The controversial question of the metaverse: the protection of brands of digital products in the virtual world

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Ralph Lauren opens its first virtual store on the Roblox gaming platform, Gucci sells a purely virtual Dionysus handbag for more than $4,100 on the same platform, Nike registers several brands as “virtual goods” and Hermès even sees its rights to mark on the breached Birkin Bag: and all of these things are happening in the “Metaverse” digital cosmos. Since Mark Zuckerberg presented his vision for a new virtual world in October 2021 at the latest, more and more companies are frolicking there. And, of course, trademark law also got there a long time ago.

What is the metaverse anyway?

The Metaverse is a collective, virtual 3D space in which people move freely and interact with each other as individual avatars: One can “live” in the Metaverse in a digitally animated way, “shop”, generate and exchange data , “travel” in the (virtual) world or just play. For example, after buying digital sneakers from your favorite virtual store, you can go to a business meeting with colleagues sitting at the virtual table in wild or not-so-wild avatars. Then, head to the virtual medical office and in the evening, a live digital theater.

Unlike previous VR games, however, the Metaverse won’t be limited to a single platform, but will be comprised of many different platforms. Its decentralization is therefore crucial. Data, objects and content must be interoperable so that a functioning economic system can be established in which ownership and investment are possible.

The connection to the Metaverse is created through the already familiar VR glasses or with the help of augmented reality. So you don’t just stare at a screen, but actually immerse yourself in this world and control your Metaverse avatar with your own movements. Or as Facebook founder Mark Zuckerberg describes it: “The Metaverse is an embodied Internet that you are in rather than just looking at.”

Where is the metaverse?

Much of this is not yet in sight, but recently there has been a sense of optimism, particularly in the area of ​​digital products. The principle of in-app or in-game purchases has been known for a long time. For example, users already spend a lot of money on purely digital clothing for their game avatars. On the Roblox game platform, for example, you can dress your avatar in luxury items, the price of which – just like in real life life – varies greatly depending on the rarity. The decisive function in the metaverse are NFTs, or non-fungible tokens. This secures digital assets via blockchain and certifies their authenticity and ownership. Each NFT is unique and therefore virtual products also have a certain monetary value. Payment is made with cryptocurrencies such as Bitcoins, Dogecoins or Ethereum.

What role does trademark law play?

Experts predict a market value of 708 billion euros for the Metaverse by 2024 and many companies perceive a whole new sales market for their (digital) products. As in real life, trademark law also plays a key role in the protection and development of trademarks in the parallel virtual universe. In this respect, it is not surprising that large companies such as Nike, Converse or Abercrombie & Fitch have extended their trademark protection at the USPTO explicitly for digital products in recent weeks and have registered several brands of virtual goods. for classes 9, 35, 41 and 42, among others. Also within the EUIPO there are already isolated applications for “downloadable virtual goods” and “non-fungible tokens” in classes 9, 18 or 25 or for corresponding services in classes 35 and 41 (e.g. “virtual goods online shops”), for example by Pirelli or Allbirds.

And where the #trademarks are, the first virtual trademark disputes are not long in coming. A current example is the case of MetaBirkins: the digital artist Mason Rothschild had offered a hundred NFTs of the famous Birkin bag from Hermès for sale on the online market place “OpenSea”. Shameless counterfeiting or innovative line art? In any case, Hermès has been bringing a trademark action against the MetaBirkins since the beginning of the year. Rothschild invokes the freedom of art under the American First Amendment. Whether (and where) Hermès will take legal action remains to be seen. The principle of territoriality of trademark law, which imposes an act of infringing use within the country, also plays a decisive role here. Based on the principles established by the Federal Court of Justice to reconcile trademark law and artistic freedom, the chances of Hermès should not be too bad: firstly, the MetaBirkins lack a satirical-humorous argument and secondly , the business purpose of selling NFTs is clearly at the forefront here.

What do brand owners now have to pay attention to?

With the decentralized and still rather unmanageable marketplace of the metaverse, the danger of trademark infringement and reputational damage increases for brand owners. Digital products can be even easier to counterfeit than physical products. A few simple clicks are enough.

Many companies already have trademarks registered in various markets, but this may not be enough for effective protection in the metaverse. Trademark owners should therefore review their portfolios and adjust them if necessary. As in the early 2000s, it is also important to be wary of trademark registrations in bad faith by private third parties. There have already been a few cases in the USA. And even if a company is not yet active in the Metaverse, its own products can still find their way into the digital world, as the Hermès case shows.

European harmonized trademark law offers an advantage over the American system: in the United States, many companies have had to register their trademarks for virtual goods on the basis of “intent of use” because they do not use not the mark in the metaverse yet. The registration of the mark is then only finalized in the event of commercial use, with a maximum of three years to do so. In European trademark law, on the other hand, it is not necessary to prove use at the time of application and a grace period of five years for use applies to registered trademarks.

Conclusion

Even though the Metaverse is still strongly reminiscent of science fiction, it certainly won’t hurt to consider a possible extension of trademark protection for its own products at an early stage. Because there is no doubt that the Metaverse is a market of the future.

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