Marcella Ballard Maria R. Sinatra Kristen S. Ruisi October 17 2022 Trademarks and source identifiers in the metaverse: practical considerations for brand owners in newly emerging virtual marketplace Venable LLP | Intellectual Property - USA Marcella Ballard, Maria R. Sinatra, Kristen S. Ruisi Intellectual Property IntroductionCurrent metaverse and supporting hardware and technologiesHow brands currently protect 2D and 3D source identifiers in real worldFactors to consider when creating metaverse presenceAvoiding damage to existing trademarksTaking advantage of existing 3D trade dressCommentIntroductionAs technology and the physical lives of consumers continue to converge, businesses active in metaverse and blockchain technologies will need to think about how their brands and source identifiers might evolve or change in these new digital spaces. Will the digital storefront of a well-known brand mirror its brick-and-mortar storefront? Will businesses' two-dimensional (2D) trademarks be transformed into more metaverse-friendly three-dimensional (3D) brands and interactive source identifiers? Will companies create unique standalone source identifiers for their brands and metaverse activities?Stakeholders will need to be cognisant of the fact that the use of source identifiers in the metaverse can affect currently registered trademark rights in the real world. This article discusses some factors that companies and stakeholders should consider as they create a new metaverse presence. It also presents some practical considerations to consider before modifying existing source identifiers or creating entirely new 3D marks for use in the metaverse.Current metaverse and supporting hardware and technologiesThe metaverse is a network of interoperable virtual worlds, including augmented reality (AR), virtual reality (VR) (including video games) and other experiences. Currently there is no one unified metaverse, but rather multiple metaverse experiences operating across multiple platforms. Users can buy virtual items, play virtual games and attend virtual concerts, among other activities.For example, video game users were recently able to watch musician Travis Scott perform a virtual concert, all within the video game Fortnite.(1) Some metaverse experiences are currently accessed with the use of VR headsets and hand controls, allowing users to make the VR experience more realistic. Different metaverse experiences can also be accessed with the use of AR glasses, or mobile apps that place 3D visual images or text over "real-world" experiences, such as the popular mobile application Pokémon Go.(2) Other metaverse experiences can be accessed via traditional web browsers, such as the popular experience found at Roblox.Although not exclusively involved in the metaverse, cryptocurrency and unique non-fungible tokens (NFTs) using blockchain technology can be used to pay for virtual goods in connection with various metaverse platforms, or to take possession of the goods. Cryptocurrencies and NFTs using blockchain technology operate on a decentralised basis, meaning that everyone – no matter where they are located geographically – has access to the blockchain ledger, where all the data detailing the blockchain transactions is stored.How brands currently protect 2D and 3D source identifiers in real worldBrand owners in the United States have traditionally trademarked words, phrases, symbols, designs or a combination of these elements for use in and/or on 2D planes. In addition to other formal requirements of the United States Patent & Trademark Office (USPTO), brand owners seeking to obtain trademark registrations for 2D word or design marks can obtain trademark registrations if their trademark is sufficiently distinctive and used in US commerce. Depending upon the combination of words and/or designs involved with a 2D trademark, it can be inherently distinctive to consumers, such that the trademark is distinguishable from other sources of goods and/or services in the marketplace.The way in which brand owners have obtained trademarks involving 3D designs is often more complicated. 3D source identifiers typically involve the trade dress of a product, including product labels, containers, colourations and point-of-sale materials, which may not be inherently distinctive. If a trade dress is functional, it cannot also serve as a source identifier and must be refused registration. Despite these hurdles, companies nonetheless have been able to establish the distinctiveness of 3D source identifiers by demonstrating long-standing use, commercial success and advertising expenditures. For example, candy and soft drink companies have long obtained trade dress registrations for the shapes of prominent product offerings. Likewise, other businesses, such as hotels and restaurants, have trademarked the overall look and feel of the exterior and interior design elements of their brick-and-mortar business.Factors to consider when creating metaverse presenceWhile 2D trademarks are likely to be one piece of a brand's metaverse presence, 2D trademarks may not be the only source identifiers associated with well-known brands in the metaverse. Some companies may seek to modify existing 2D trademarks into more 3D-friendly virtual source identifiers. Other brands may seek to create brand new source identifiers for virtual 3D spaces. When establishing their metaverse presence, stakeholders should:evaluate how they can use existing brands in the metaverse without damaging the already established value of the brand; andbe aware that creating new 3D virtual source identifiers is unlikely to immediately satisfy the current requirements for trade dress protection.Some businesses have already taken initial steps to try to figure out what their brands in this virtual space may look and feel like to consumers. For example, in April 2022, Wendy's had the grand opening of the Wendyverse within Horizon Worlds to offer fans "3D opportunities to virtually interact with each other and the brand", which consisted of different consumer experiences, including a virtual Wendy's restaurant and a Wendyverse town square.(3)Fashion brands are also participating. In March 2022, fashion companies participated in the Decentraland Metaverse Fashion Week to showcase their Spring 2022 collections. While at the virtual fashion week events, consumers could shop with their avatars for virtual goods, or purchase physical real-world clothing items from metaverse stores.(4)In both examples above, companies used both existing "real world" 2D trademarks and 3D retail storefronts and restaurants reminiscent of their brick-and-mortar physical locations to identify their products in the metaverse. Such use of existing 2D and 3D source identifiers in the metaverse can be beneficial because:it may avoid damage to the existing trademarks; andit allows the company to build on existing 3D trade dress to decrease enforcement issues in the virtual world.Avoiding damage to existing trademarksImagine a consumer is walking down a virtual street and comes across the virtual storefront of Business A, whose trademark consists of a 2D circle design in the real world. In the metaverse, Business A may want to modify its traditional 2D circle design to a 3D sphere at the door of its virtual location so that consumers can walk around its trademark outside the store, seeing it from all different angles, as depicted in Figure 1.Figure 1: modification of 2D circle to 3D sphereSuch modification may seem necessary or obvious to companies when creating a metaverse brand, but companies should take care not to modify existing trademarks too drastically. When modernising or modifying brands by freshening core source identifiers, there is a risk that modernisation may affect the brand owner's priority rights in the trademark. Making too many modifications such that the modified trademark can no longer be viewed as the "legal equivalent" of the original mark may result in a loss of priority rights in the mark that a company has used for years.(5) The marks must "'create the same, continuing commercial impression' so that consumers 'consider both as the same mark'".(6)Accordingly, to avoid loss of any existing trademark rights because of metaverse trademark modifications, brand owners should seek legal counsel regarding modifications they wish to make, continue using their existing real-world 2D source identifiers outside of the metaverse and seek to obtain separate trademark registrations for modified metaverse source identifiers.Taking advantage of existing 3D trade dressBrand owners should also seek to take advantage of existing 3D trade dress in the event they need to enforce the trade dress within the metaverse. For example, Business B, a prominent hotel chain whose hotels bear distinctive exterior façades, is interested in creating a unique immersive virtual metaverse hotel. In designing its metaverse hotel, Business B must determine whether to create a virtual hotel – mirroring elements of its real-world hotels' features – or to create a virtual hotel with different unique exterior elements. Business B is likely to have an easier time protecting the design of a virtual hotel bearing elements of its real-world trade dress features than it is protecting an entirely new virtual 3D design.Given the challenges present in demonstrating the distinctiveness of 3D trade dress, using an entirely new 3D façade in the metaverse unrelated to Business B's existing hotels will not allow Business B to take advantage of any long-standing use or advertisements featuring its hotel façades to demonstrate trade dress distinctiveness. Brand owners should be aware that creating entirely new 3D trade dress for virtual retail or restaurant locations may not be immediately enforceable against pirates and copycat users.If a brand does use a new 3D source identifier in its metaverse activities, it may attempt to register the mark with the USPTO, depicting the shape of the source identifier, whether that be a virtual building façade or some other trade dress. A trademark applicant seeking protection for a 3D mark must include a description of the mark, indicating that it is 3D, and a drawing, indicating a rendition of the mark in three dimensions, among other standard USPTO requirements.CommentAs metaverse virtual services, goods and experiences become more prevalent, stakeholders should seek legal advice to figure out the best way to secure their rights to metaverse trademarks, trade dress and source identifiers, because what may constitute a source identifier within the metaverse is constantly evolving, depending upon advances in AR and VR, and existing software technologies.For further information on this topic please contact Marcella Ballard, Maria Sinatra or Kristen Ruisi at Venable LLP by telephone (+1 410 244 7400) or email ([email protected], [email protected] or [email protected]). The Venable LLP website can be accessed at www.venable.com.Endnotes(1) See Kevin Wong, "Every Major 'Fortnite' Live Event, Ranked", Complex (5 January 2022).(2) See Nick Wingfield and Mike Isaac, "Pokemon Go Brings Augmented Reality to a Mass Audience" (11 July 2016).(3) See "Welcome to the Wendyverse™: Wendy's® Opening First Restaurant in Virtual Reality", The Wendy's Company (30 March 2022).(4) See, for example, "Metaverse Fashion Week: The next chapter of fashion" and "Boson Protocol Partners With Major Brands For Metaverse Fashion Week", Medium (25 March 2022).(5) See generally Hana Financial, Inc v Hana Bank, 574 US 418 (2015).(6) See Hana Financial, 574 US at 422.