The lines between physical and virtual reality are getting set for an overhaul as the Metaverse continues its gradual entry into our everyday lives. Whilst the Metaverse is still only in its infancy, leading developers in the space have already made it possible for users to work, learn, socialise, play and do business in this exciting, albeit slightly mystifying, new digital world.

Whether or not you have plans to blend your business activities with NFTs and/or the Metaverse, there is value in awareness of the threats and opportunities facing brand promotion and protection that arrive with the evolving digital arena.

Trade Mark Protection in the Metaverse

You may have heard when Nike Inc recently applied to register a number of trade marks globally, which included claims in class 9 for “downloadable virtual goods”, and in class 35 for “retail store services featuring virtual goods”. Since then, Nike Inc has become far less lonely in their exploration of NFTs (non-fungible tokens) and the opportunities that exist in the Metaverse, with many other well-known companies having shown interest in joining the evolving digital arena. A recent and exciting addition to this category of companies is McDonalds, as early reports indicate McDonalds could open ‘virtual restaurants’, as well as develop NFTs and sell virtual goods.

In the midst of this growing trend, it’s worth asking the question of whether the strategies and procedures for protecting brands from misuse will also need to adapt to the new marketplace. The answer, of course, will vary.

For trade marks being used in connection with virtual goods or services, protection can begin with filing for registration of the mark in class 9 (computer and scientific apparatus and software), class 35 (retail, business and advertising services), class 41 (entertainment services) and/or class 42 (scientific and technological services).

However, traders of goods and services only in the physical world might also consider filing in these classes. In theory, anyone can make a virtual product, which stresses the need to be ready for intervention upon discovery that someone else is making virtual copies of your goods, or applying your trade mark to digital material without your permission. If you provide services such as entertainment, education, business or legal services, there may be less of a need to adapt your claims to specify that they are also provided virtually, however, this could depend on the exact nature of your services.

In Australia, a trade mark offers protection against similar or identical trade marks claimed on the same or similar goods or services. Typically, virtual goods would not be considered similar to physical goods such as clothing or jewellery. The classification system in Australia has not yet comprehensively adapted to the changing consumer landscape and there is currently no clear timeframe for when this will take place. Whilst awaiting clarification, many brand owners have adopted the strategy of including protection over virtual renditions of their goods, as is evidenced by the large number of pending or recently registered Australian trade marks which include claims for “digital materials” or “downloadable virtual goods”.

A possible showcase of the value of this approach has arisen out of the ongoing dispute between the luxury goods company Hermès and Mason Rothschild, who recently created and sold 100 “MetaBirkin” handbags in the form of NFTs. Whilst Hermes owns registrations in the United States for BIRKIN covering physical bags, the registrations do not cover virtual goods or the design of the bag. Hermès is now taking action against Mason Rothschild, alleging that the NFT handbags created and sold by Mason Rothschild using the name “MetaBirkin” infringe the BIRKIN trade mark. The merits of the allegations have not yet been assessed, however the U.S. District Court for the Southern District of New York denied Mason Rothschild’s motion to dismiss the suit, which is a promising outcome for Hermès.

A similar dispute has arisen between Nike Inc and StockX LLC, an online shoe retailer, on the basis that StockX has minted NFTs utilising the Nike trade mark, without permission. In defence of their actions, StockX has asserted that its NFTS are, in essence, a “key” to access a stored physical item rather than “virtual products” themselves.

These disputes have so far offered valuable take-aways for trade mark owners. Firstly, and more obviously, is that registering your trade mark also in respect of virtual goods might reduce the complexity of the dispute and/or the strength of any allegations of trade mark infringement. Secondly, is that alleging intellectual property infringement against the maker of an NFT may not be straight-forward, because an NFT is merely a digital token that conveys ownership of a digital asset. It can be thought of as a receipt proving ownership of an asset (e.g. digital artwork) rather than the asset itself. Further clarification from law-makers on the effect of this distinction is no doubt welcome.

Territoriality and the Metaverse

Another key issue facing trade mark protection in the Metaverse is that trade mark registration grants protection only in the territory where the mark has been registered. Conversely, the Metaverse worlds may not have similar regard for the territorial boundaries we recognise in the physical world. Therefore, it will not always be clear which laws and within what jurisdiction disputes which arise in the Metaverse should be considered.

Until a clear regulatory framework is introduced to resolve this issue, trade mark owners will have to be particularly vigilant when it comes to detecting infringements and enforcing their rights against other parties. As a possible safeguard, it may be worthwhile at this stage to register trade marks in multiple jurisdictions.

In summary, there will be plenty of uncertainty for trade mark owners in the years ahead as the Metaverse and utility of NFTs continues to expand. To manage this uncertainty, you may consider:

  • Registering your trade mark in classes 9, 35, 41 and/or 42 to cover digital renditions of your goods and services or specifying that your services are also provided in virtual mediums or relate to virtual products.
  • Broadening the scope of your territorial coverage to ensure all major markets are captured.

The metaverse phenomenon is said to be a new version of the internet, enhanced by immersive online engagement through VR technology and augmented reality. But how does intellectual property operate in this emerging online world?