Trade Marks in the Metaverse

I.    Introduction

The metaverse conjures up infinite possibilities of a space without limits where our physical selves move seamlessly into virtual worlds as digital avatars in altered realities to play, work, learn, create, shop, socialise and trade. The metaverse as initially described by Mark Zuckerberg in October 2021 promises a more immersive and embodied internet as “a set of interconnected digital spaces that lets you do things you can’t do in the physical world.”[1]

The term “metaverse” was first coined in Neal Stephenson’s 1992 speculative fiction novel Snow Crash, and the 2003 virtual world platform Second Life is often credited as the first metaverse. Despite the lack of clarity on what the “metaverse” really means in terms of its interoperability, mechanics, technological networks and governing laws,[2] the rebranding of Facebook as Meta in 2021, the introduction of Horizon Home, and the announcement of the company’s focus to improve virtual and augmented reality experiences have led to a seismic change in business models around the globe to focus on leveraging the metaverse. According to Forbes in 2022, the metaverse was predicted to grow into a US$783.3 billion market by the year 2024.[3] However, things are looking less rosy at the time of writing as the metaverse is looking more and more like a collage of virtual games and social networking sites that lack interconnectedness and interoperability.

In April 2023, the International Trademark Association (INTA) released a white paper titled “In The Metaverse” which warned that the metaverse “currently does not identify a single shared virtual space, but is decentralized across various platforms.”[4] Thomas Stackpole, writing for the Harvard Business Review, wryly comments: “Is the metaverse our future? Companies like Meta and Microsoft seem to think so, though their virtual worlds remained closed rather than the open ideal … We dream of the metaverse but end up with a mall.”[5] Many companies that have ventured into the fray are now suffering losses and reevaluating their investments. Regardless, the shift by Facebook to adopt Meta as its name has spurred many companies around the world to change their business models, invest in Web3 innovations, and increase efforts to make virtual worlds more significant in the video game, social media, and e-commerce sectors.[6] Nonetheless, commercial opportunities abound, and many well-known brands have filed trademark registrations for myriad forays into the metaverse, as well as for non-fungible tokens (NFTs). In reality, the metaverse as presently understood is not an interconnected seamless world; it is in fact disparate virtual environments of games and networking spaces built on different proprietary platforms and blockchain technologies that are not interoperable. Virtual goods or NFTs purchased in Roblox or Decentraland cannot be brought into Fortnite or Blankos Block Party.

Beyond the lucrative commercial opportunities, the metaverse also offers a realm where identity is not just a concept, but a lived experience, demanding a balance between self-expression and privacy protection.[7] Every individual is capable of having a metaverse identity due to the choices they make both online and offline. According to a 2024 report published by the World Economic Forum, identity comprises “layered aspects of cultural heritage, ethnicity, age, professional and social roles, hobbies, gender identification, sexual orientation and much more.”[8] These attributes can become vulnerabilities in the metaverse where “[p]ossession [and] … revealing certain identity facets, may invite bullying, harassment, stalking, discrimination, prosecution, legal action, persecution, grooming or bias.”[9]

This article, adapted from a longer version in the Media & Arts Law Review,[10] will focus on an overview of how trademark rights can be enforced in the metaverse.

II.   Understanding the Metaverse

On 28 October 2021, Mark Zuckerberg’s communique on the rebranding of Facebook to Meta marked the start of a new era that transformed our daily lives and redefined business models and strategies around the world. In Zuckerberg’s open letter, he wrote:

The next platform will be even more immersive — an embodied internet where you’re in the experience, not just looking at it. We call this the metaverse, and it will touch every product we build.

The defining quality of the metaverse will be a feeling of presence — like you are right there with another person or in another place. …

In the metaverse, you’ll be able to do almost anything you can imagine — get together with friends and family, work, learn, play, shop, create — as well as completely new experiences that don’t really fit how we think about computers or phones today. …

The metaverse will not be created by one company. It will be built by creators and developers making new experiences and digital items that are interoperable and unlock a massively larger creative economy than the one constrained by today’s platforms and their policies.[11]

From his description, it appears that the metaverse as an “embodied internet” is a concept of a space without limits, and one that connotes the integration or connection disparate internet sites that offer extended reality (XR) experiences,[12] and consequently a paradigmatic shift in the way we live our lives and the way we do business. This lofty vision has attracted numerous critics. For instance, Herman Narula commented that “Facebook’s vision of the metaverse amounted to vapor-ware: a theoretical space in which users could do almost anything, and thus an idea that, practically, amounted to nothing.”[13] At the time of writing, it would appear that this digital landscape is unlikely to be an interconnected or interoperable virtual space with multiple points of entry, but more resembling a “loosely related constellation of virtual world-type experiences”[14] or “merely a buzzword for more advanced video games”.[15] Indeed there are already numerous online social networking platforms that allow for customisation of avatars (e.g. Second Life) and a giddy kaleidoscope of massively multiplayer online role-playing games (MMORPGs) that pre-date Zuckerberg’s announcement of the metaverse.

Other more optimistic proponents of the metaverse, for example, Nick Clegg, described the metaverse as a logical evolution of the internet, and that its three attributes — ephemerality, embodiment and immersion — would mean “people will experience the metaverse in a way that is much closer to physical world interactions than to the experience of using a mobile app or website.”[16] In urging for greater interoperability, Clegg comments that “[d]igital items for avatars — or any 3D objects that someone might wish to take with them throughout the metaverse — will need to be like GIF or JPEG image files in today’s internet.”[17] This expansion of virtual worlds, and in particular, interoperability, will have to occur within an environment largely defined by intellectual property (IP) rights of copyright, trademark, patent, trade secret, and the right of publicity or personality right, as well as the digital property rights associated with NFTs and their smart contracts.

Often spoken (and frequently erroneously) in conjunction with the metaverse, NFTs are digital assets that have been verified using blockchain technology, and they can exist independently of the metaverse of games and social networking platforms, or integrated into these digital worlds. The play-to-earn business model is taking flight in the metaverse where players in MMORPGs can collect cryptocurrencies or NFTs in games like Alien Worlds and Splinterlands. There is no standardised process by which an NFT is created or – to use the technical jargon – “minted”, but one would need to start with a digital file (e.g. a .jpg image file) and then produce a “hash” of that file. Hashing entails the use of an algorithm to take data of an arbitrary size to produce a deterministic fixed-length output, which serves as a fingerprint of the original data.[18] A metadata file is then created including the first hash, following which a hash of the metadata file is produced, culminating in a unique hashchain on a blockchain. Most NFTs are part of the Ethereum blockchain, though other blockchains have implemented their own version of NFTs. A NFT consists of a unique token identifier, or token ID, in the form of a unique uint256 variable, which is mapped to an owner identifier and stored inside a smart contract on the blockchain. When the owner of a given token ID wishes to transfer it to another user, it is easy to verify ownership and reassign the token to a new owner. When NFTs are minted, they are listed on an NFT marketplace such as OpenSea or Rarible where NFTs can be sold or traded in accordance with smart contracts that govern the transfers.[19] By mid-2023, the stratospheric prices and buying frenzy of NFTs in the last two years have abated.[20] Nevertheless, the unauthorised minting and sale of NFTs associated with trademarks that have been the subject of high-profile lawsuits will set important legal precedents, such as Hermes suing artist Mason Rothschild for the MetaBirkins NFTs,[21] and Nike claiming that online reselling platform StockX had infringed its marks by displaying and selling its Vault NFTs that are each tied to a specific pair of Nike sneakers.[22]

III.  The Use of Trademarks in the Metaverse

A trademark functions as a designation used to identify and distinguish the source of goods and services of a person or company from other sources. Businesses routinely register a trademark (which can include words, images, shapes or colours) in the class of good and services, and in the specific jurisdictions, in which they are conducting their trade. Trademark law generally protects against unauthorised third-party uses of a trademark in a manner that would cause a reasonable consumer to believe that the trademark owner either was the source of the goods/services or endorsed or sponsored such goods/services (often referred to as the “likelihood of confusion” analysis in trademark infringement), or in a manner that may dilute a famous or well-known trademark.

There are typically 45 categories of goods and services known as the Nice Classification, of which 34 relate to goods and 11 relate to services. The Nice Classification was established following the conclusion of the Nice Agreement Concerning the International Classification of Goods and Services for the Purposes of the Registration of Marks in June 1957.

On 1 January 2023, the 12th edition of the Nice Classification entered into force and it had been updated to more explicitly refer to uses in what we would call the metaverse, as well as NFTs. When minting and selling NFTs that comprise its own trademarks or when using its marks in an online game, a company should register its mark in the appropriate class. These are the four most relevant classes:

• • Class 9: includes “downloadable virtual goods/digital files authenticated by non-fungible tokens [NFTs]”
  • Class 35: includes “retail store services featuring virtual goods”
  • Class 41: includes “virtual entertainment services, namely, providing online, non-downloadable virtual footwear, clothing, bags, sports equipment, art, toys and accessories for use in virtual environments; providing online virtual guided tours”
  • Class 42: includes “mining of crypto assets/cryptomining”

Although there exists much ambiguity as to cohesive and viable business strategies regarding the metaverse and NFTs, big brands in the fashion, food, entertainment, automobile and real estate sectors are definitely registering their trademarks in these classes and commencing a spectrum of XR activities and issuing of NFTs. Based on information collected from the US Patent and Trademark Office (USPTO), as of January 2023, the USPTO has received 7,746 trademark applications that incorporate or relate to NFTs, compared to 2,179 trademark applications in 2021 and only 18 in 2020.[23] For metaverse and/or virtual products and services, it has received 5,850 trademark applications, compared to 1,798 trademark applications in 2021 and just 155 in 2020.[24]

In particular, luxury fashion brands such as Louis Vuitton, Gucci, Balenciaga, Dolce & Gabbana and Burberry, as well as sporting apparel titan Nike, are actively exploiting the metaverse with a proliferation of online collaborations, digital experiences and NFT sales. Over the past year, watch brands like Hublot, Bulgari and Panerai have also embraced the possibilities of NFTs as a way to release works by notable artists inspired by the companies’ watch designs, to serve as a mark of authentication and ownership and to enhance customer experiences.[25] Jewellery brands are similarly hopping onto the bandwagon.[26] Despite the fact that “many NFTs lost their luster given the plethora of legal issues, commercial risks, market fluctuations, and other uncertainties”,[27] many brands are continuing to register their marks in the relevant classes.

On 17 May 2021, Gucci teamed up with Roblox, one of the most renowned gaming platforms, to exhibit Gucci handbags, hats, and sunglasses on avatars, in the Gucci Garden space.[28] It ran for two weeks, allowing enthusiasts and gamers to buy collectibles and several rare Gucci accessories, and more than 20 million players visited the Garden. It followed up with a permanent space on Roblox called Gucci Town, where players can compete in games to earn GG gems, discover and create art pieces, and purchase from a boutique of limited-edition virtual items from Gucci for their avatars.[29] In June 2021, Gucci offered up its first NFT, a film inspired by its Aria Fall-Winter 2021 fashion runway collection, for auction at Christie’s. The sale, titled Proof of Sovereignty: A Curated NFT Sale by Lady PheOnix, is an NFT-specific auction that features a single work from Gucci, and it realised US$25,000.[30] It later collaborated with Superplastic to launch a three-part SUPERGUCCI NFT collection. The first drop in February 2022 featured ten unique NFTs each accompanied by a handmade Italian ceramic sculpture designed by both Gucci and Superplastic.[31]

In October 2021, Nike was the first apparel brand to file a number of new intent-to-use applications for its most famous trademarks in the US for use on various virtual goods/services that foreshadowed Nike’s since-confirmed intentions to make big strides into the metaverse. Since then, it had launched “Nikeland” in partnership with Roblox, launched NFTs created in conjunction with RTFKT Studios.[32] and sued online resale marketplace StockX for, inter alia, infringing its trademarks by selling NFTs tied to physical sneakers.[33] Nike acquired RTKFT, which was established in 2020 and has already posted an impressive performance, teaming up with crypto artist Fewocious in 2021 to sell 600 pairs of shoes as NFTs, amassing a total of US$ 3.1 million in less than seven minutes.

When artist Mason Rothschild launched his furry colourful digital renditions of a Hermes Birkin at Art Basel in Miami – 100 digital collectibles created on the Ethereum blockchain – and then sold them on the OpenSea NFT marketplace, he was sued by Hermès.[34] While the NFTs in this case are not strictly part of the metaverse, since they exist independently of MMORPGs and other immersive virtual environments, the ongoing litigation presents an insight into how courts and the broader legal community are approaching the issue of balancing freedom of expression with the enforcement of proprietary rights in a well-known mark. After a nine-day trial, an eight-person jury found Rothschild to be liable for trademark infringement, trademark dilution and cybersquatting, awarding US$133,000 in damages. In his opinion and order handed down on 26 June 2023, Justice Rakoff addressed the Supreme Court’s decision in Jack Daniel’s Properties, Inc v VIP Products LLC,[35] and held that Rothschild has in fact used the Birkin trademark as a trademark, and hence the Rogers artistic relevance test would not be applicable.[36] It was relevant that Rothschild used a website “www.metabirkins.com” to sell the NFTs labelled as “MetaBirkins NFTs”. Moreover, the jury found that Rothschild did use the Hermes’ marks with “an intent to deceive” potential customers into believing that Hermes was associated with his NFT project.[37] Ultimately no error was found in the jury’s decision, and the court ordered an injunction on the marketing and sale of the MetaBirkins NFTs, disgorgement of profits and transfer of the domain name to Hermes.

IV.   Conclusions

There is much money to be made in the metaverse, but many IP issues are unresolved. For instance, the frequency with which brands’ trademarks were being used on the virtual goods in the Second Life ecosystem without their authorisation had led to metaverse-related lawsuits. But due to swift settlements or the defendants’ failure to turn up in court, these lawsuits provided little insight into how courts would treat trademarks – and claims of trademark infringement – in the metaverse.

In summary, for well-known marks in Singapore, even if they are not registered for particular classes of goods or services related to the metaverse, they can still avail themselves of the anti-dilution right (e.g. dilution by blurring or taking unfair advantage of the distinctive character of a mark)[38] or an action in passing off.[39] Lawyers in Singapore have opined that: “Although trademarks for goods and services specifically relating to NFTs and the metaverse ought to be registered as far as possible, if necessary, existing trademark registrations may perhaps be relied on in Singaporean trademark disputes if the factual matrix allows for it. … For example, a business running a physical café that has registered its trademarks under Class 35 (covering marketing and advertising online) may be able to contend that its trademark protection extends to a virtual café in the metaverse (which arguably would amount to a certain degree to online marketing and advertising).”[40] With regard to infringement, section 27 of the Trade Marks Act 1998 contains a broad definition of using a sign “in the course of the trade”, and should be able to cover many uses in MMORPGs and so-called metaverse social networking platforms, as well as NFTs.

AUTHOR INFORMATION:

David Tan is Professor of Law at NUS, and also Co-Director of the Centre for Technology, Robotics, Artificial Intelligence & the Law (TRAIL) at NUS Law.
Email: david.tan@nus.edu.sg

REFERENCES

[1]      Meta, “Connect 2021: Our vision for the metaverse”, Meta (28 October 2021) <https://tech.facebook.com/reality-labs/2021/10/connect-2021-our-vision-for-the-metaverse/>; Mark Zuckerberg, “Founder’s Letter, 2021”, Meta (28 October 2021) <https://about.fb.com/news/2021/10/founders-letter/>.

[2]      See, e.g. Roger Brownsword, “Law’s Imperfect Governance: Is the Metaverse the Solution?” {paper submitted to Media & Arts Law Review} at p 3.

[3]      E.g. Martin Taylor, “The Metaverse Is Coming – Are You Ready?”, Forbes (29 November 2022) <https://www.forbes.com/sites/forbestechcouncil/2022/11/29/the-metaverse-is-coming-are-you-ready/?sh=7396769a2115>.

[4]      International Trademark Association, In The Metaverse: A Report From INTA (April 2023) at 13 <https://www.inta.org/wp-content/uploads/public-files/perspectives/industry-research/METAVERSE_REPORT-070323.pdf>.

[5]      Thomas Stackpole, “Exploring the Metaverse”, Harvard Business Review (July 2022) <https://hbr.org/2022/07/exploring-the-metaverse>.

[6]      Jon M. Garon, “Legal Implications of a Ubiquitous Metaverse and a Web3 Future” (2022) 106 Marquette Law Review 163, 167.

[7]      World Economic Forum, Metaverse Identity: Defining the Self in a Blended Reality – Insight Report March 2024 (2024) 9.

[8]      Ibid.

[9]      Ibid.

[10]    David Tan, ‘Trademarks in the Metaverse: Everything, Everywhere, All At Once’ (2023) 25 Media & Arts Law Review 285.

[11]    Mark Zuckerberg, “Founder’s Letter, 2021”, Meta (28 October 2021) <https://about.fb.com/news/2021/10/founders-letter/>.

[12]    Extended reality (XR) stands for “reality-plus” technology using any kind of display, and is an umbrella term that covers virtual reality (VR), augmented reality (AR) and mixed reality (MR). VR is a subset of XR and is an immersive computing or gaming experience where the user’s entire field of vision is filled via the device’s display. AR is a subset of XR and it involves superimposing anything from the digital world onto a display of one’s real surroundings, such as a Pokémon Go character in one’s living room. MR is a blend of VR and AR; it is immersion, such as when one uses a smartphone screen in a headset to fully immerse in gameplay. Tom Gerencer, “What is Extended Reality (XR) and How Is it Changing the Future?”, HP (3 April 2021) <https://www.hp.com/us-en/shop/tech-takes/what-is-xr-changing-world>.

[13]    Herman Narula, Virtual Society: The Metaverse and the New Frontiers of Human Experience (Penguin, 2022) 107.

[14]    Ibid at 108.

[15]    Ibid at 113.

[16]    Nick Clegg, “Making the metaverse: What it is, how it will be built, and why it matters”, Medium (18 May 2022) <https://nickclegg.medium.com/making-the-metaverse-what-it-is-how-it-will-be-built-and-why-it-matters-3710f7570b04>.

[17]    Ibid.

[18]    For a detailed description of how the artist Beeple minted his NFT Everydays: the First 5,000 Days, see Kelvin F.K. Low, “The Emperor’s New Art: Cryptomania, Art and Property” [2022] Conveyancer and Property Lawyer 382, 388.

[19]    Ibid at 389. This article will not be discussing in detail the mechanics of minting a NFT and the types of smart contract or blockchain technologies available, Low provides an excellent account of this process. See Low, ibid at 388-390.

[20]    Farah Nayeri, “NFTs, on the Decline Elsewhere, Are Embraced by Some Museums”, The New York Times (30 November 2022) <https://www.nytimes.com/2022/11/30/arts/design/nfts-museums.html>; Shanti Escalante-De Mattei, “After 2022’s Crypto Crash, the Future Vision of NFTs Is Looking Far More Banal”, ARTNews (27 December 2022) <https://www.artnews.com/art-news/news/future-of-nfts-2022-opensea-royalties-1234651990/>.

[21]    Hermès International v Mason Rothschild, Case 1:22-cv-00384 (SDNY, complaint filed 14 January 2022); Hermès International v Rothschild, 2022 WL 1564597 (SDNY, 18 May 2022); Hermès International v Rothschild, Case 1:22-cv-00384-JSR (Opinion and Order) (SDNY, 23 June 2023).

[22]    Nike, Inc v StockX LLC, Case 1:22-CV-00983 (SDNY, complaint filed 3 February 2022).

[23]    “Do Metaverse and NFTs Have a Future? These Statistics on Trademark Filings Will Convince You”, Cryptofiles (5 January 2023) <https://blog.cryptoflies.com/do-metaverse-and-nfts-have-a-future-these-statistics-on-trademark-fillings-will-convince-you/>.

[24]    Ibid.

[25]    Jessica Bumpus, “Expanding the Watch World’s Metaverse with a Gaming Twist”, The New York Times (14 June 2022) <https://www.nytimes.com/2022/06/14/fashion/watches-nfts-nimany.html>.

[26]    Jessica Bumpus, “Jewelry Decorates the Metaverse”, The New York Times (24 March 2022) <https://www.nytimes.com/2022/03/24/fashion/jewelry-nft-jevels.html>.

[27]    Lorraine Tay and Pin-Ping Oh, ‘Looking Back at the Rise of NFTs & Lessons for Brands Going Forward’ (The Fashion Law, 14 December 2022) <https://www.thefashionlaw.com/with-enduring-uncertainty-at-play-lessons-for-brands-looking-to-nfts/>.

[28]    “The Gucci Garden Experience Lands on Roblox”, Roblox (17 May 2021) <https://blog.roblox.com/2021/05/gucci-garden-experience/>; Maghan McDowell, “Inside Gucci and Roblox’s new virtual world”, Vogue Business (17 May 2021) <https://www.voguebusiness.com/technology/inside-gucci-and-robloxs-new-virtual-world>.

[29]    Andrew Webster, “Gucci built a persistent town inside of Roblox”, The Verge (27 May 2022) <https://www.theverge.com/2022/5/27/23143404/gucci-town-roblox>.

[30]    Angelica Villa, “Gucci Sells NFT Inspired by Latest Collection at Christie’s”, ArtNews (2 June 2021) <https://www.artnews.com/art-news/market/gucci-nft-auction-christies-1234594632/>; Online Auction 20669 – Proof of Sovereignty: A Curated NFT Sale by Lady PheOnix, Christie’s (3 June 2021) <https://onlineonly.christies.com/s/proof-sovereignty-curated-nft-sale-lady-pheonix/gucci-est-1921-6/121268>.

[31]    Jake Silbert, “Superplastic X Gucci = SuperGucci NFTs”, High Snobiety (17 January 2022) <https://www.highsnobiety.com/p/gucci-superplastic-supergucci-nft-collab/>.

[32]    Bernard Marr, “The Amazing Ways Nike is Using the Metaverse, Web3 And NFTs” (Forbes, 1 June 2022) <https://www.forbes.com/sites/bernardmarr/2022/06/01/the-amazing-ways-nike-is-using-the-metaverse-web3-and-nfts/?sh=6c001b56e94f>.

[33]    Nike, Inc v. StockX LLC, Case 1:22-CV-00983 (SDNY, complaint filed 3 February 2022). See also “Nike Adds Counterfeiting, False Advertising Claims to Case Against StockX”, The Fashion Law (31 May 2022) <https://www.thefashionlaw.com/nike-adds-counterfeiting-false-advertising-claims-to-case-against-stockx/>. The litigation is still ongoing at the time of writing.

[34]    Hermès International v Rothschild, 2022 WL 1564597 (SDNY, 18 May 2022).

[35]    599 US 140 (2023).

[36]    Hermès International v Rothschild, Case 1:22-cv-00384-JSR (Opinion and Order) (SDNY, 23 June 2023) at 7-9.

[37]    Ibid at 10.

[38]    Trade Marks Act 1998 (2020 Rev Ed) s 55.

[39]    E.g. Staywell Hospitality Group Pty Ltd v Starwood Hotels & Resorts Worldwide Inc [2013] SGCA 65 [2014] 1 SLR 911; Guy Neale v Ku De Ta SG Pte Ltd [2015] SGCA 28; [2015] 4 SLR 283.

[40]    Lam Chung Nian, Daniel Chan and Leow Jiamin, ‘Specialist Chapter: NFTs, the Metaverse and Blockchain Technology Create New Risks to Brand Protection in Singapore’, World Trademark Review (25 August 2023) <https://www.worldtrademarkreview.com/review/the-trademark-litigation-review/2024/article/nfts-the-metaverse-and-blockchain-technology-create-new-risks-brand-protection-in-singapore>.