Metaverse Blog Series: No. 6

Registration and Protection of Trademarks

18. November 2022

In the metaverse, with its immersive technologies, new, exciting opportunities are emerging to promote your own goods and services. This trend is not bypassing even the large corporations. Many companies want to take advantage of the opportunity to advertise their brands on metaverse platforms as early adopters.

But to what extent is German and European trademark law already prepared for the metaverse, and what special features need to be considered when registering and defending trademarks in the metaverse? Are companies in the metaverse completely defenseless without corresponding trademarks?

In this article, we will take a look at the most important legal aspects of trademark law and explain what needs to be considered when applying for and protecting trademarks in the metaverse, based on specific examples from practice.

Corporations discover the metaverse

Particularly younger consumers are spending more and more of their time in virtual spaces such as Roblox or Fortnite. However, these gaming platforms not only satisfy the urge to play games but are also digital forums in which players can exchange ideas. Many of the currently most successful computer games are available for free and are financed entirely through the purchase of virtual goods.

The purchase of virtual goods on these platforms is creating a separate industry with significant potential. This is also demonstrated by collaborations such as the one between Dolce & Gabbana and the NFT marketplace UNXD. The fashion company auctioned off several items of clothing on the platform which could be purchased both as a “physical” item and as an NFT, as well as the NFT of a completely digital piece of jewelry, for the equivalent of 5 million euros in total.

In addition to selling virtual goods as NFTs, the metaverse platforms also function as advertising platforms for selling goods in the physical world. Since the platforms are not tied to the physical boundaries of the analog world, they provide maximum freedom of design for the placement of advertising. In the metaverse, for example, a fashion company’s new sneaker can float in the virtual sky in a giant 3-D animation and be admired by millions of users around the world at the same time.

Some well-known brands are already taking advantage of these advertising opportunities. Pioneers in this regard are for example Nike, which has developed its own video game on the Roblox platform called Nikeland. Balenciaga, which with Afterworld has created its own computer game away from the established platforms, is taking a slightly different approach. Events such as the “Metaverse Fashion Week” by Decentraland, where participants can buy wearable NFTs, are also gaining in importance.

“Gold Rush” in the metaverse – trademark infringements guaranteed

As in the physical world, one is not immune to trademark infringement in the metaverse. This can be seen, for example, in the recent cases of unauthorized digital goods being traded as NFTs and thereby infringing registered trademark rights.

One of the most prominent examples of this is the “MetaBirkins” case in the U.S. (Hermès International et al. v Mason Rothschild, 22-cv-00384 (SDNY)), in which the fashion company Hermès sued the artist Rothschild for creating and commercializing about 100 NFTs in the metaverse that were very similar to the famous Birkin bag, which he sold as “MetaBirkins” – NFTs for over $1 million. The court’s decision is still pending, but the result will most likely be considered as a landmark decision in the field of trademark infringement in the metaverse.

In a similar case (Nike Inc. v StockX LLC, 22-cv-983 (SDNY)), Nike sued the metaverse marketplace StockX for offering NFTs of shoes which were inspired by physical versions of popular Nike sneakers. This litigation is also taking place in U.S. courts and is still pending.

Protection using an internationally recognized classification system

So how can trademark owners ensure that their trademarks are protected in the digital world?

There is a particularly high level of trademark protection against the use of signs that are identical to the trademark and are used for a product or service for which the trademark is registered (so-called double identity). Only under certain conditions can a trademark also be protected against the use of a similar sign for similar goods/services. In addition, only trademarks with a particularly high reputation receive additional protection against the exploitation of reputation.

The protection provided for a trademark is therefore primarily determined by the goods and services for which it has been registered in the relevant trademark offices. Most trademark offices worldwide use a trademark classification system for this purpose, which divides similar goods or services into 45 different classes using the so-called “Nice Classification”.

Registering trademarks for the metaverse – Which classes are the right ones?

EU trademarks for virtual goods must be registered in Class 9, which is relevant for information technology. This was stated by the European Union Intellectual Property Office (EUIPO), which is responsible for the examination and protection of EU trademarks.

This requires the content to which the goods refer to be specified in more detail. For example, the term “downloadable virtual goods” is unspecific according to the EUIPO, while terms such as “virtual clothing” are registrable in Class 9. A digital downloadable piece of clothing which is authenticated by an NFT should be specified accordingly as “downloadable clothing authenticated by NFT”.

Complementary services should be registered in the Classes 35 (e.g., “retail services relating to virtual, non-downloadable goods”), 36 (e.g., “financial services, including digital payment services”) and 41 (e.g., ” educational and entertainment services in virtual environments, non-downloadable”) and 42 (e.g., for “technical services relating to virtual goods and NFTs”; “software as a service”).

Some companies have already acted here to secure their protection in advance. This is illustrated by the following examples of trademark applications related to the metaverse:

  • McDonald’s has registered McDONALD’s, MCCAFE and its M-logo a. for “virtual food and beverage products” in Class 9.
  • Crocs has registered a trademark for CROCS a. for “retail services and online retail services featuring virtual goods” in Class 35.
  • Kiehl’s has registered a trademark for KIEHL’S a. for “entertainment services, namely the provision of non-downloadable virtual perfumery, toiletries, cosmetics, makeup and skin care products” in Class 41.
Criticism regarding the EUIPO’s application practice

The EUIPO’s practice of classifying all virtual goods in Class 9 has been criticized by some. As the relevance of digital spaces continues to grow, increasingly long lists of goods in Class 9 would emerge. This would also not always be appropriate for the partly very different categories of goods.

Therefore, it is partly suggested that the classes for physical goods should also include their corresponding virtual counterparts. For example, the application for a trademark for shoes in Class 25 would at the same time include an application for “digital” shoes. This could simplify the assessment of a trademark infringement case (more on this below). One argument in favor of such a solution is that many of the digital platforms are being used increasingly as social forums, replacing the real world in certain parts or complementing it in the context of AR applications. On the other hand, digital goods are not entirely comparable to their analog counterparts in terms of their production and function. It therefore seems appropriate to locate them in a separate class.

According to another approach, subclasses should therefore be created for virtual goods, in which case digital clothing would be in a new Class 25.1, for example. However, the introduction of a new system of subclasses would involve considerable bureaucratic effort, which means that this solution is unlikely to be implemented.

Protecting trademarks against infringement – double identity, likelihood of confusion and exploi-tation of reputation

Once a trademark is registered for digital goods and complementary services, it must be used and defended accordingly. If an EU trademark is not used for five years (in other jurisdictions after three years), it expires. If any uses of the trademark by third parties are tolerated, claims to defend the trademark may be forfeited.

As mentioned previously, trademarks can be defended against third parties in cases of double identity (§14 (2) No. 1 MarkenG) and under the aspect of likelihood of confusion (§14 (2) No. 2 MarkenG). In the case of well-known trademarks, protection against exploitation of reputation is added (§14 (2) No. 3 MarkenG).

The possibilities of defense are most clearly illustrated by an example. Let’s take the already mentioned “MetaBirkins” case, which is currently in trial before U.S. courts, and take a look at how it would be judged under European law.

The plaintiff Hermès has no registered trademark for “MetaBirkins” in the EU, so a case of double identity (use of an identical sign for identical goods/services) is eliminated. If the applicant had such a trademark, it would have had to be registered in the mentioned Nice Classes according to the mentioned practice of the EUIPO in order to establish a double identity.

An infringement would be possible under the aspect of likelihood of confusion. Hermés is the owner of the trademark “BIRKIN” and a similarity to the used sign “MetaBirkins” is supported by the fact that the addition “Meta” has a rather descriptive function and therefore the element “Birkins” is decisive in this regard.

However, the question arises here to what extent the goods “bags”, for which the trademark “BIRKIN” is registered in Class 18, are comparable to the digital “MetaBirkins” bags. On one hand, a digital bag, just like a bag in real life, can be worn and displayed. Depending on the function of the platform, items can also be stored in it. On the other hand, trademarks are also intended to serve the purpose of protecting certain expectations of the trade regarding the quality of a product (so-called quality function). Here, some differences arise between digital and analog goods. Just because a company sells particularly high-quality leather goods, it cannot automatically be assumed that this company also launches a high-quality, software-based digital product on the market.

However, the “BIRKIN” trademark could be a “trademark with a reputation in the country”, as a German higher court has already assumed in the case of Hermès’ “Kelly Bag” (OLG Cologne, judgment of April 28, 2006 – 6 U 121/05). An exploitation of the good reputation and the esteem is therefore quite obvious.

Ultimately, it remains to be seen how the U.S. courts will decide the case and how German and European courts will assess this issue. In consideration of the current practice of the EUIPO, however, it can be assumed that a legally secure way can only be to register trademarks that are protected in the metaverse also in the corresponding trademark classes.

Exploitation of reputation, competition law, copyright law, design law

Even without a trademark registered in classes that are relevant for the metaverse, companies are not unprotected. In addition to the mentioned protection of well-known trademarks against exploitation of reputation, under certain conditions a supplementary protection under competition law may also enable action against imitations. If a certain 2D or 3D design is registered as a design (also known as a design patent) in the relevant register, action can also be taken against the digital representation of this form in the metaverse. If the digital goods used are copyright-protected works, copyright claims may also exist.

Consequences for the trademark strategy of companies

To protect assets or enforce rights against very similar or identical representations of their products in the etaverse, trademark owners should not rely on their existing registered trademarks. For reasons of legal certainty, according to the EUIPO’s current classification practice, trademark owners should apply to register their European trademarks as well as their national trademarks in the 27 jurisdictions of the EU for virtual goods in Class 9 and, in addition, in complementary service classes. When filing an application, it should be ensured that the goods and services are sufficiently specified.

Also, a legally secure defense of trademarks is only possible if the trademarks have been registered in the Nice Classes which are relevant for the metaverse. If this is not the case, the supplementary protection under competition law, copyright law and design protection may provide a remedy under certain circumstances. Well-known trademarks may also be protected under the aspect of reputation exploitation.

It remains to be seen how the practice of the trademark offices and the case law in the matter of metaverse trademarks will develop and what part the other aforementioned protection possibilities will play in this.

 

Authors: Carolin von Fritsch und Rolf Tichy

Weitere Blogbeiträge

Stay tuned for our journey through the metaverse, and feel free to take a look at the other legal topics we have already explored as part of this blog series:

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