Some expect that entering the metaverse will become a necessity for brands, yet companies seeking to exploit this potential should be aware of the risks – and start thinking now about whether and how to adapt their brand protections.
Potential of the metaverse
Experts predict the metaverse will have a market value of €708bn by 2024. In this virtual 3D world, real people can interact using virtual or augmented reality technologies. Future iterations of the metaverse should enable people to not only play with each other but also shop, travel, go to concerts and much more virtually. A completely new economic system will be established in which ownership and investment are possible and companies can earn real money via sales of digital goods and services. Companies will also be able to use the metaverse to connect with Generation Z, and by doing so establish positive branding effects in the real world. The metaverse can therefore offer a completely new virtual market with huge potential.
A number of companies are already active in online platforms such as Roblox, Zepeto and The Sandbox, which are used by up to 49 million people every day and last year generated $100bn in virtual sales. Ralph Lauren, Gucci and adidas run shops selling digital clothing, shoes and accessories for avatars; Nike has launched a digital ‘Nikeland’ (which includes an online store) on Roblox, while Dyson has also established a virtual showroom that makes it possible to experience and buy its products. In these virtual environments, digital goods are increasingly offered as ’non-fungible tokens’ (NFTs), in exchange for payment with cryptocurrencies. NFTs are individual tokens with valuable information stored in them, ie virtual proofs of ownership represented by blockchain technology. Digital services such as virtual restaurants and even (metaverse-specific) investment advice are also conceivable.
Risk of trademark infringement - need to adjust trademark protection?
As with any new market, companies should consider how to protect their brands in the metaverse. After all, those who think too late about these safeguards run the risk of exposing themselves to potential trademark infringements through virtual imitations or bad faith third-party trademark applications. For example, Hermès recently filed a lawsuit for trademark infringement against the digital artist Mason Rothschild, who offered 100 virtual ‘interpretations’ of Hèrmes’ cult ‘Birkin Bag’ for sale as NFTs on an online platform under the name ‘MetaBirkins’, with some allegedly bought for as much as $65,000.
What can trademark owners do? The metaverse is not a legal vacuum, and the applicable law covers many virtual world scenarios. However, it is questionable whether already registered trademarks also offer protection for ‘metaverse products.’ Does a trademark registered for physical goods (for example ‘handbags’ in class 18) also cover their digital counterparts, or are virtual objects more likely to be assigned to the field of ‘computer software’ (class 09) where registered trademark protection does not apply? In view of recent developments, there are still no clear guidelines as to which kind of registration and classification confers sufficient protection for the new type of virtual goods and services.
As a precaution, trademark owners should therefore, if necessary, file new applications for potentially relevant digital products in order to be able to refer to correspondingly clearly defined prior trademark protections in the future, and to prohibit third parties from registering and using confusingly similar signs.
Significant rise in metaverse- and NFT-related trademark applications
One thing is certain: the run on metaverse trademarks has already begun. In 2021, 1,263 NFT-related trademarks were filed in the US – a huge increase on the three filed in 2020. Similarly, at the European Union Intellectual Property Office a significant increase in metaverse-related trademark applications has been seen since the end of 2021. In the EU, trademarks have the advantage of a five-year grace period, whereas in the US, commercial use of the trademark must be proven after three years at the latest.
Major brands including Nike, McDonald’s, Walmart, Johnson & Johnson, NYSE Group, Mastercard – as well as stars such as Jay-Z and Shaquille O'Neal – have also taken the initiative and applied for, among other things, new US and EU trademarks for their core brands in relation to the metaverse and NFTs. These applications have been creative in trying to cover several conceivable wordings and classifications of the digital goods and services they are looking to protect (eg in class 09 (‘downloadable virtual goods, namely computer programs featuring footwear, clothing for use online and in online virtual worlds’), but also in class 35 (‘online retail store services in relation to virtual goods, namely, footwear, clothing, for use online’), class 36 (‘processing of virtual credit card and virtual payment card transactions, payment processing services … in the metaverse and other virtual worlds’) and class 41 (‘entertainment services, namely, providing on-line, non-downloadable virtual footwear, clothing for use in virtual environments).
It remains to be seen how the offices will handle these metaverse-related applications. However, trademark law has historically proven flexible and will no doubt adapt to cover new categories of purely virtual products and expand the scope of protections of eligible trademark classes accordingly.
Check and secure your branding potential
Even if the virtual world cannot yet be clearly defined, it contains unimagined potential waiting to be discovered. Entering the metaverse by extending brand protection to virtual goods and services at an early stage may already be the right step for companies.
If you would like to discuss what you can do to prepare your trademark protection for the metaverse, please get in touch with our team.
With the kind help of Katrin Eßer.
For more information related to the metaverse:
- Regulating the metaverse – a day in the life, James Smethurst, John Risness, Emily Smith (freshfields.com)
- Does the metaverse provide a usecase for central bank digital currency?, Claire Harrop (freshfields.com)
- Freshfields Fintech: predictions for 2022 - #1 The Cryptosphere, Claire Harrop, John Risness, Brock Dahl, Eva Schneider, Tom Hingley, Daniel Klingenbrunn