The Metaverse: A new frontier for trade marks

19th October 2022

The metaverse is such a hot topic right now among IP practitioners. It’s on every IP conference program, and the subject of so much discussion in the profession. But it’s not just future-gazing. Many businesses are building their plans for the metaverse, and some are already active in it.

For those unfamiliar, the metaverse has been described as the 3D or ‘embodied’ internet. It’s a convergence of the real and the virtual world, enabled by VR and/or AR technology. From attending virtual concerts or museum exhibitions, through training medical workers or mechanics, to enriched video conferencing experiences, there are infinite use cases.

What can brand owners do now to embrace this exciting new technology?

1. Define and refine your filing strategy

In some situations, brand owners will be able to rely on their existing trade marks to enforce against brand misuse in the metaverse. But there are three benefits to broadening your filings to include metaverse-specific terms:

• No need to prove likelihood of confusion
• No need to prove reputation
• More effective take-downs

Let’s unpack those:

1. Broaden your trade mark specification to add terms which are identical with goods/services in which potential infringers are going to be using your mark. This means that in the UK and Europe you can rely on “double identity” claims. This is where a mark identical to yours is being used in relation to goods/services identical to those for which your mark is registered. This avoids arguments about whether consumers are likely to be confused by the infringing use.
   
2. Being able to bring a double identity claim also reduces the likely need to rely on claims based on owning a famous mark, where evidence of reputation is required. It also helps owners of marks which are not famous enough to qualify as a trade mark with a reputation in the first place.
   
3. In relation to take-down notices issued to platforms on which third parties are misusing your brand, some platforms respond more quickly when the trade mark owner relies on a registration covering identical (rather than just similar) goods. Indeed, some platforms may even require this.

A rush to file

As a result, many brand owners have been rushing to file marks with new goods/services specifically related to the metaverse and NFTs. Trade mark offices have also been giving guidance about the proper terms to use. For example, the EUIPO guidance indicates that “downloadable virtual goods” are proper to Class 9, and that you need to identify the type of content to which they relate e.g. “downloadable virtual goods, namely clothing”. Services relating to virtual goods and NFTs will be classified in line with established principles. For example:

• Class 35: retail store services featuring virtual goods; and
• Class 41: entertainment services, namely, providing on-line non-downloadable virtual goods. [See our recent article: Protection in the Metaverse: the EUIPO issues practice tips for trade mark classification)
  

2. Consider enforcement strategy

Jurisdiction

One FAQ for trade mark misuse in the metaverse is: in which real-world location is that use taking place and which court has jurisdiction? In a web 2.0 context, the test for assessing whether such use is actionable in a jurisdiction is one of targeting. “Targeting” means taking deliberate aim at the consumers in another country: the mere fact that a website or platform is available in a territory is not sufficient.
For metaverse usage, many of the criteria traditionally considered in a targeting assessment may not be so applicable. For example, language, currency, phone numbers, country code TLD, testimonials/clientele from country, delivery options/terms mentioning country.

This can increase the importance of other factors. These include spend on country-specific search engines, the international nature of the activity, site traffic transactions from IP addresses in the relevant jurisdiction, etc.

It will also increase the importance of some broader factors: the appearance and content of the website and even circumstances beyond the website itself, such as the nature and size of the infringer’s business.
This will make it even more important for brand owners to pick their cases carefully.

Intermediaries

As with web 2.0, the role of intermediaries will also be central. This ranges from simple take-down notices to the potential suitability of more complex measures, such as disclosure orders and other forms of potential injunctive relief.

Room for creativity

For brand owners relying on traditional registrations containing only real-world goods, there is room for creativity. The UK/EU test for assessing similarity of goods looks at the uses, users, physical nature, and trade channels of those goods, and whether they’re complementary/in competition.

Considering the uses of physical vs virtual sneakers, for example:

• At first sight the assessment might not look so good for a brand owner.
• But these days isn’t the intended use of real-world fashion sneakers the same as a virtual pair? Just as much about self-expression, projecting an image and identity, and being loyal to a brand, rather than keeping feet protected, warm and dry?#
• There is a massive market for real-world sneakers as collectibles, which are never in fact worn. If a digital product is backed by an NFT, then it can be collected, traded, and sold on for profit, much like a real collectible item.

Tech 101s

Brand owners will also need to become familiar with new concepts and technology in adjacent areas, like the basics of blockchain, NFTs and IPFS.

An infringing virtual item in a metaverse may be backed by an NFT. But an NFT exists on the blockchain and technically cannot be destroyed or changed, even if a court were to order that. Instead, there is the idea of “burning” an NFT, consigning it to the digital trash can via a public, irreversible, and permanent transaction that is recorded on the blockchain ledger.

3. Keep up to date

This is a fast-moving area: legal precedent, as well as daily practice, is being shaped all the time.

Developments

For example, a UK court recently allowed service of a claim by NFT. The NFT would be ‘airdropped’ into the digital wallets which were said to contain the assets allegedly misappropriated. Compared with service by Twitter, which has been allowed in the past by UK courts, this is arguably less controversial. This is because there is a higher chance that the wallet owner will become aware of service, and there is immutable clear evidence of what documents were served. (See our article: The UK High Court permits service of legal proceedings via an NFT.)

Earlier this year, the Law Commission of England and Wales published new proposals to reform the law relating to digital assets, and is inviting responses by consultation. Responses may be submitted online until 4 November 2022.

Horizon scanning

In the IP world, the most visible disputes so far are playing out in the US. Most brand owners will already be watching developments in the Meta Birkin case¹. Two other cases to follow are the Nike v StockX case² and the Bored Ape case³. While all three relate to NFTs, the arguments are relevant to the metaverse as well. (See our article: Trouble in NFT Paradise – Lessons for Brand Owners.)

A recurring theme seems to be the extent to which an alleged infringer is protected by arguments based on freedom of expression. In the UK, a court considering whether to grant relief must take account of whether such relief may adversely affect the European Convention right to freedom of expression. Most trade mark related UK case law in this area is in the field of comparative advertising cases/trade libel. But there have been some comments from other UK trade mark cases in the past, suggesting it may be a high bar for defendants to meet.

• In the Hearst v Avela case⁴ the judge rejected a defence that a finding of infringement would be a disproportionate restriction on freedom of expression. This was in the context of unofficial Betty Boop merchandise, i.e. commercial speech where the purpose of using the mark was to sell goods which had been found to infringe.
• In the “Mr Miss World” case⁵ the judge was sceptical that use of a trade mark other than in political speech can of itself generally engage freedom of expression rights.

Key Takeaways

So many of these assessments (similarity of goods, targeting, restrictions on freedom of expression) are highly fact-sensitive, making them hard to predict in the abstract. At this point, it seems to be a case of refining and adapting existing tests and strategies rather than tearing them up in favour of new ones. The one thing we can predict with certainty is that this area will continue to generate lots of interest. Brand owners and their advisors will do well to keep on top of it all.

Get in touch with Nick if you’d like to discuss your options for taking your brand into the Metaverse!

Footnotes

1. Hermès International et al. v Mason Rothschild, 22-cv-00384 (SDNY)
2. Nike Inc. v StockX LLC, 22-cv-983 (SDNY)
3. Yuga Labs Inc v. Ripps, U.S. District Court for the Central District of California, No. 2:22-cv-04355.
4. Hearst Holdings Inc & Anor v A.V.E.L.A. Inc & Ors [2014] EWHC 1553 (Ch)
5. MissWorld Ltd v Channel Four Television Corp [2007] E.T.M.R. 76.

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