Virtual worlds, virtual goods, NFTs, Web 3.0, and blockchain technology have been increasingly covered in the media in recent years. As an impulse to this awakening of the biggest current megatrend can probably be regarded the announcement of Facebook in October 2021 to change its brand name to Meta and its plans to develop Meta into a metaverse company[1]. These concepts are mentioned in almost every seminar, irrespective of the field, and a lot of material on their references and meanings can be found on the Internet[2]. This article does not focus on these concepts or their underlying technology as such but discusses – in the light of the current practice of the European Union Intellectual Property Office (EUIPO) – whether it is possible for firms to protect virtual brand items and services appearing on the Internet, in virtual reality and in the metaverse, with a trademark. Even though some disputes are already pending around the world, case law on applying intellectual property rights to trademarks appearing in virtual reality has not emerged yet, and regulation in this field is waiting to be updated as well.
A conventional leather handbag is protected in Class 18 according to the trademark classification system, so-called Nice Classification. In which class should an application be filed, if an item having an appearance similar to a physical bag of a well-known brand is sold in the virtual world to be used, for example, as a handbag for a virtual character, i.e. a so-called avatar, or as an independent collectible? Is a conventional trademark registration in class 18, protected in e.g. the EUIPO, sufficient for using the brand in the metaverse?
What does the EUIPO say about the classification of handbags?
A handbag or an image representing it can be presented in digital format in various ways. A physical handbag can be sold online by taking a digital photograph of the handbag and placing it in an online marketplace. Such a handbag is still a physical handbag, and it is protected in Class 18. A virtual item, such as the above-mentioned handbag for an avatar, can also be made of the handbag by encoding. In such a case, the item is not a handbag but a digital content or image of an object looking like a handbag. EUIPO made a first statement on the classification of virtual goods in June 2022[3] when the terms ”virtual goods” and ”NFT” started to increasingly appear in lists of goods and services of trademark applications. At that time, the office took the approach that such virtual goods are proper to Class 9 of goods because they are treated as digital content or images. According to the current classification practice, the common term “virtual goods” lacks clarity and precision, so it must be further specified by stating the content to which the virtual goods relate (e.g. downloadable virtual goods, namely, virtual handbags).
The above-mentioned acronym NFT stands for non-fungible token. The NFT on its own is not a “product” or not even a digital image depicting one, as the above-mentioned handbag. The NFT is a unique digital identifier, a digital certificate, by which the owner of a given virtual item is registered in a blockchain. For such NFT items, the office stated that they will also be treated in Class 9 of goods in the classification system, but as unique digital certificates registered in a blockchain, which authenticate digital items but are distinct from those digital items. Moreover, the office does not accept the term ”non-fungible tokens” on its own but the type of digital item authenticated by the NFT must be specified.
At present (in October 2022), the office is preparing an update to the guidelines relating to the classification. In early 2023, new guidelines will be issued, in which virtual goods are taken into account more clearly, but the instructions outlined above can be applied already.
Does a branded bag on sale in the metaverse infringe registered trademark rights?
Is it an infringement of trademark rights if a trademark registered by the EUIPO is used in the metaverse by a third party without the proprietor’s consent? The territorial principle is strongly involved in intellectual property rights, such as trademark rights. A registration and the exclusive right provided by it is, in principle, linked to the sovereign state or region in which the registration is in force. For example, a trademark registered by the EUIPO provides protection in all the 27 member states of the EU.
In the metaverse and in computer games, the physical and digital worlds merge. Beside our tangible world, virtual realities have been technologically created, in which people interact as characters called avatars. A metaverse may be centralized, whereby it is controlled by a given enterprise, ordecentralized, whereby individuals own their own data and decide on sharing it.
The metaverse and NFTs provide e.g. a branded bag manufacturer with new business opportunities for expanding the use of the brand to the virtual world and the gaming industry, as long as e.g. the classification is in order. As stated above, the NFT as such is a certain identification by which an item can be authenticated, so the “item” is verified and protected in that sense. But if a third party sells a branded bag well-known on our physical globe as an NFT branded bag in the metaverse, in which country or region does the possible infringement of trademark rights take place? Can the manufacturer of physical handbags and the owner of the respective trademark registration interfere with these NFT handbags or accessories of a game character, even if the handbag were also protected in Class 9?
In a centralized metaverse, there is normally an underlying enterprise administering the metaverse. Normally, joining such communities and acting in them is ultimately based on agreements and terms of use between the enterprise and the participant. In such a situation, it may be possible to tackle an infringement under contract law. In decentralized metaverses, there is no centralized ownership or control, but there may be a smart contract, in practice a computer program or a code, between two parties. How such a smart contract or code is interpreted, for example, in a case of a trademark dispute, is still unregulated by legislation and case law.
Waiting for new case law
For the time being, not even the EUIPO has been able to give direct answers to these questions. Instead, it has encouraged trademark owners to be active in opposition proceedings and disputes and to develop their positions in a comprehensive manner and to provide the office with evidence to support their views, in order to create new case law in the field.
If your firm already operates in metaverses or if there is a risk that a third party might start to utilize your brand in the virtual world, we recommend that you take time to check the scope and classification content of your own registrations as well as the terms and conditions of various cooperation and product development agreements.
[1] https://about.fb.com/news/2021/10/facebook-company-is-now-meta/
[2] https://about.meta.com/what-is-the-metaverse/, https://fi.wikipedia.org/wiki/NFT, https://fi.wikipedia.org/wiki/Lohkoketju (21.10.2022)
[3] https://euipo.europa.eu/ohimportal/fi/news-newsflash/-/asset_publisher/JLOyNNwVxGDF/content/pt-virtual-goods-non-fungible-tokens-and-the-metaverse (21.10.2022)
Paula Sailas
In addition to my work as a lawyer advising our clients in their contentious and non-contentious intellectual property matters including trademarks, designs and domains. I’m actively involved in IP organizations and frequently featured as an expert in related media and events in Finland and abroad. I’ve been involved with International organizations such as INTA and FICPI for over 10 years.