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August 8, 2022
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Brands, trademarks and NFTs – challenges faced in the metaverse world

By Paul Cosmovici

Metaverse, non-fungible tokens (NFTs), cryptocurrency, decentralization, Web 3.0 or Altcoin are all buzzwords that were the talk of the town in 2021. Arguably it was the year in which tech businesses transitioned into a new age that saw the consumer appetite for the metaverse visibly skyrocketing.  With more and more investments into plots of virtual “land”, concerts and shows moving into the metaverse and digital art being sold as NFTs, there is a lot of hype around this market of virtual “everything”, especially as NFTs have analogs in the real-world, raising awareness on a large array of branded merchandise and limited-edition collabs, which translate in a high ROI.

If the previous articles The NFT “gold rush” in a copyright “Wild West” and Counterfeiting, luxury brands and intellectual property – from pineapples to Patek Philippe discussed the hype around NFTs and the rise of counterfeited and fake products, now brands are facing a different sort of  challenge due to the increasing number of copyright and trademark infringement cases. And, once again, intellectual property (IP) rights come into the limelight, meaning that all trademark owners should start considering expanding their IP assets to include virtually downloadable products, making sure that their brand has a secured presence in the metaverse.

 

How brands adapted to the need of a presence in the metaverse

 

The term “metaverse” can literally mean completely different things to different people. Perhaps, the evolution of the internet could help with a more effective representation. Web 1.0 is the very first stage of the World Wide Web that connected information, during which we have started using internet. Note that during the phase, ads were banned whilst “surfing” the internet. Then, came Web 2.0, also known as “the participative social web” that brought about the user-generated content, connecting people in a social media dialogue, collaborating with each other in a virtual community. During this stage during which ads were allowed, boosting the presence of companies online and their dissemination across the globe. Now, as we are stepping into the Web 3.0, that connects people, places, spaces, assets, every so often, in a virtual environment where users can interact with others and increasingly more with brands, the line between the real and virtual interaction with the brands is becoming less clear, as the two realms merge together.

This raises some rather thought-provoking issues when it comes to how a brand can nowadays be present in a virtual setting, especially since most of the IP law was certainly not drafted to fit the metaverse.

Think of Facebook that in the wake of the Web 3.0, rebranded into Meta, which in turn has spiked the public`s interest in the metaverse, which was largely unknown up until then. Another company that took no chances is Nike, awing the IP world when it revealed that it has filled applications with the U.S. Patent and Trademark Office (USPTO) for their word mark, logo and slogan, in three classes unrelated to the core business – class 9 (downloadable virtual goods, meaning computer programs including clothing, footwear, accessories etc. to be used online and in virtual worlds), class 35 (retails store featuring virtual goods) and class 41 (entertainment services, providing on-line, non-downloadable virtual goods for the use in virtual environments). Soon after, other brands followed suit and joined the “meta” bandwagon, and in the last couple of years, brands such as Coca-Cola, Warner Bros, Gucci or Netflix have entered the metaverse.

 

So, what about intellectual property, brands and the metaverse?

 

Early December 2021, artist Mason Rothschild launched the MetaBirkins NFT collection on OpeaSea, featuring faux fur and colorful designs of the infamous Hermès Birkin bag and selling a staggering 100 NFTs for around 230 ETH (Ethereum), the equivalent of approximately $800,000.

Rothschild claimed that scammers took advantage of his idea and that they were selling the fakes and profiting from that, prior to which he was also hit with a trademark and copyright infringement claim from Hermès. The fashion house stated that the main issue with MetaBirkins is that it can create confusion amongst existing and prospective clients, making them believe that the NFTs are actual Hermès products. In a Financial Times piece, a representative confirmed that “Hermès did not authorize nor consent to the commercialization or creation” of the Birkin bag in the metaverse, hence “these NFTs infringe upon the intellectual property and trademark rights Hermès and are an example of fake Hermès products in the metaverse.” Meanwhile, Hermès issued a statement recently claiming that it did not approve or agree to the sale or manufacture of the 100 virtual NFTs.

Trademark law is very much well cemented when it comes to trademark infringement over goods and corresponding services, meaning that Rothschild`s unauthorized use of the Hermès name and the Birkin trademark in a manner that might confuse consumers or that could damage the brand`s name, eventually lead to the infringement or dilution claims formulated. Things get interesting when considering that trademark owners can prevent others from using their registered mark or a similar mark on related goods or services. Hermès is not operating in the metaverse, and Rothschild is not using the Birkin trademark for the same class of goods or services as they do, however the artist did used the mark in relation to a commercial element, by putting up for sale the NFTs on OpenSea and could have potential long-term effects on the French luxury brand provided that it might go in the business of actually selling virtual Birkin bags. And, at the end of the day, such disputes are a clear indicator that navigating intellectual property in an NFT world is still a “Wild West”.

 

Conclusion

 

The role of trademarks both in the real and virtual world is an issue to follow in the coming year, especially since the logos or word marks that brands use are an indicator of source and they play a key role in the minds of the consumers. Basically, marketers are now looking for ways in which to keep the customers engaged and offer them meaningful experiences that go beyond the “traditional” products or services the brand offers, just as Nike and others are already doing. By taking their trademarks into the metaverse, brands increase awareness and loyalty, whilst gaining new customers, building a virtual community around their brand through NFTs and generating considerable revenue.

 

Note:

 

Paul Cosmovici is Managing Partner at Cosmovici Intellectual Property, European Trademark Advisor and member lawyer of the New York and Geneva Bars. He has experience in the field of Intellectual Property strategy, getting involved in commercial transactions, extensions of brand portfolios and in the protection of IP assets for multinationals, but also for start-ups

 

 

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