Questions Brands Should Ask About Brand Protection in the Metaverse

With an estimated value of $800 billion by 2024 and the potential to eventually generate $1 trillion in revenue by JP Morgan calculations, the metaverse is characterized as the “New Internet” and an innovative way for brands to connect with consumers. Still relatively new, consumers and businesses are experimenting with engagement on various platforms, including Decentraland, The Sandbox, and Roblox. And the latter seek to connect with consumers and drive business value, as platforms like Roblox have reportedly attracted nearly 50 million daily active users and offered more than 5.8 billion branded virtual items – to both via sales and freebies – in the process.

Thanks to virtual and augmented reality technologies, consumers can interact with brands in different ways in the metaverse, for example via virtual concept stores, as well as fashion shows and sporting and musical events. For example, Decentraland’s Metaverse Fashion Week, which took place in March 2022, received more industry attention than any previous digital fashion event. Beyond fashion, IKEA’s “Studio” lets shoppers visualize how products will look in their homes, and brands like iTechArt and Oculus VR, which produce VR headsets for immersive use in digital spaces , aim to improve the user experience and encourage experiences like IKEA’s.

At the same time, non-fungible tokens (“NFTs”) have captured mainstream attention as digital assets, despite continued volatility in the crypto market, with some displaying higher prices than the physical equivalent. . And yet, even governments have jumped on the metaverse bandwagon, with the Seoul Metropolitan Government planning to build a 3.9 billion won metaverse platform to enable citizens to virtually access public services. In Thailand, the Tourism Authority launched the Amazing Thai Metaverse tourists to explore virtual durian orchards and collect NFTs that can be used in the “real world”.

With inflationary pressures in 2022 and wild swings in cryptocurrencies, some may wonder if interest in the metaverse and NFTs is sustainable in the short to medium term. In the longer term, if public services and infrastructure improve, enabling more daily users, then more brands beyond the fashion, cosmetics or sports segments (which have been among the first and more enthusiastic to adopt) can follow efforts of their own to connect with consumers as part of an economy that McKinsey projects could be worth $5 trillion by 2030.

Control and Jurisdiction in the Metaverse

As brands decide on their IP strategy in anticipation of entering a metaverse enterprise, some of the preliminary questions worth considering relate to issues of control and jurisdiction, namely, who controls the metaverse in question and which jurisdictions are relevant? In terms of control, the more an organizing entity (potentially such as Meta in Horizon Worlds) controls, the more likely it is that policies, such as notice and takedown mechanisms, will be in place to enforce the violation of the trademark and/or copyright. In contrast, there are decentralized metaverse platforms, such as Decentraland, which is user-owned and governed by a decentralized autonomous organization. These platforms lack single ownership, which can make it difficult to formulate – and enforce – policies that allow brand owners to participate while ensuring their intellectual property is protected.

Will the metaverse of the future be a unique digital universe? Ideally, a user should be able to seamlessly transition from the Meta version of the metaverse to the Microsoft version, etc., with assets and information flowing freely between platforms. The notion of interoperability is a fundamental tenet of the metaverse, which should work something like the internet today – albeit without borders. In this context, the question becomes: how can brands protect themselves in this unique new digital environment? Will brands be offered a single withdrawal mechanism for the entire metaverse? And which service providers will be responsible for potentially illicit actions taking place in the metaverse?

Currently, some platforms have takedown mechanisms to enforce violations. NFT marketplace OpenSea, for example, maintains a system where it removes listings based on trademark owners’ infringement complaints. However (and thanks to the nature of NFTs, which are immutably recorded on the blockchain), an individual can continue to offer the allegedly infringing NFTs (and any digital assets related to those NFTs) on other platforms.

This reality also raises questions from a jurisdictional perspective. For example, if a trademark owner can identify the infringer and their country of origin, would traditional legal action be possible in that country? (Based on a growing number of existing infringement lawsuits, that answer appears to be a simple yes.) Additionally, can trademark owners successfully sue the owner(s) or controller(s) of a metaverse for liability? intermediaries? And if so, what is the competent court? These are just a few of the many questions brand owners need to ask themselves right now.

Marks in the Metaverse

Another question trademark owners are currently facing is whether they can simply rely on existing trademark rights when it comes to enforcing the metaverse and thus avoid filing separate applications for trademarks. virtual goods and services? Although there are ongoing infringement cases in the United States in which companies rely on their “real world” trademark rights to claim infringement in relation to NFTs and early iterations of the Metaverse, there there is still no clear ruling in many jurisdictions. Although there is an argument that with the blurring of physical and digital space, companies should be able to rely on existing rights. Despite (or perhaps because of) such uncertainty, there has been an increase in metaverse-related deposits across the globe.

As of February 2022, 16,000 Chinese trademark applications containing “METAVERSE” or “元宇宙” (YUAN YU ZHOU, which means “metaverse” in Chinese) had been filed in each class of goods/services. The National Intellectual Property Administration of China has taken a clear stance against the misuse of the registration of trademarks containing such terms and only allows trademarks with distinctiveness in the “real” world equivalent to that in the virtual world for registration to protect those interests in the metaverse.

Meanwhile, in the US, more than 4,000 NFT-related trademark applications were filed with the US Patent and Trademark Office between January 1 and May 31, 2022. And the Office European Union Intellectual Property has seen a similar increase in the number of new applications filed. in 2022 – football club Inter Milan, luxury sports car maker Maserati and energy drink brand Red Bull are among the companies that filed claims related to NFTs and/or the Metaverse.

These metaverse-focused applications are generally classified in Class 9 for “downloadable virtual goods, including NFTs”, Class 35 for “retail stores of virtual goods”, and/or Class 41 for ” entertainment services in virtual environments”. Depending on the level of brand commitment, broader protection may also cover Class 36 for financial services related to virtual currencies, Class 38 for telecommunications services related to virtual communities, Class 42 for computer software not downloadable for virtual goods creation/NFT trading.

With the increase in filings related to the metaverse, at least some local trademark offices are also reviewing and updating the new classification of goods and services. For example, in Thailand the Trademark Office guidelines have been updated to reflect some of these new terms and in practice the Vietnam Trademark Office has also accepted this specification. On the other hand, in Indonesia metaverse-related goods and services are not yet standard items and therefore one option is to try to adapt the terms to locally accepted specifications until new specifications are available. locally developed. In China, as long as the Chinese national registration of a mark covers all subclasses of traditional goods and services that align with the relevant metaverse classes, this should provide sufficient coverage without incurring additional costs of new filings. .

Generally, for a brand to future-proof its brand portfolio, it may make sense to extend trademark rights in (and registrations for) key commercial markets and/or where the ownership enforcement regime Intellectual property may not be as developed as you would need to rely on trademark registration for a specific virtual specification. Trademark owners should also continue to actively consider protecting 3D shape marks, sound marks (i.e. MP3), holograms, motion marks and multimedia marks, as they may be more relevant in the audio-visual sensory environment of the metaverse.

Brands will no doubt be keen to monitor future developments on the Metaverse and ensure that their intellectual property is properly protected. Having the right strategy in place will be crucial for any brand looking to thrive in the “New Internet” and gain control over their brand.

Lisa Yoon is director of to wake up Indonesian office with extensive IP experience in Southeast Asia.

Love Fält is a senior partner based in Rouse’s Stockholm office.

Ya Wen is a senior trademark attorney based in Rouse’s Beijing office.

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