United Kingdom February 11 2022
For a long time it was seen as the preserve of fantasy role-players and hard core gamers, but now the metaverse has definitely exploded into the mainstream (…or should that be that the mainstream has jumped feet first into the metaverse?).
In the world of fashion, Vogue recently previewed Decentraland’s first metaverse fashion week, a four-day meta-event starting on 24 March this year. Here you will be able to immersively experience runway shows, after-parties and music events, view the latest branded digital wearables and buy them as NFTs for your avatar using the MANA cryptocurrency and your Ethereum wallet. Some digital goods will also have physical equivalents that can be delivered to your physical home. You may even be able to buy a virtual plot of land in Decentraland’s fashion district in which to set up your branded store, although the competition is intense and prices high, with one company reported to have paid close to $2.4m.
Opportunities and risks
Decentraland markets itself as the “virtual destination for digital assets”. The increased opportunities for brands, designers and content providers on this and other metaverse platforms – not only in terms of developing creative content and new collaborations but also for e-commerce and targeted promotions – make this a natural home for retail, entertainment, brands and celebrities of all descriptions to flourish. However, intellectual property (IP) owners will also be all too aware of the potential risks; as demonstrated by Nike’s recent action against StockX for alleged infringement of its sneaker NFTs, there will be an increased need for vigilance in this eclectic environment.
So what should IP owners be thinking about? Although “metaverse” means “beyond the universe”, it will not, of course, be beyond the earthly law, and we expect a strong IP portfolio in the “real” world to provide effective protection in the metaverse too.
- Registered trade marks are nearly always easier to enforce than unregistered rights such as passing off or unfair competition. Not only are such unregistered rights often uncertain, they differ widely between jurisdictions and although registration costs are saved, the costs of enforcement are usually considerably more. Although registered trade marks are by no means always the same between countries, they are more uniform, better understood by infringers and more suited to the global nature of the metaverse. So register trade marks if possible, ensuring that registrations cover new product areas you may wish to develop.
- It is as yet unclear whether, in some jurisdictions at least, there may be a need to register trade marks specifically for digital assets to cover sales of branded digital goods and services occurring exclusively within the metaverse. As an example, Nike recently applied to register some of its brands in the US for a variety of digital goods including shoes, headgear and sports equipment.
- Sometimes referred to as an enhanced internet, the metaverse platforms will generally be accessible globally. In relation to websites, the principle of “targeting” to decide in which jurisdiction infringements occur is now established, so that infringing use of a trade mark on a website that ‘targets’ UK consumers – for example by offering to deliver the goods in the UK and accepting pounds Sterling – is likely to infringe the UK trade mark but not necessarily the French one. However, it is not yet clear how such jurisdictional rules will develop in relation to potential infringements occurring exclusively within the virtual world where no clear connection to any real world place is evident and where cryptocurrencies are used to pay. This will be a space to watch.
- The more creative and interventional end users are, the greater the risk that they will use brands without permission or infringe in other ways. Commentators also point out that many users are likely to be young and may not understand the rules on trade mark use. Brand owners will be looking to the various metaverse platforms as intermediaries to work with them to prevent and identify infringements where possible. The extent to which such intermediaries are obliged by law to do so is a developing area on which brand owners are likely to continue to lobby. We can expect notification and take-down procedures to continue to apply, but brand owners may experience greater difficulties in monitoring infringement across an expanding virtual space and a multitude of different platforms.
- Brand owner control of licensees is also key, both to protect the enforceability of the trade marks and also from a reputational point of view to prevent rogue use. Strong, clear licence terms in brand licences are needed.
- Finally, the use of trade mark watch and other monitoring services is likely to be even more important.
Copyright content and designs
- Infringing content uploaded by users is expected to be a major area of concern. This may include films, images, music, digital fashion or characters for example. As for trade marks, IP rights holders will be looking for cooperation with platform providers and notice and take down procedures are likely to continue. Again, a major problem is likely to be tracking down infringements in an increasingly complex virtual environment, which could include both public and private virtual spaces.
- It will be particularly important to tell potential infringers that the copyright owner’s rights are asserted. The use of the copyright © and prominent statements making it clear what activity is not permitted will contribute to warning off infringers, and to dispel any notion that permission to copy is implied. In jurisdictions where registration of copyright is possible (such as the US), this is likely to be wise.
- However, ultimately the use of copy protection mechanisms, where practicable, is likely to be key as will placing copyright material behind a paywall to prevent unwelcome linking.
Finally, how do NFTs come into it?
Non fungible tokens can be used to buy and sell digital assets in the metaverse (or elsewhere). For example, a digital dress might be sold using an NFT. The NFT would represent a right of access to the digital dress and terms within the NFT would usually amount to a licence allowing the purchaser or their avatar to use/wear the dress. In this sense the purchaser of the NFT owns the particular digital dress identified by the NFT, but not the copyright. It might be a limited edition where only a certain number of NFTs of the dress could be sold, but that would depend on the terms of the NFT. Reproduction of the dress outside the terms of the licence would still represent infringement of the digital dress, so taking a screenshot of the dress would normally infringe. The point of the NFT is that it can only be sold through the block chain so a sale through the block chain is evidence of a legitimate trade. The purchaser knows that they are not infringing third party rights by wearing the digital dress, or by selling it on.