What is the metaverse?

To set the scene, the term ‘metaverse’ was originally coined in the 1992 science fiction novel Snow Crash, in which the author, Neal Stephenson, combined the prefix ‘meta’ and the word ‘universe’ to describe a virtual universe. More than 30 years later, what was originally imagined by Neal Stephenson has become a reality. This is seen in the popular games ‘Fortnite’, ‘Roblox’, and ‘Secondlife’, in which users access the virtual environments of the game via ‘digital avatars’.

What does the metaverse mean for brand owners?
How are trade marks being used and infringed in virtual environments?

More recently, a number of notable brands have entered the metaverse in other ways. Some brands have done this by way of collaboration with the gaming platforms, including:

• Nike partnering with Roblox to form “Nikeland” on the platform;
• Dolce & Gabbana, Tommy Hilfiger and Adidas participating in “Metaverse Fashion Week” on Decentraland; and
• Ariana Grande and Travis Scott participating in in-game performances on Fortnite.
  

Outside of gaming platforms, brands have created virtual reality environments, like the “Dyson Demo VR” which is an “immersive” virtual reality environment where customers can shop and learn about Dyson’s products and tech company Nvidia’s ‘Omniverse’ platform can be used to create real-life simulations of buildings and factories.

Brand owners are also discovering that the metaverse provides new opportunities for infringers. In the US case of Hermès International, et al. v. Mason Rothschild 1:22-cv00384-JSR (S.D.N.Y. May 18, 2022), Hermes successfully claimed that the sale of NFT “Metabirkins” by Mason Rothschild amounted to an infringement of its trade marks for the physical Birkin bag. While the ruling in Hermes is promising for brand owners, it remains unclear whether existing trade marks for real-world goods and services will apply to any virtual copies sold in the metaverse and these issues have not yet been considered by Australian courts.

How can you protect your trade marks in the metaverse?

Brand owners are having to consider how they can utilise and adapt the existing trade mark system designed for real world goods and services to provide protection in the metaverse. The two main challenges here are the classification of goods and services and questions of jurisdiction.

Classification

Helpfully, IP Australia has recently issued classification guidance for virtual goods, the metaverse, non-fungible tokens (NFTs) and blockchain. Specifically:

• Virtual goods being digital objects used in virtual environments, are classified in class 9 because they essentially consist of data, but the exact nature of the goods must be specified, for example “downloadable virtual clothing”;

• services relating to virtual goods are classified depending on the nature of the relevant service, for example, “online retail services for downloadable virtual clothing” would be classified in class 35;

• the classification of virtual services depends on whether the virtual and real-world impact are the same. For example, virtual and in-person education services have the same real-world impact, and both belong in class 41, but a virtual restaurant would be considered an entertainment service in class 41, whereas its real-world counterpart would fall into class 43; and

• in respect of NFTs and blockchain, the nature of the goods and services that are being authenticated by the NFT or that is related to the blockchain technology should be specified. For example, “downloadable audio and video recordings featuring movie clips and memes, authenticated by non-fungible tokens”.

Brands are starting to seek protection for their marks in virtual environments with wine brands PENFOLDS and 19 CRIMES as well as fashion brand ZIMMERMANN securing Australian registrations. Overseas, applications for BUDWEISER and McDONALDS have also been filed in the US covering virtual goods and services.

Jurisdiction

The other challenge is that the metaverse is, by definition, unconstrained by geographical boundaries. However, trade marks are only enforceable within the jurisdiction in which they are registered. Further, while platforms like Roblox or Fortnite may offer assistance with the removal of any infringing material, pursuing trade mark enforcement beyond this may be challenging due to the use of decentralised blockchain technology within the metaverse. Unlike Web2 domains, a blockchain domain is not regulated by a central entity like ICANN or a Registrar. This can present challenges in both identifying infringers and pinpointing the location of any infringing conduct. The best course may be to consider trade mark protection across multiple real world markets to provide protection in the metaverse, including markets where platform servers are located or where high volumes of users and/or infringers are likely to be based.

What’s next?

We expect to see many more brands enter the metaverse in the near future. This will present opportunities for new uses, exposure and collaborations. At the same time, brand owners will face challenges in securing adequate protection via traditional trade mark registrations for their brands as well as challenges in actions to enforce those rights.