What is pixelated to avoid trademark issues?

The metaverse might just be the next big thing. But how will you protect your brands in the metaverse? Even if you are not an early adopter, it is better to be safe than sorry. Read on to find out more about trademark protection for all things metaverse from a general EU trademark perspective.

The metaverse covers a lot of things, but its next iteration is likely a more advanced network of virtual worlds.

The term metaverse has been around for over thirty years but it only recently regained widespread attention. However, its scope and applications are not yet clear. For some, the metaverse broadly refers to a digital layer on top of the ‘real’ world through augmented reality.

Others see it as a network of virtual worlds, where our digital alter egos can, for instance, buy virtual goods authenticated by non-fungible tokens (NFT’s). Or maybe it is a combination of these? One thing is certain, the metaverse is a whole new world of opportunities for intellectual property holders. To that end, many famous brands are paying close attention to its evolution and investing heavily. A prime example is social media giant Facebook, which changed its name to Meta last October (1).

In what some say was a ‘surreal presentation’, Meta CEO Mark Zuckerberg showed us Meta’s version of the metaverse. It is a virtual world where your avatar can meet, walk and talk with others (much like the real world but a bit too pixelated to our taste). Not everyone was impressed, but Mark assured us that we will soon be able to do ‘more’. Next generation VR headsets and other wearables will help us
to truly immerse into the metaverse. A virtual world may well be the next iteration of the metaverse.

Further, the metaverse is not just a playground for tech companies. In these virtual worlds, consumers
will buy goods or services of a virtual or hybrid nature (2).

This is already happening right now, as several world famous brands have already dipped their toes into NFT’s and the metaverse (3). Some examples include Nike releasing virtual sneakers that were sold as NFT’s. The NFL turned Super Bowl tickets into collectible NFT’s. And one could even buy a digital Birkin bag NFT, a ‘MetaBirkin’ – although this one was not made by Hermès. More on that later!

The metaverse can be an opportunity for your business – and for free-riders.

Not everyone is convinced that all of this will really take off, and there are many critical voices out there. But the next iteration of the metaverse does not need to be a dystopian nightmare. It may well be a more advanced version of the virtual worlds that already exist today as video game platforms, combined with virtual and augmented reality, and a specific way of offering and paying for goods and
services. And that may be opportunity for you and/or your client’s business.

As in the real world, adequate trademark protection is necessary to safeguard both past and future investments in your brand.

How do you protect your trademarks in the metaverse?

Trademarks are registered for specific goods and services. They are categorized in 45 different classes according to the International Nice Classification system. But which goods and services will you exactly be offering, and how should they be characterized? Part of the difficulty in delineating your goods and services in the metaverse lies in the vague nature of the metaverse itself. Another part is the lack of clarity on the nature of these goods and services.

There are no guidelines addressing this particular topic. For now, we base ourselves on the EUIPO Guidelines, the Nice classification explanatory notes, and – with caution – on the trademarks which are already on the EUIPO and BOIP registers. While none of the below suggestions are set in stone, we think several classes may prove useful to prepare your trademarks for the metaverse.

Metaverse goods

Some suggest that the physical goods classes cover the virtual ones. However, we see that the EUIPO
has issued classification deficiencies for “digital clothing” in class 25. The class that then comes to mind is class 9. Following the EUIPO Guidelines, all virtual goods belong to class 9 (by analogy with downloadable goods). ‘Virtual goods’ as such lacks clarity and precision, so the
wordings should – at least for now – specify each virtual good. This could result in gargantuan lists of goods and services, with class 9 containing a ton of ‘virtual goods’ (4). This class will also cover NFT’s themselves – including associated media content (5).

Skins and digital clothing for your avatar may as well belong to class 9. Until further clarification arrives, we recommend to include recorded content, software and media content.

Metaverse services

Do you plan to sell virtual goods of others? Then consider adding class 35 which covers retail and wholesale services. But, make sure to indicate the type of goods that you are selling with sufficient clarity and precision. The EUIPO will object to the term ‘retail and wholesale services relating to virtual goods’ as it lacks clarity and precision. Activities in the metaverse are, however, about much more than
the sale of goods. Several metaverse services are likely entertainment services (class 41) in their nature, consisting of providing virtual goods for use in virtual environments. IT services, such as the creation of an online virtual environment belong to Class 42.

We will have to wait and see how the EUIPO and other trademark offices deal with hybrid services that have a virtual and a ‘physical’ component. The EUIPO has already objected to ‘operating a virtual restaurant providing physical and virtual food and beverages’ in class 43; the virtual food and beverages were deleted from the term.

All of the above is, of course, just a primer. What matters most are clear and specific wordings. Contrary to some offices, like the USPTO, the EUIPO also accepts broad terms as long as they are clear and precise. But for metaverse related goods and services, both the EUIPO and BOIP are still testing the waters to see what will become office practice.

You may run into risks if you do not re-file your trademarks.

Even if you do not have plans to indulge in the metaverse, it may prove useful to have your trademark portfolio re-evaluated to see whether new filings are necessary.

The most common and straightforward ground for establishing a trademark infringement is likelihood of confusion where you have to prove that both the signs, as well as the goods, are similar. When your trademarks cover the above mentioned relevant metaverse goods and services, it should be fairly easy to establish likelihood of confusion in the event a third party is using a sign which is identical or similar
to your trademark in the metaverse.

You may, however, experience difficulties in making your case when your trademarks are not protected for such goods and services. Whether national judges and relevant trademark authorities may eventually consider certain specific digital goods and services similar to your existing list of goods and services is uncertain. One could, for example, argue that virtual clothing and actual clothing should be considered similar since these goods are in competition and they, at least, partially coincide in their intended purpose. Moreover, it can be argued that these goods have the same origin, as it becomes common practice for fashion brands to extend their activities to the metaverse. This will probably
become more clear over time and the EUIPO’s classification practice may influence this debate.

For the time being, you may be better off being proactive and leaving nothing to chance.

You may still be able to take action without the need for new filings.

However, being proactive doesn’t mean additional trademark filings are always necessary. For starters, your trademarks may already be registered for broad terms in the relevant classes which can encompass the metaverse goods and services that are relevant for your business.

Further, reputed trademarks enjoy a broader scope of protection. In practice, those are also the trademarks more likely to fall victim to the metaverse free-riders. Reputed trademarks will allow to act against the use of identical or similar signs for certain (virtual) goods or services, even if they are not registered for goods or services which are considered similar.

Not all virtual use of a trademark is an infringement – just as in the real world.

Even with adequate protection, you cannot stop all use of your trademark.

The Californian artist behind the ‘MetaBirkins’ claimed that he did not infringe Hermès’ rights as his virtual bags are artworks, ‘a commentary on fashion’s history of animal cruelty, and its current embrace of fur-free initiatives and alternative textiles’. The artist invoked the First Amendment (artistic expression being a type of speech protected under it) and referred to the Rogers balancing test for artistic uses of trademarks (Rogers v. Grimaldi, 875 F.2d 994, 999 (2d Cir. 1989)). We yet have to await the outcome of this case.

The EU trademark legislation also limits the effects of a trademark (6). A trademark proprietor is, for
example, not entitled to prohibit a third party from using his trademark in the course of trade if it is
for referential use and in accordance with honest practices in industrial or commercial matters (7). In
the end, trademark protection needs to be reconciled with freedom of expression in the EU as well; both are fundamental rights.                  The concrete application can differ.

Evaluate your trademark portfolio, even if you do not yet offer virtual goods and services.

You need adequate trademark protection to be prepared for what is to come. In practice, many trademark owners want to be on the safe side by filing additional trademarks – especially if they will soon delve into the metaverse. Do a thorough review of your trademarks as they may already include wordings that offers adequate protection. GEVERS can help you clearly delineate what you will actually offer and, if you’re not ready yet, we are here to evaluate your portfolio.

(1) Facebook was facing bad press at the time. As you may remember, whistleblower Frances Haugen revealed that the company knew about its products’ detrimental impact on teenagers’ mental health, but didn’t really care. The timing of this rebranding exercise was thus remarkable!

(2) Virtual goods and services may also have real-life perks – and the other way around. While your avatar visits your favorite franchise for a
virtual hamburger, you may be saving up for a discount on a real one. When you buy a new sweater, you might receive a code to redeem the
virtual version on a certain platform.

(3) Now, you surely read a lot about NFT’s already. We still want to draw your attention to one particular misconception: that an NFT itself
necessarily grants the owner property rights– such as the copyright on a piece of digital art. It doesn’t. Several NFT enthusiasts – and critics – do not make the distinction between the work, its carrier, and the non-fungible token associated with the carrier. After all, the NFT itself is code distributed on a blockchain. Famous NFT’s are usually NFT’s that refer to media content, such as a pixelated drawing or a cartoon of a bored monkey. But again, those pictures are usually hosted elsewhere, not in the NFT itself. As a trademark owner, you will probably want trademark protection for the associated matter backed (or authenticated) by an NFT, next to protection for the NFT itself.

(4) To avoid long class 9 lists, the Nice classification could be amended so that ‘physical goods’ classes include their virtual counterparts. Digital sneakers would then belong to class 25, together with ‘physical’ sneakers. some even suggest to create subclasses for virtual goods: clothing in class 25, and digital clothing in a new class 25.1.

(5) An NFT does not need to be associated with media content. It may refer to something else.

(6) For EU trademarks, see the EU Trade Mark Regulation or EUTMR. For national trademarks in EU member states, see national trademark laws. The member states had to implement the EU Trade Mark Directive (the EUTMD) which harmonizes trademark law across the 27 member states to a great extent.

(7) See art. 14 EUTMR and its pendant in the directive, art. 14 EUTMD.

Nils Dillemans – Intellectual Property Attorney

Thomas Verborgh – Intellectual Property Attorney

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