portfolios to include trademarks for virtual goods and NFTs in Class 9 and service marks in Class 35.
- Extending the territorial scope of your trademark protection, as it is currently unclear what range national trademarks will have in the metaverse.
- Adapted monitoring of trademark applications filed by third parties – especially for virtual goods and NFTs in Class 9 – so as to identify conflicting applications in time.
Our expert Digital Economy group is happy to help assess specific plans, discuss individual aspects in depth or answer any questions you may have.