Well-versed with the Metaverse? An IP perspective

Technology is evolving every second and change is the only constant. In a competition-driven and tech-powered ecosystem, it is imperative to be aware of where the future is headed and get the first-mover advantage. While this can be a space with multiple obstacles, it may very well be the next breakthrough.

One such development where big businesses seem to be foraying into is the Metaverse. Simply put, it is “a virtual-reality space in which users can interact with a computer-generated environment and other users”. However, it is not that simple a concept from the legal standpoint, with the lack of any laws and regulations in this space with respect to data security, privacy and censorship, regulatory enforcement, tax reporting, cyber fraud and crime. Hence, it becomes even more imperative to understand this work in progress.

What is a Metaverse?

Metaverse is a combination of the words ‘meta’ and ‘universe’ and is practically the creation of a parallel virtual universe with digital avatars where one may be living their regular life, an alter ego. It will expand the scope of the internet to bring together digital spaces like social media, online gaming, 3D spaces, decentralized commerce, virtual/augmented/mixed/extended reality, non-fungible tokens, cryptocurrency, immersive learning and the like.

This would allow one to sit in the comfort of their home and dine atop the Eiffel Tower, and enable people from different parts of the world to collectively have an experience at their convenience, across time zones. Another scenario could be a skiing trip to the Swiss Alps without actually travelling to the location, sans the risk of physical injury, pandemic travel restrictions and risks, and most importantly a budget that blows a hole in one's pocket. While such experiences may affect tourism adversely, they may aid in preservation of the environment, and there is no saying how the Metaverse will change the way we perceive the world we live in.

The application of Intellectual Property Laws, more specifically trade marks and brand names, is relatively new to this concept. Of late, one has come across various brands that have made a proactive entry into the Metaverse sphere by way of filing trademark applications in various jurisdictions including the United States and European Union. Many famous marks, such as NYSE, DKNY, PUMA, NIKE, etc have been filed for such goods and services in the Metaverse.

It has been noted in these filings, goods such as “downloadable virtual reality, augmented reality, and mixed reality software”; "downloadable computer software and application programming interface (API) to allow users to access, maintain, store, display, buy, sell, and trade virtual and digital assets, artwork, collectibles, and non-fungible tokens"; "downloadable virtual goods, namely, non-fungible tokens"; "blockchain-based non-fungible tokens (NFTs) and NFT collectible series"; "digital media, namely, digital collectibles, digital tokens, non-fungible tokens (NFTs), cryptocurrencies, and digital art"; "downloadable virtual goods, namely, computer programs featuring clothing, colors, badges and tools for use in online virtual environments"; "downloadable virtual goods, namely, computer programs featuring clothing, colors, badges and tools for use in online virtual environments"; "entertainment services, namely, providing on-line, non-downloadable virtual footwear, clothing, headwear, eyewear, bags, sports bags, backpacks, sports equipment, art, toys, accessories, digital animated and non-animated designs and characters, avatars, digital overlays, and skins for use in virtual environments"; etc., are being used for Metaverse related trademark filings globally.

Other entities that have such filings are Ralph Lauren (in respect of store services in Class 09, virtual products for online virtual worlds in Class 35 and online, non-downloadable virtual products for virtual environments in Class 41) and Walmart (for virtual reality game that features a virtual version of a store selling virtual goods), amongst others.

Multiple applications for this space have also been filed by the likes of Alibaba Group Holding, Tencent Holdings and ByteDance. which are pending review at the Trade Marks Office, China, while some have already faced rejection.

Recently, two trademark applications were filed in the US by third-parties for the Gucci and Prada logos in a range of Metaverse-related arenas, including downloadable virtual goods, virtual worlds and virtual clothing used in virtual spaces. On Metaverse platforms with user-generated content, such as Roblox, creators are currently selling clothes that feature logos from the likes of Louis Vuitton, Prada and Chanel.

In another recent news, luxury fashion house Hermès initiated legal action against artist Mason Rothschild for launching a follow-up collection after previously selling an NFT artwork “inspired” by the iconic Birkin bag. Hermès stated that the NFTs “infringed upon the intellectual property and trademark rights of Hermès and are an example of fake Hermès products in the Metaverse”. Their cease and desist letter was replied to by way of an open letter on his Instagram account.

Therefore, businesses need to understand the importance of IP prosecution and enforcement in this space before it is too late.

Filing trademarks for the Metaverse

While filing trademarks for the Metaverse, one must consider the word/device mark, logo, tagline, shape of products, packaging, colour combination and the non-conventional marks such as architecture and layout, and sound/motion/hologram/pattern/smell/taste marks.

Further, while the Nice Classification is yet to be updated to accommodate the recent development, the relevant classes at present would be 9 and 42 as the primary classes and 35, 38 and 41 as the secondary classes to cover virtual products/spaces/stores, non-downloadable products, downloadable virtual products, NFT, crypto/digital coins/tokens/currency, digital overlays/animation etc. as the specifications.

The theory of zone of expansion, that is, a consumer’s assuming a relation/connection of certain goods or services with a brand offering similar goods or services, would come to the rescue in matters of conflict in the Metaverse. For example, if a business deals in clothing under its mark/brand, the said entity may be able to prevent a third party from using their mark/a similar mark for virtual clothing and footwear. The points of contention would, however, be to prove the first user of the mark, that is to prove the first use in the Metaverse, and also reasonable deception and confusion even if the trade channel, point of purchase, purpose and consumer base are different.

With the rise and new found need for virtual events, the time is not far that the virtual world would be the space with much activity. There would be a plethora of entities making money off of providing goods and services in the Metaverse to increase virtual footfalls at such events. This would be a breeding ground for IP (specifically trade mark) infringements.

Even if the infringers do not copy the trade marks, infringement of other IP rights in the trade dress, copyright and / or design would be rampant. There would be a need for innovative protection of IP rights, such as the hospitality industry protecting their physical location layouts (by way of 360 degree views) and the fashion industry protecting its artwork and designs. This would indeed be a brand’s and an IP practitioner’s nightmare in terms of due diligence by way of investigations, market surveys, trap purchases, takedowns, collection of evidence, seizure of products by way of raids etc. The IP offices and Courts would also have to change their traditional way of handling of such matters.

Vikrant Rana is Managing Partner, Ananyaa Banerjee is a Managing Associate and Pranit Biswas is a Senior Associate at SS Rana & Co.

For more information on Metaverse, please write to us at info@ssrana.com