In recent years, there’s been an explosion of online “virtual worlds” in which players create fantasy versions of themselves (called an “avatar”) and interact in real time with other players located around the world. Virtual worlds are designed for every age group—adults can escape in Second Life, IMVU, The Sims Online and Kaneva, teens can explore Habbo Hotel, Ego, and Teen Second Life, and kids can become cute animal avatars on Club Penguin, Webkinz and Sqwishland. There’s also been a dramatic rise in MMORPGs—massively multiplayer online role-playing games—which are real-time fantasy games but with less usergenerated content than virtual worlds. Popular MMORPGs include World of Warcraft, City of Heroes and Star Wars Galaxies. Virtual worlds and MMORPGs are a billion-dollar industry,1 generating revenue in a variety of ways. One business model requires players to pay a subscription fee, another creates a mechanism for commercial transactions within the virtual world using real money, and another sells in-game advertisements and product placements. Some virtual worlds use all three, as well as many others.

A look at some Second Life statistics demonstrates the popularity and financial success of virtual worlds. Second Life was established by Linden Labs in 2003. Over 700,000 players visit Second Life on a monthly basis, with as many as 88,200 concurrent users in one day.2 Linden Labs has created a virtual economy—the LindeX is Second Life’s official currency exchange and it allows avatars to purchase Linden Dollars ($L) with US dollars (and vice versa) at around 300$L to US$1. During the first quarter of 2010, US$31 million worth of Linden Dollars were exchanged on LindeX.3 Avatars use Linden dollars to buy land, open stores and purchase goods and services, and avatars can also earn money by working in online businesses. As in the real world, owning land is a lucrative business venture—for example, one player has earned over US$250,000 through land development on Second Life.4 Linden Labs reports US$45 million in user-to-user transactions per month in-world.5  

The rise of virtual worlds is a mixed blessing for trademark owners. On the one hand, virtual worlds are a new avenue to reach consumers and promote and advertise their brands. On the other hand, the virtual worlds provide fertile ground for trademark abuse. This article briefly explores how trademark owners can get a piece of the virtual action, and what measures they can take to stop or limit abuse.  

Trademark Owners’ Virtual Presence

Virtual worlds create an affordable marketing opportunity for brand owners to promote their products to potential consumers on a worldwide basis. Virtual marketing campaigns are designed to build consumer goodwill and often affect consumer behavior in the real world.  

Examples of online marketing campaigns include:  

  • MTV offered free virtual replicas of celebrity accessories and fashion items to promote consumers to watch its 2010 MTV Video Awards show.  
  • H&M showcased its new denim collection and encouraged consumers to purchase the products they liked in brick-andmortar stores.  
  • Gibson Guitar runs an island on Second Life where it offers avatars free guitars.  
  • Colgate offers players a script (or computer program) that allows an avatar to smile brightly.  

Many companies have opened storefronts within virtual worlds and sell or give away in-game versions of their products that usually correlate with a more expensive real-world item. For example, at the Reebok store in Second Life, an avatar can purchase Reebok sneakers and then the user can click through to the Reebok website and purchase the same sneakers for use in the real world. Companies also engage in virtual marketing campaigns with specific product placement, consumer contests and virtual product giveaways. A presence in these virtual worlds appears to have real-world financial benefits for these trademark owners in terms of brand awareness and generating goodwill among consumers.  

Fertile Ground for Abuse  

Not all is fun and games, however, for brand owners. As in the real world, infringers abound in the virtual world by selling unauthorized virtual versions of real-life products or using real-world trademarks without consent. Infringement is easy in light of the fact that it is relatively simple to create a virtual counterfeit. Trademark owners have a new burden to police their brands in virtual worlds and evaluate whether the misuse is worthy of action.  

Virtual-world providers have terms of service that prohibit intellectual property infringement and provide a method by which IP owners can report abuse. In addition to filing a notice of infringement with the service provider, trademark owners have taken some alternative creative measures when faced with virtual infringements:  

  • Coca-Cola freely licenses the use of its mark on Second Life.  
  • Herman Miller ran a “Get Real” campaign where it offered to replace knock-off Aeron chairs that users had purchased with Herman Miller’s official virtual version of its Aeron chair.  

Legal precedent is sparse with respect to more traditional steps to enforce trademark rights, and many questions remain open. For example, the Lanham Act requires a “use in commerce” for an infringement action—is selling virtual Nike knock-off sneakers a use in commerce? Does “use in commerce” solely depend on there being an exchange of money, like on Second Life, or will courts recognize the unauthorized use of a trademark in a virtual world not connected to the sale of a virtual product as an infringement?6 Will federal courts follow the lead of the U.S.P.T.O., which has issued a trademark registrations for an “avatar” and for services rendered soley in a virtual world, and find that virtual activity is a regulated use in commerce?7  

Jurisdictional issues also abound—what if the defendant is located outside of the United States, yet his virtual storefront is accessible by US consumers/avatars? How do the principles of fair use, parody and the First Amendment apply in a virtual world? Are damages accounted for in Linden dollars or US dollars? How these issues play out in a real court of law will be interesting to watch develop. In the meantime, the rise of virtual worlds can no longer go unnoticed by brand owners.