How trademark advisers can help brand owners make sense of the metaverse

Step one: Become conversant in the metaverse

Understanding the metaverse requires some familiarity with a few of its key terms, people and platforms:

Metaverse: The origins of the word can be easily traced to a 30-year-old science-fiction novel, but its current definition is a little more contested. Still, most experts agree that the metaverse is a shared, immersive environment that allows people to interact virtually with each other and digital objects in real time.

Some like to think of it as a 3D version of the internet: rather than 'looking at' the pages of today's two-dimensional version, we will be able to 'step in' to the metaverse via virtual reality headsets or augmented reality technologies that superimpose digital elements on to the real world.

NFTs: The digital assets that populate the metaverse and adorn the avatars of its users typically take the form of non-fungible tokens, whose ownership and uniqueness is confirmed via transactions encrypted and logged on a blockchain.

Facebook: The company's recent rebrand as Meta – as well as the zeal of founder Mark Zuckerberg for building out the economic and social elements of the metaverse – have certainly helped propel the concept into the mainstream, but the tech giant is far from the only player in this field.

There is not currently – and may never be – a single metaverse. In the meantime, various apps and platforms with metaversal qualities are staking an early claim. For example, 3D virtual world Decentraland's monthly users number in the six figures, while The Sandbox made headlines for its collaboration with Snoop Dogg, which prompted one fan/investor to spend $450,000 on an NFT plot next door to the rapper.

Meanwhile, Zepeto and Zheli have made an impact with users seeking customized avatars for virtual world exploration in South Korea and China respectively.

While some dismiss these disparate efforts as glorified gaming experiences, many technologists envision the fully built metaverse as a functioning digital economy running in parallel to the real world, where people can create, meet, work, sell and shop, all from the comfort of their own homes.

Step two: Get excited – parallel lives mean unparalleled opportunities

For brand owners who are willing to dive in, the metaverse opens up a completely fresh, untapped market, that is only likely to grow as its foundations solidify, according to Monique Couture, a lawyer and trademark agent in Gowling WLG's Ottawa office.

The metaverse dissolves the constraints of the physical world and will allow brands to expand and monetize digital assets in a whole new way. - Monique Couture

"Indeed, the lack of physical constraint means brand owners can let rip their creative juices; digital products can change physically, or produce an effect upon a certain event (e.g. encounter of avatars donning the same thing) – be it visual, sound or haptics, or a combination of them," adds Seiko Hidaka, a tech-oriented IP lawyer based in London. "Careful trademark applications will need to be drafted to ensure that they do not fall foul of the clarity criterion."

In addition to capturing the attention of a previously out-of-reach clientele, the metaverse also offers brand owners new ways of communicating with existing customers.

Depending on their line of business, trademark owners may be able to promote or test new products virtually ahead of a real-world launch. But other customer relationships may never leave the metaverse, says Jon Parker, a trademark specialist based in Gowling WLG's Dubai office.

"Someone who lives in the city may not wish to buy a motorized vehicle in the real world, but might like to equip his avatar with one in the metaverse," he explains. "In the MENA region, we are already supporting clients who are looking to protect iconic tourist attractions, so that these are not misappropriated in the metaverse by third parties. The metaverse offers an opportunity for potential tourists to make initial 'visits' to attractions, or for those unable to travel, to see the attractions virtually."

In a similar way, the generally lower prices of designer accessories in NFT form allows users to outfit their online avatars with high-end items they could never afford in the physical version. This may help explain why investment bank Morgan Stanley has identified luxury brands as some of the biggest potential beneficiaries of the metaverse, predicting digital demand could drive extra sales as high as $50 billion by 2030.

Gucci and adidas are among the companies that have already bought land in The Sandbox, building virtual showcases for their products, while Samsung and Amazon have recently hosted interactive events for users of Decentraland.

"Fashion, gaming, media and luxury brands are likely to be first in the queue," agrees Kate Swaine, the U.K.-based co-head of Gowling WLG's global Intellectual Property Group.

"But if you have a brand of any kind, then the metaverse is likely to impact you at some stage," she adds.

Step three: Develop a protection plan

Wherever brands go in the real world, the infringers are never far behind. And the same will be true in the metaverse, says Céline Bey, an intellectual property partner in Gowling WLG's Paris office.

"Many brand owners are on the alert about certain abuses, and their concerns are justified," she says, pointing to the recent furor over a range of "MetaBirkin" NFTs created by an American artist.

Hermès, which makes the real-world Birkin bags, has filed a U.S. District Court complaint alleging that its trademarks were infringed by the unauthorized reproductions, while the artist claims his works are protected under the First Amendment.

Despite the futuristic setting, Couture says "metaverse enforcement will require imagination and foresight, as well as good old fashioned IP strategies," including subscription to a trademark watch service and fresh trademark filings. "A strong trademark strategy integrates and anticipates business objectives: trademark filings should anticipate the metaverse plans. The Metaverse possibilities appear endless, and have yet to be fully explored or understood" says Ottawa-based Couture.

Some companies are already taking steps to protect their rights in the metaverse, with the U.S. Patent and Trademark Office reporting a recent spike in applications for virtual goods and services. Among them were brands as varied as McDonald's, K-Pop group BTS, basketballer Lebron James and Nike, which filed seven applications for "virtual goods" and "retail store services featuring virtual goods."

"We recently had a successful removal of an infringing NFT which had 70 editions on offer" said Parker, "which was dealt with swiftly due to the steps the client had already taken to protect its trademarks and secure its copyrights."

Step four: Stay tuned

As might be expected of a world that remains under construction, there is considerable uncertainty about the law and regulations surrounding intellectual property in the metaverse.

"It raises more questions than answers at this stage," Swaine says.

The extent to which the usual conventions of protection, infringement and enforcement will apply in a multi-platform virtual world are unclear."

Jurisdictional issues and territoriality will be at the heart of many disputes, she predicts, noting that interoperability and multiple points of access are key components of the metaverse.

"Determining the geographical or contractual jurisdiction that applies will not be straightforward," Swaine says.

In addition, lawyers around the globe will likely end up arguing over the extent to which existing trademark protection for physical items covers their virtual counterparts in the metaverse, as well as the ability of trademark holders to sue over virtual infringement if they have not established a presence themselves in the metaverse.

The answers to some of these questions will come via litigation, such as the MetaBirkin case already underway. Others may require a more fundamental revamp of existing legal frameworks – or new ones altogether.

Sébastien Gardère and Harleen Khanijoun, trademark lawyers from Gowling WLG's Montréal and Hamilton offices, and co-authors of the article The metaverse: A brief overview and certain trademark protection considerations for brand owners, agree but add that "while trademark law may very well need to transform further to address all issues related to brand violations that may arise in the metaverse, existing mechanisms with the benefit of the lessons learned from the internet experience over the years, provide some guidance and tools to address some potential abuses in the emerging metaverse. In any scenario, embracing the metaverse - in whatever form it arises - or at least preparing for it by ensuring that trademark filing and protection strategies are adopted, may be preferable than waiting and seeing."

According to Couture, the wave of metaverse-related applications around the world could pose existential questions for the Nice Classification system that has governed trademark registrations for more than 60 years.

Many were filed in connection with the already-bulging Class 9, which covers various types of technology, including electronic goods and software.

"It has amplified existing doubts about whether the Nice Classification system can adequately answer the demands of a virtual world," she says. "An update is likely needed to keep up with the accelerating pace of change."

As the detail and execution of the metaverse materializes in the coming years, new questions and issues are likely to arise, according to Swaine.

"The narrative is moving quickly, and it is important for brand owners and their advisers to keep pace with developments," she says.

To learn more, contact a Gowling WLG intellectual property professional at one of our global offices