Brands in the metaverse: showtime for the fashion and cosmetics industry

The metaverse presents a unique opportunity for brands to create immersive experiences that capture their audience's attention in a way that traditional social media cannot match. During the recent Metaverse Fashion Week some brands managed to keep users engaged for over 12,000 minutes, indicating the effectiveness of the metaverse's "attention economy". 

Brands have quickly recognized the significance of enabling users to self-express through their avatars by offering virtual goods such as clothes, footwear, and headwear, as well as virtual space to socialize. They are moving away from campaign-based activations inside virtual worlds to create persistent experiences through collaborations that foster deeper connections with their audience. These changes have naturally led to a myriad of legal issues, especially in the trademark realm.

Right advice can conquer

If you give a brand the right advice, it can conquer the metaverse. The past two years have been marked by a trend towards metaverse trademark registrations, driven by brand owners' desire to secure trademarks covering downloadable goods and virtual goods in order to safeguard their brands in the metaverse. However, it's essential for brand owners to keep in mind that they will face the genuine-use requirement in the metaverse as well.

Various trademark authorities have also recently clarified their approach to classification. 

The European Union Intellectual Property Office's (EUIPO) new trademark guidelines, which were effective from 31 March 2023, provide definitions, core principles, and examples for the classification of downloadable goods and virtual goods. While virtual goods are proper to class 9, the term must be clarified as to the content of the physical goods. For non-fungible tokens (NFTs), the term must always be linked to something different from itself to be acceptable.

Regarding services related to the minting of NFTs in class 42, the specification is not necessary because the nature of the service refers to a piece of software. When it comes to services provided online or in a virtual environment, classification is based on the underlying nature of the service and its impact in the real world. The classification by the office is still ongoing – so watch this space.  

Following the efforts already provided by the United States Patent and Trademark Office (USPTO) and the EUIPO, the UK Intellectual Property Office has also recently released guidance on NFTs and the metaverse. 

While the USPTO has not released supplementary guidelines, it has been active in the metaverse space. In an office action, the USPTO reaffirmed the need for brand owners to specify the underlying digital or physical items represented by NFTs for proper classification and identification. 

Brands must carefully assess their business strategy when entering the metaverse. Simply filing for defensive purposes may provide temporary protection but could leave brands vulnerable to cancellation actions later, and repeatedly filing for defensive purposes could result in bad faith cancellation actions. Another key issue is the lack of clarity around what constitutes genuine use in the metaverse, which is yet to be fully resolved. To mitigate this, it is recommended to gather detailed evidence, such as screenshots, affidavits, articles, and other documentation to provide a strong case in the event of cancellation actions. 

'Till I got flashed by the paparazzi

A new trademark application is not necessary for well-known trademarks, which are protected across all classes. Early USPTO decisions regarding famous brands indicate that trademarks of well-known companies for "real world" goods and services extend to the metaverse. The strength of the earlier mark, as well as the market activity of its owner, will be crucial factors in such cases. Furthermore, considering the EUIPO's similar approach to regulating new technologies, it is highly probable that they will follow the USPTO's lead in protecting well-known trademarks in the metaverse. 

Metaverse for spring? Groundbreaking. 

With the expansion of brands into the metaverse and trademarks appearing on virtual products worn by avatars, the question arises as to whether they should be granted the right to prevent unauthorized third parties from using similar signs and causing confusion or taking advantage of their reputation in this new realm of commerce.

Trademark owners generally have the power to prohibit the use of identical or similar signs for identical or similar goods and services as long as there is a likelihood of confusion unless the prior trademark is a reputed trademark registered for the relevant territory. 

The likelihood of confusion arises when consumers may mistake the products bearing a conflicting mark for those of the original brand. As brand owners strive to navigate the complexities of trademark infringement in the digital age, the existence of a cross-realm risk of confusion largely depends on the similarity between physical and virtual goods. The merging of digital and real-life products through collaborations with gaming platforms and the strength of the earlier brand can lead to a likelihood of confusion for consumers, making it difficult to distinguish between genuine and fake goods, potentially leading them to believe that the disputed goods come from the original brand or related undertakings.

In the case of a trademark with a reputation, the scope of protection is broader, and there is no need to consider similarity because the right holder can enforce its rights against all goods and services. In fact, the metaverse presents an opportunity for brand owners to increase the reputation of their trademarks by engaging with new audiences and benefiting from the reputation. 

Osborne Clarke comment 

While trademark law has demonstrated adaptability to new technologies, navigating the metaverse still poses significant challenges in protecting and enforcing intellectual property (IP) rights. Early decisions in the fashion space have highlighted the need for proactive measures in the metaverse, such as tracking intentions to enter the space and monitoring actual usage. Additionally, to enforce IP rights effectively in the metaverse, meta-enforcement tools such as monitoring within the metaverse and tracking genuine goods are becoming increasingly necessary. These tools may involve leveraging user networks to ensure proper protection and enforcement of IP rights in this rapidly evolving virtual environment.