Brand Protection in the Metaverse
With an estimated value of US$800 billion by 2024 and is expected to generate US$1 trillion in revenue the metaverse is considered the “New Internet” and an innovative way for brands to connect with consumers. For companies looking to capitalize on the business value of the Metaverse, this note aims to highlight what the Metaverse means for brands and whether additional trademark rights are required to exercise control over the brand.
What are the opportunities for brands?
The Metaverse is still relatively new, and both consumers and businesses are experimenting with engagement on various platforms, including Decentraland, The Sandbox, and Roblox. The latter would attract nearly 50 million daily active users and more than 5.8 billion virtual objects acquired (paid and free).
Thanks to virtual and augmented reality technologies, consumers can discover brands through virtual concept stores, sporting and musical events. For example, Decentraland’s Metaverse Fashion Week in March 2022 received more industry attention than any previous digital fashion event. NFTs have also become mainstream digital assets, despite the volatility of crypto, with some fetching higher prices than the physical equivalent. Beyond fashion, IKEA’s “Studio” lets shoppers visualize how products will look in their homes. Brands like iTechArt and Oculus VR that produce VR headsets for immersive use in digital spaces aim to improve the user experience, encouraging experiences like IKEA’s.
Even governments have jumped on the metaverse bandwagon, with the Seoul Metropolitan Government planning to build a 3.9 billion won metaverse platform to enable citizens to virtually access public services. In Thailand, the Tourism Authority launched the Amazing Thai Metaverse for tourists to explore virtual durian orchards, collect NFTs and vouchers that can be used in the real world.
With inflationary pressures in 2022 and wild swings in cryptocurrency, some may wonder if interest in the metaverse is sustainable in the short to medium term. In the longer term, if public services and infrastructure improve, enabling more daily users, then more brands beyond the fashion, cosmetics or sports segments can follow suit with the examples below. above. According to McKinsey, the economic value of the metaverse could potentially be worth $5 trillion by 2030.
Who controls a metaverse and in which jurisdiction?
As brands decide their IP strategy upon entering the metaverse, preliminary questions to ask are who controls the metaverse and which jurisdictions are relevant?
In terms of control, it refers to the degree to which a metaverse is centralized. The more control an organizing entity has, potentially like Meta in Horizon Worlds, the more likely it is that policies such as takedown mechanisms will be in place to enforce IP infringers. In contrast, in a decentralized metaverse such as Decentraland, there is no single ownership, which can make it more difficult to formulate policies that allow brand owners to participate while ensuring that their intellectual property is protected and that trademark infringements can be addressed.
Will the metaverse of the future be a unique digital universe? Ideally, a user should be able to travel between the Meta version of the Metaverse and the Microsoft version seamlessly. The metaverse will be something like the internet today, without borders. The question then arises as to how brands protect themselves in this unique new digital environment? Will brands be offered a single withdrawal mechanism for the entire metaverse? Which service providers will be responsible for potentially illicit actions taking place in the metaverse?
Currently, some platforms have takedown mechanisms to combat infringement. For example, OpenSea quickly removed listings based on complaints from brand owners. However, the infringer may continue to sell the virtual items and list the virtual items under different names or on other platforms. If the infringer can be traced back to the country of origin, would traditional legal action be possible in that country of origin? Additionally, can trademark owners sue the owner or controller of a metaverse for intermediary liability? If so, what jurisdiction is the controller of the metaverse site, if centralized? Many questions need to be considered for brand owners at this time.
Do brands need new metaverse-focused branded apps?
Can trademark owners simply rely on their existing trademark rights to enforce them in the metaverse without filing separately for virtual goods and services? Although there are ongoing cases in the United States relying on traditional trademark rights, there is still no clear decision in many jurisdictions, although there is an argument with the blurring of the physical and digital space, we should be able to rely on existing rights. Despite this uncertainty, there has been an increase in metaverse-related deposits.
In February 2022, it was reported that there were 16,000 Chinese trademark applications containing “METAVERSE” or “元宇宙” (YUAN YU ZHOU/Metaverse in Chinese) across all classes. It is clear that CNIPA decides to prevent abuse of the registration containing the terms, which may be further reflected in the subsequent rejection in May 2022 of trademark applications containing the Chinese term “元宇宙” (YUAN YU ZHOU / Metaverse in CC) filed by major technology companies such as Tencent, Alibaba, iQiyi and NetEase.  It is very clear that the CNIPA only authorizes the registration of the “real” mark with a distinctive character equivalent to that of the virtual world to protect the interests in Metaverse. In the United States, more than 4,000 NFT-related trademark applications were filed with the USPTO between January 1 and May 31, 2022. At the EUIPO, there has been a similar surge in interest with new applications filed in 2022 by football club Inter Milan, luxury sports car Maserati and energy drink brand Red Bull.
These applications are typically filed in Class 9 for “Downloadable Virtual Goods, including NFTs”, Class 35 for “Retail Stores of Virtual Goods”, Class 41 for “Entertainment Services in virtual”. Depending on the level of brand commitment, broader protection may also cover Class 36 for financial services related to virtual currencies, Class 38 for telecommunications services related to virtual communities, Class 42 for computer software not downloadable for virtual goods creation/NFT trading.
With the increase in metaverse-related filings, local trademark registries are also reviewing and updating the new classification of goods and services. For example, in Thailand, the Trademark Office guidelines have been updated to reflect some of these new terms and, in practice, the Vietnam Trademark Office has also accepted these specifications. However, in Indonesia, metaverse-related goods and services are not standard items yet. Therefore, one option is to try to adapt the terms to locally accepted specifications until new specifications are developed locally. In China, as long as the Chinese national registration of a trademark covers all subclasses of traditional goods and services that align with the relevant Metaverse classes, this should provide sufficient coverage without incurring additional costs for new filings. .
Generally, for a brand to future-proof its brand portfolio, it may make sense to extend trademark rights in key commercial markets and/or where the IP enforcement regime may not be adequate. not be so developed that you would need to rely on the trademark registration for a specific virtual specification. Trademark owners should also continue to actively consider the protection of 3D shape marks, sound marks (i.e. MP3), holograms, motion marks and multimedia marks, as they may be more relevant in the audio-visual sensory environment of the metaverse.
Brands will no doubt be keen to monitor future developments on the Metaverse and ensure that their intellectual property is protected. Having the right strategy in place will be crucial for any brand looking to thrive in the “New Internet” and gain control over their brand.