The Reality of Trade Marks in the Metaverse

The metaverse is a whole new world and, with that, a whole new trade mark world. As interest in the metaverse grows, more and more brands are “setting up shop” and establishing themselves on virtual platforms such as Decentraland. We are seeing an increasing number of trade mark applications for virtual goods and services as brand owners and intellectual property offices come to grips with physical versus virtual goods.

There are, as yet, very few decided trade mark cases concerning use and/or registration of marks in the metaverse. The latest case in this new world is the so-called “MetaBirkin” case in the United States. Decided only last week, the courts found in favour of the brand owner, Hermes. It would seem that existing protection for physical goods will be sufficient (at least in the United States) to protect a brand owner from unauthorised use of its mark(s) in the virtual world. All good so far, but all may not be as it seems.

The MetaBirkin Case

The “MetaBirkin” case has been long awaited — it is one of the very first trade mark cases on virtual goods. Mason Rothschild, an artist, used Hermes’ famous handbag name, BIRKIN, on images of Birkin handbags, covered in highly colourful faux fur on non-fungible tokens* (NFTs). Hermes, which had had no involvement in the NFTs, was unsurprisingly put out by this use of BIRKIN and brought trade mark infringement proceedings against Rothschild. Hermes’ existing trade mark rights were for “handbags” in Class 18, i.e., physical handbags, not virtual handbags. Rothschild claimed that the use of MetaBirkin with the image of a vibrantly coloured furry handbag was artistic use and therefore permitted as a work of art.

The court did not agree and found that there was inter alia trade mark infringement. Whilst a number of questions have arisen from the decision, the case is important since it appears that, at least in the United States, physical goods and virtual goods will be found similar.

Intellectual Property Office Press Statements

However, the United States Patent & Trademark Office (USPTO) was one of the very first intellectual property offices (together with European Union Intellectual Property Office and the World Intellectual Property Office, as well as the Benelux Office) to release a press statement determining that virtual goods belong in Class 9. For example, whilst handbags belong in Class 18, virtual handbags are digital goods and therefore are proper to Class 9, which is, in simple terms, the software class. The USPTO statement predates the MetaBirkin decision.

The intellectual property office press statements are strongly suggestive that digital goods will be viewed differently from physical goods. Thus, the MetaBirkin decision does not seem entirely in line with the USPTO press statement on classification of goods. One reason for this apparent discrepancy is likely to be the fact that the name BIRKIN is well known in the context of a particular (and highly expensive) range of Hermes’ handbags.

The Juventus Case 

In another early metaverse trade mark decision — on the other side of the Atlantic, in Italy — the courts also found in favour of the brand owner. The IP Chamber of the Court of Rome recently halted the unauthorised use of NFT playing cards featuring the former Juventus player, Christian Vieri, with a Juventus shirt and the club’s details. The court found that although these goods were different to those registered by Juventus (Juventus, like Hermes, had trade marks registered for physical goods), Juventus’s trade mark rights benefitted from broader protection because of their “well-known” status.

Cybersquatting and Evidence

In both cases, the brand owners had rights in physical goods, yet the offending goods were virtual goods, NFTs. The US court also found Rothschild guilty of “cybersquatting”. It has been suggested by commentators that infringement in the metaverse is akin to cybersquatting, the best recourse for which is common law torts, such as “passing off” or “tortious interference”, or unfair competition laws. These actions are heavily evidence based and wherever evidence is involved, costs are high.

Recommendations

Having in mind the intellectual property office press statements and the case law, our strong recommendation to clients is to revisit their trade mark portfolios and, if not covered in Class 9, to file for virtual goods. This is so even if the existing portfolio covers the corresponding physical goods and even if the brand owner does not yet have a presence in the metaverse. Not every brand owner has the fortune to have a well-known trade mark and existing trade mark rights for physical goods may not be sufficient protection in the metaverse. It is very unclear which way the courts will go in the situation where there is unauthorised use of a mark on, e.g., virtual clothing covered by Class 9, but the brand owner’s statutory rights are for physical goods, e.g., clothing in Class 25.

In the uncertain trade mark situation, it could be that a lack of protection for virtual goods may (a) leave a brand owner far less effective in eradicating such virtual use of its brand, since it does not have appropriate Class 9 protection, and (b) facing increased costs, since it will have to rely on evidence of use of its mark.

To read the full blogpost by Claire Lehr and James Moore of Ally Law member firm Edwin Coe LLP, please click here.

* NFTs are used as certification of the ownership of a digital asset.