The metaverse is more than just a buzzword being thrown out by tech-giants, it is a new technology and digital platform rooted in virtual, augmented, and extended reality. Facebook’s recent re-brand to “Meta” evidences the forthcoming technological and cultural shift surrounding the metaverse. But what does this shift mean for established brands? What are the next steps to protecting valuable intellectual property rights that established brands have acquired in the physical realm, while also making way for and staking a claim to the correlating rights in the metaverse? While the metaverse technology is becoming more mainstream, trends are solidifying as to what actions brands need to take now.
The metaverse is a form of “cyberspace.” Different metaverse platforms allow people to access online spaces (e.g., Sandbox, Decentraland, and Metahero), most often by using avatars in combination with virtual reality headsets and other gear. Through these platforms, people can meet up with their friends in a virtual coffeeshop to relax or go to a virtual meeting room to conduct business. However, with the nuances of the physical world being brought into a virtual dimension, there comes an opportunity for brands to capitalize off of such expansion. For example, your favorite coffee shop has an interest in branding that virtual coffeeshop under its trademark. And metaverse users in the virtual meeting room may want to put their best foot forward by ensuring their avatar is dressed in a well-known designer brand.
An important aspect of the metaverse is NFTs (non-fungible tokens). An NFT is a digital asset that is encoded with a unique identifier to provide exclusive ownership. So far, we’ve seen digital art, video clips, virtual avatars, and even autographed tweets selling for exorbitant sums when “minted” as authenticated NFTs. The possibilities with NFTs in the metaverse are truly endless, as they feed off the well-known human desire to be unique and own something that everyone else around you wants, and many commentators have suggested that NFTs are likely to become the most ideal currency for the metaverse. Some expect the revenue opportunity for the metaverse to grow to $800 billion dollars by 2025. With all that revenue on the table, it is important for brands to stay informed, protected, and vigilant in their trademark enforcement.
When it comes to trademark protection secured by a federal trademark registration, that protection only extends to the goods or services listed within the trademark registration (and for which a brand owner is using its mark), and goods or services that are reasonably related. NFTs and the metaverse could create an issue for established brands with long-standing trademark registrations, as the current registrations likely do not cover NFTs, metaverse, or even metaverse-adjacent, goods or services. For instance, Hermès registered a trademark for the BIRKIN mark covering various leather goods in September of 2005. In December of 2021, an artist began advertising and selling NFTs depicting specialized Birkin bags, an iconic Hermès bag silhouette. Hermès subsequently sued the artist in federal court for infringement of its trademarks, despite not having a registered trademark covering metaverse related products/services or actual use of its marks and trade dress in the metaverse. Lawyers and brand owners around the world will be taking note of the arguments presented in this case as it continues to unfold in the Southern District of New York and shapes future legal precedent in this space.
What can be done to minimize infringement and litigation risks? One option might be for brands to file trademark registrations for their classic marks, as well as new marks, to cover uses in a virtual marketplace. This ensures that the brands’ trademarks will be better protected from infringement in the metaverse, without having to jump through the additional hoop of arguing that the physical goods or services covered by a dated registration are related to the infringing virtual goods or services in the metaverse.
The filing of trademarks covering virtual goods and services related to the metaverse can be a useful tactic regardless of a brand’s current plans for the metaverse. For companies that intend to have a large virtual presence, i.e., participating in virtual marketplaces, selling virtual goods, or contributing to metaverse experiences, a trademark covering such metaverse-related goods and services can be imperative for brand protection. These companies want to carve out their rights in the space to expand their potential market of consumers. On the other hand, some companies might not have any intentions of building out a large virtual presence themselves, but might be able to monetize their brands via licensing arrangements. These brand owners will likely want to avoid other players capitalizing on their good name through infringing uses in the virtual platforms, and can take advantage of untapped revenue streams afforded by licensing use of their mark in the metaverse. The trademark rights acquired from trademark registrations covering virtual uses can be used to prevent infringing virtual content that could dilute or tarnish the reputation established by the brand in the physical world. With the current trend of brands of all sorts and sizes applying for trademark protection in the metaverse and virtual platforms, brands that fail to expand to this new setting may get left behind.
Along with the typical costs that come with filing new registrations, brands should expect to increase brand protection and enforcement budgets with the expansion of intellectual property rights into the metaverse. First of all, there are more fields and areas to monitor for infringing uses of trademarks than ever before. Second, it’s currently unclear exactly what forms infringement can and will take in the many metaverse platforms. This open question could delay brands’ identification of infringing parties and result in damaging, infringing uses of registered trademarks being active and available for longer than brands are accustomed to with conventional physical infringement. Additionally, many metaverse platforms are based off of blockchain technology—another obstacle to brands trying to enforce their trademark rights given the absence of any centralized control. Currently, if there is an infringing product listed on an established e-commerce website, the e-commerce website likely has a mechanism in place for the trademark owner to have the listing removed on the basis of its intellectual property rights. However, in the blockchain and virtual platforms, there is not yet a set hierarchy or protocol to get an infringing use of your mark removed. In addition, infringers in the metaverse can be anywhere in the world, presenting yet another obstacle for intellectual property right owners. It will be important to watch how this landscape develops—federal regulations or other international guidance from the World Intellectual Property Organization (WIPO) could come about to alleviate at least some aspects of these problems.
As the metaverse and virtual platforms become more developed and integrated into the everyday life of customers around the world, inherent problems with the technology will be solved and latent problems will come to light. In the meantime, brand owners should focus on preparing and revamping their intellectual property portfolios responsive to the shift to the virtual world to ensure that their rights are adequately protected in all forms and spaces.