Thomas Verborgh Bram Dejan October 10 2022 EU trademarks related to the metaverse GEVERS | Intellectual Property - European Union Thomas Verborgh, Bram Dejan Intellectual Property BackgroundOpportunities for businesses – and free-ridersHow can trademarks be protected in the metaverse?Filing additional trademarks to be sufficiently protectedTaking action without refiling trademarksNot all virtual use of trademarks constitutes infringementCommentThe metaverse might be the next big thing. But what does this mean for brand protection? Even for those that are not early adopters, it is better to be safe than sorry. This article provides an introduction to trademark protection relating to the metaverse from a general EU trademark perspective.BackgroundThe term "metaverse" has been around for over 30 years, but it only recently regained widespread attention. However, its scope and applications are not clear yet. For some, the metaverse broadly refers to a digital layer on top of the real world through augmented reality. Others see it as a network of virtual worlds, where digital alter egos can, for instance, buy virtual goods authenticated by non-fungible tokens (NFTs). The metaverse may even be a combination of the two. Clearly, it represents a whole new world of opportunities for IP owners. To that end, many famous brands are paying close attention to its evolution and are investing heavily.One such investor is social media giant Facebook, which changed its name to "Meta" in October 2021.(1) In what has been called a "surreal presentation", Mark Zuckerberg demonstrated Meta's version of the metaverse, a virtual world in which avatars can interact with others. While not everyone was impressed, Zuckerberg claimed that more is coming. Next-generation virtual reality headsets and other wearables will help people to truly immerse themselves in the metaverse. A virtual world may well be the next iteration of the metaverse.The metaverse is a playground not just for tech companies, but also for consumers. In virtual worlds, they will buy goods and services of a virtual or hybrid nature.(2) Several world-famous brands have already dipped their toes into NFTs and the metaverse.(3) For example:Nike has released virtual sneakers that were sold as NFTs;the National Football League turned Super Bowl tickets into collectible NFTs; andit was possible to buy what seemed to be a digital Birkin bag NFT – a "MetaBirkin" – although this one was not made by Hermès.Opportunities for businesses – and free-ridersNot everyone is convinced that all of this will take off. Many commentators also criticise the metaverse as an all-encompassing world in which people would do nearly everything. But the next iteration of the metaverse need not be a dystopian nightmare. It may well be a more advanced version of the virtual worlds that already exist today as video game platforms, combined with virtual and augmented reality and a specific way of offering and paying for goods and services. This may represent opportunities for businesses.As in the real world, adequate trademark protection is necessary to safeguard both past and future investments in brands. The metaverse may be virtual, but trademark infringement is real and IP conflicts have already occurred. For example, the aforementioned "MetaBirkin" bags were not made by Hermès, but by a Californian artist, who claimed that there was no trademark infringement. Hermès did not share that vision and sued the artist. While this pending case is rather particular and involves a reputed trademark, it clarifies that trademark infringement is likely to occur in the metaverse.How can trademarks be protected in the metaverse?EU trademarks are registered for specific goods and services and categorised in 45 different classes according to the Nice Classification. But which goods and services will be offered, and how should they be characterised? Part of the difficulty in delineating goods and services in the metaverse lies in the vague nature of the metaverse itself. The lack of clarity on the nature of some of these goods and services adds to this difficulty.Until recently, there were no guidelines addressing this particular topic. In June 2022, however, the EU Intellectual Property Office (EUIPO) published its first guidance, which it will incorporate into the 2023 EUIPO Trademark Guidelines. Stakeholders could comment on the guidance until 3 October 2022.Several classes may prove useful to prepare trademarks for the metaverse, as set out below.Metaverse goodsSome suggested that the classes which cover physical goods should also cover virtual ones. This approach is not followed by the EUIPO. It has clarified that "virtual goods" are proper to class 9 because they are treated as digital content or images. Before the June 2022 guidance, the EUIPO had already sent classification deficiencies letters for "digital clothing" in class 25.The term "virtual goods" as such is, however, not acceptable: it lacks clarity and precision. Each virtual good needs to be specified. This makes sense: the same precision is necessary for physical goods. But the fact that all virtual goods will belong to class 9 could result in long lists of goods and services. It can be argued that this would lead to a lack of administrative clarity, as EU trademarks with even longer lists of goods and services can be expected, in particular several "virtual goods" in class 9.The EUIPO made the interesting decision to not accept "NFTs" as such. Instead, they are treated as "unique digital certificates registered in a blockchain, which authenticate digital items but are distinct from those digital items".A term that will find its way to the 12th edition of the Nice Classification (due to enter into force on 1 January 2023) is "downloadable digital files authenticated by non-fungible tokens". This term is rather broad, just like other terms that arguably encompass every kind of virtual good, regardless of whether they are authenticated by an NFT. Think for example of "software", or the even broader "recorded content". It seems that the latter terms continue to be safe "blanket" terms for trademarks in the virtual realm. They may also eliminate the need to specifically enumerate all virtual goods in a certain trademark.Metaverse servicesIf a business plans to sell others' virtual goods, it should consider adding class 35, which covers retail and wholesale services. But brands should make sure to indicate the type of goods that they are selling with sufficient clarity and precision. The EUIPO will object to the term "retail and wholesale services relating to virtual goods" as it lacks clarity and precision.One example of an acceptable term as included in the EUIPO's webinar is "providing an online virtual environment for trading virtual art and virtual art tokens" in class 35.Activities in the metaverse are, however, about much more than the sale of goods. Several metaverse services are likely entertainment services (class 41) by nature, consisting of providing virtual goods for use in virtual environments. Providing a virtual environment in which users can interact for recreational, leisure or entertainment purposes would also be an acceptable term in class 41, the EUIPO has clarified. IT services, such as the creation of those virtual environments, belong to class 42.It remains to be seen how the EUIPO will deal with hybrid services that have a virtual and a "physical" component. The EUIPO has already objected to "operating a virtual restaurant providing physical and virtual food and beverages" in class 43; "virtual food and beverages" was deleted from the term. Likely, these hybrid services need to be split out into the respective physical and virtual component and classified accordingly.Whichever the class, what remains most important is clear and specific wording. For metaverse-related goods and services, the EUIPO has now provided specific guidance and a first set of examples. Time will show how more hybrid and complex services will be classified.Filing additional trademarks to be sufficiently protectedEven if a business has no plans to enter the metaverse, it may prove useful to have its trademark portfolio re-evaluated to see whether new filings are necessary.The most common and straightforward ground for establishing trademark infringement is likelihood of confusion, whereby it must be proven that both the signs, as well as the goods, are similar. When trademarks cover the aforementioned relevant metaverse goods and services, it should be fairly easy to establish likelihood of confusion in the event a third party is using a sign which is identical or similar to a business's trademark in the metaverse.However, difficulties may be experienced when trademarks are not protected for the relevant (digital) goods and services. Whether the EUIPO will eventually consider certain specific digital goods and services as similar to existing goods and services is uncertain. It could be argued, for example, that virtual clothing and actual clothing should be considered similar, because they have the same usual origin, as it is increasingly becoming common practice for fashion brands to extend their activities to the metaverse. But if virtual clothing is in itself software, which is recorded content, it may be thought that there should be some similarity between software and clothing – taking into account this new market reality. Case law addressing these and related metaverse issues is highly anticipated.For the time being, businesses may be better off being proactive. A thorough evaluation of a business's trademark portfolio may thus show that additional trademark applications in the relevant classes for metaverse-related goods and services are useful.Taking action without refiling trademarksBeing proactive does not mean that additional trademark filings are always necessary. Trademarks may already be registered for broad terms in the relevant classes, which can encompass the relevant metaverse goods and services.Further, reputed trademarks enjoy a broader scope of protection. In practice, these are also the trademarks more likely to fall victim to metaverse free-riders. Owners of reputed trademarks will be able to act against the use of identical or similar signs for certain (virtual) goods or services, even if they are not registered for goods or services which are considered similar.Not all virtual use of trademarks constitutes infringementEven with adequate protection, businesses cannot stop all and any use of their trademarks.The Californian artist behind the "MetaBirkin" claimed that he had not infringed Hermès's rights as his virtual bags were artworks, "a commentary on fashion's history of animal cruelty, and its current embrace of fur-free initiatives and alternative textiles". The artist invoked the First Amendment (artistic expression being a type of speech protected thereunder) and referred to the Rogers balancing test for artistic uses of trademarks.(4) The outcome of this case remains to be seen.EU trademark legislation also limits the effects of a trademark.(5) A trademark proprietor is, for example, not entitled to prohibit a third party from using its trademark in the course of trade if it is for referential use and in accordance with honest practices in industrial or commercial matters.(6) In the end, trademark protection needs to be reconciled with freedom of expression in the European Union as well; both are fundamental rights. The concrete application of such rights can differ.CommentBusinesses need adequate trademark protection to be futureproof. In practice, many want to be on the safe side and will thus wish to file additional trademarks – especially if they plan to delve into the metaverse. However, trademarks may already include wording that offers adequate protection.For further information on this topic please contact Thomas Verborgh or Bram Dejan at GEVERS by telephone (+32 2 715 3711) or email ([email protected] or [email protected]). The GEVERS website can be accessed at www.gevers.eu.Endnotes(1) Facebook was facing bad press at the time: whistle-blower Frances Haugen revealed that the company knew about its products' detrimental impact on teenagers' mental health, but did not really care.(2) Virtual goods and services may also have real-life perks – and the other way around. For example, when an avatar visits a restaurant for a virtual hamburger, the person behind the avatar might be saving up for a discount on a real one, or when a real person buys a new sweater, they might receive a code to redeem the virtual version on a certain platform.(3) A common misconception is that an NFT grants the owner IP rights – such as the copyright on a piece of digital art. It does not. Several NFT enthusiasts – and critics – make no distinction between the work, its carrier and the NFT associated therewith. The NFT itself is code distributed on a blockchain. Most famous NFTs refer to media content, such as a pixelated drawing or a cartoon of a bored monkey. These pictures are usually hosted elsewhere, not in the NFT itself. Trademark owners will likely want trademark protection for the associated matter backed (or authenticated) by an NFT, next to protection for the NFT itself.(4) Rogers v Grimaldi, 875 F2d 994, 999 (2d Cir 1989).(5) For EU trademarks, see the EU Trademark Regulation (EUTMR).(6) See article 14 of the EUTMR and article 14 of the EUTMD.