Lost in Cyberspace: Real World Trademarks vs. the Metaverse: Re-Evaluating a Portfolio for the Metaverse, NFTs, and Digital Assets
By Rosanne Yang
The evolution of technology often drives a need for trademark owners of all kinds to re-examine their portfolios and determine whether their existing registrations adequately protect their rights in these new environments. For instance, once upon a time, newspapers who moved to online distribution needed to supplement their existing registrations for “newspapers” (which is now required to be stated as “printed newspapers”) with applications for “providing online non-downloadable newspapers.” Today, the birth of the metaverse and the increasing popularity of NFTs and other kinds of digital assets provide ample reason for just such a re-examination.
The Internet is certainly not new though – it’s been possible to mock up a digital Nike shoe for a long time, for example. So, why is this a “thing” now? Is it really all that necessary – won’t registrations for “real world” products protect the digital versions? What should a brand even apply for? There are so many questions.
Why Is This a “Thing” Now? Isn’t It All Just a Fad?
Many of us have been down this path before – Second Life keeps coming up as the analogous situation to the metaverse. It is true that many of the same concerns, analyses, and experiences are applicable here too, and it is true that the sky didn’t fall for brand owners when Second Life exploded onto the scene and later petered out of the “sensation” phase. (It’s still around, by the way.)
What is different now is that there seems to be much more widespread and significant market momentum by platforms, by consumers, and by brands to be part of the metaverse, NFT distribution, and similar digital asset exchanges.
The adage is that you need to be where your customers are, and today, customers are spending more time on digital experiences. The acquisition, possession, and sale of digital assets is becoming increasingly valued by and accessible to mainstream consumers, so it is being quickly normalized. In any case, the downsides of losing the bet that it’s a fad far exceed the minimal cost to make some plans to protect yourself today.
What Are the Risks?
For many brands – not just the big, famous ones – new filings will be needed in order to protect and defend their rights and provide them with opportunities in the digital universe. Here’s why:
Limitations of Third Party Rights Clearance. Are trademark searches really turning up prior rights for real world goods/services when virtual goods/services are at issue, or vice versa? Will a third party really understand the risk even if it turns up? Not always. Having rights registered for both the real and virtual worlds increases your chances of deterring would-be interlopers.
Inconsistent/Strict Trademark Office Practice. The USPTO has not exactly been known for its speed in adapting to new realities, much less for consistency among the trademark examiners.
Would a trademark examiner search both real world and virtual goods and services in determining whether two owners’ marks are potentially conflicting? The best case answer here is, “not consistently.” It might just be “randomly.” You certainly don’t want to rely on the USPTO to recognize these issues and reject applications that are inconsistent with your rights.
If for any reason you have use of the mark only in the virtual world but have a registration for real world goods or services – or vice versa – you will not be able to maintain the mismatched registration, and it will be cancelled or abandoned due to lack of a qualifying use. It will be important to ensure that your registrations match up to your uses. The mismatch could happen if you decide that a particular line of products doesn’t perform well in the real world so production stops, but they are selling well enough in the metaverse (e.g., for “vintage” or “nostalgia” reasons) to keep it going there. Or, maybe you decide that you want to test a new product line via NFTs, and again, it does well enough in the virtual world and distribution continues, but for one reason or another, real world production never comes to fruition.
Requirements for On-Platform Enforcement. Platforms may require a registration for the specific goods or services before they will step in to implement your enforcement request. Platforms may have these simple, bright line rules out of economy – they may not have the bandwidth to personally individually? evaluate each request and make a legal determination on whether there is a likelihood of confusion that warrants granting your request, and so a lot of the workload may be done through automation. Platforms may also want clear incontrovertible rules to help control their own legal risks and keep them out of risks associated with gray areas.
Unclear Outcomes in Courts. If it comes down to litigation in the courts, existing cases involving digital uses of or riffs on real world goods and services often end in disappointment for brand owners. Questions of creative/artistic expression, free speech, lack of confusion between real world and digital “games,” and lack of “tangible” harm have been known to convolute the analysis and lead to less than desirable results. Famous brands will likely have it easier here because the scope of their protection is well established to spill over further beyond their registrations, but for the rest, this could be a serious problem.
What Should a Brand Apply For?
If you make the decision to update your trademark portfolio, be aware that in the United States, to file for a mark, you need a bona fide intent to use (or actual use of) a mark in connection with the applied-for goods or services. It’s not enough to want to “have them on the shelf…just in case.” So, you need to have at least some kind of a plan around these uses to get started.
Most companies who apply are filing for downloadable virtual goods (computer programs that reside on a user’s own device), online non-downloadable virtual goods and NFTs (things the user has access to only on other systems and platforms), digital tokens/coins/currency, or retail store services for virtual goods, but your particular application strategy will depend on the types of goods or services you offer already, and how you foresee your brand interacting with digital environments and products.
What About the Borderless World?
Keep in mind that in many countries, rights are based entirely on registration, and not at all on the fact, nature, or scope of your use in that country. So, if that platform is based in China (for instance), you’ve got no rights unless your rights are registered very particularly to the goods or services in question.
When determining whether or not a brand needs applications in countries around the world, we assess that in terms of where the brand wants to actively do business, where the brand manufactures its products, and the risk of counterfeiting/infringement in certain countries. The metaverse and digital products are no different. Questions of where the relevant platforms are based, whether and to what extent they may honor or consider local rights, and where the platform has large user bases will help drive whether or not applications in other countries are warranted.
Take Aways
When evaluating whether additional trademark applications are needed in light of the metaverse and NFT developments, ask yourself:
Are we likely to want to “show up” in these new digital spaces?
Are we likely to need to enforce our rights in these new spaces?
Is there a risk of international complications in these new spaces?
If the answer to any of these is “yes,” a conversation with a qualified trademark attorney is your best next step.
Originally published by InfoLawGroup LLP. If you would like to receive regular emails from us, in which we share updates and our take on current legal news, please subscribe to InfoLawGroup’s Insights HERE.