Mark Biernacki November 21 2022 In brief: protecting brands in the metaverse Smart & Biggar | Intellectual Property - International Mark Biernacki Intellectual Property IntroductionBrand auditTaking actionCommentIntroductionThere is no single definition of the metaverse, but it is generally understood to refer to a persistent virtual world that exists parallel to the physical world. That virtual world can comprise many different types of media and technology, including augmented reality, virtual reality and even three-dimensional holographic avatars that respond to movement and facial expressions.The metaverse is still in its early stages. However, as the technology improves, it is expected that more and better apps will be developed – not just for games, but also for work and for commerce. As businesses expand into the metaverse, it will be important to consider whether and to what extent their existing brand protection will apply in the metaverse.Over the past year, thousands of companies have filed new trademark applications to extend their brand protection to cover virtual reality and metaverse-related goods and services. Currently, there is considerable uncertainty in the law regarding the extent to which real-world rights extend to the metaverse, and to what extent the metaverse is a natural zone of expansion. These issues are currently being litigated before the courts and it remains to be seen how they will grapple with these issues.This article, part of a series on the metaverse and non-fungible tokens (NFTs),(1) outlines an action plan that businesses can use to assess their current level of brand protection in the metaverse and steps that can be taken to ensure sufficient brand protection as the metaverse continues to evolve.Brand auditThe first step that a business should take is to audit brand use in the metaverse, which should cover at least the following three questions:How is the brand being used?What is the brand being used with?Where is the brand being used?How is the brand being used? This question should be considered from two perspectives: how the brand is currently being used in the metaverse and how it might be used in the future. Since it is possible to file trademark applications before use has started, it is important for businesses to consider and anticipate how they may use their brands in the future so that they can file trademark applications early and stay ahead of their competition.Many businesses underestimated the importance of the Internet to their brands in the 1990s – and a lot of those businesses and their brands are no longer active. If the metaverse becomes only a fraction as important as visionaries are predicting today, it will be crucial for companies and brand owners to think very carefully about how they may interact with that technology in the future.What is the brand being used with?It is important to consider whether the brand is going to be used with physical or digital goods, or both. Brand owners must also consider whether their brand is going to be used with a product or service, or both. Importantly, how a company is using their brand today in the real world may be very different from how it may be using it tomorrow in the metaverse.For example, consider a hypothetical example of a shoe company that:has no retail stores;sells its shoes through third-party retailers; andowns a trademark registration for its brand for shoes.That company may decide to expand its business into the metaverse and open a virtual store to sell its shoes. It may also be interested in NFTs and start selling digital versions of its shoes for people to wear in the different virtual environments. This company may now require the following additional types of trademark protection:It may have a gap with respect to digital goods, so it might want to extend its registration or file new applications for virtual goods in class 9.If it was not offering retail store services in the real world, it may now be doing so in the virtual world, so it may also want trademark protection in class 35.If it is tokenising its virtual or digital goods or NFTs, or if it is accepting payment with cryptocurrencies, it may now be offering tokenisation and cryptocurrency services in class 36.If it is allowing people in the virtual environment to model their shoes and see how they will look in the real world, it may be offering virtual reality entertainment services in class 45.By going through this exercise, a business may identify gaps in its current or future protection.Where is the brand being used?How a brand is being used in the physical world may be very different from how it is being used in the metaverse. By expanding into the metaverse, a company may suddenly begin offering its products and services internationally, or at least in those countries where consumers are able to virtually visit the business's virtual platform and interact with the brand. This is important because the requirements for marking trademarks, and what constitutes trademark use, differs from jurisdiction to jurisdiction.Taking actionHaving carried out the above steps, brand owners should:identify any gaps;set a budget for the project;prioritise the tasks;fill the gaps; andreview their best practices.Identifying gapsIn the hypothetical example set out above, there were clear gaps in the scope of the brand owner's trademark registration. If a business wishes to launch an entirely new brand in the metaverse, it may need to conduct clearance searches and file applications for entirely new trademarks. Further, depending on how a business wishes to expand in the metaverse, it may have jurisdictional gaps in its protection as well.Setting budgetOnce any gaps in trademark protection have been identified, it is important to set a budget for the project. It can be a useful exercise for a company to pause and reflect on the value of its brands to the business – often a brand is far more valuable than a company realises. Once a company has gone through this exercise, it can allocate a proper level of resources to the project of protecting its brands.Prioritising tasksInvariably, such budgets are not unlimited, and companies may have to prioritise the gaps they have identified. In order to do so, companies should focus on two factors:How important is the task to the business – is it mission-critical, nice to have or not important at all?How much will the task cost – will it consume the entire budget (eg, filing a lawsuit) or is it more modest (eg, filing a new trademark application)?This exercise makes it much easier to determine the value of each task.Consider the hypothetical shoe company discussed above. If it has a registration for shoes in the real world and it has decided to launch a new brand in the metaverse, clearing and obtaining rights on its new brand would likely be a mission-critical task. In terms of existing registrations that only cover real-world goods, the question is whether it should extend those applications or registrations to new goods and services in the metaverse. This may not be mission-critical but – based on what other brand owners are doing – it would be at least an important task.Filling gapsAfter having completed a prioritisation exercise, companies should execute their plans. This may not necessarily involve immediate action – it may be a multi-year project. What is important, however, is that companies develop a plan and execute it.Best practicesBrand owners may also want to consider reviewing their best practices. Most sophisticated companies have already developed best practices for the use of their trademarks. If they have not done so, this would be a good opportunity to develop them. However, even if a company has best practices with respect to its trademarks, it is not unusual for them to lose sight of those best practices when they shift domains – be it moving from the real world to online, or moving from the Internet to the metaverse.CommentGiven the fast-moving and evolving nature of the metaverse, it is important to return to the steps outlined in this article from time to time – probably sooner rather than later. What brand owners think the metaverse will be like, and how they think they will be using it, may well turn out to be very different from the reality.For further information on this topic please contact Mark Biernacki at Smart & Biggar by telephone (+1 613 232 2486) or email ([email protected]). The Smart & Biggar website can be accessed at www.smartbiggar.ca.Endnotes(1) This article was prepared by ILO based on the webinar "Brands in the Metaverse and NFTs: Protecting Trademarks & Copyrights Online, in Digital Media, and Beyond" hosted by Smart & Biggar, and is shared with permission by Mark Biernacki and Daniel Anthony. The webinar is part of a series on practical tips and strategies for global brand protection in Canada. For the complete list of webinars, see "Canadian Trademarks: Protection Strategies for Global Brands".