Trademarks And the Metaverse

Introduction

The “Metaverse” has turned out as one of the most fiercely debated technological developments in the post-covid age. In an effort to connect with a younger, tech-savvy consumer base, more and more firms are deciding to debut their products and advertise them electronically through the Metaverse. The race to protect intellectual property rights in the Metaverse is under way, despite the fact that there is still some scepticism about the concept. It wouldn’t be overstating things to argue that, in a few years, the Metaverse might influence how we enforce and safeguard intellectual property rights. Companies creating the Metaverse like Nike, Apple, Epic Games, Roblox Corporation etc. are concentrating on creating new features and technologies to allow people to communicate with each other successfully and efficiently online. Future immersive experiences will revolutionise the digital world, and the Metaverse firms are leading the way.

According to Mr. Arun Jaitley v. Network Solutions Private Limited[1], “any individual’s or organization’s popularity or fame on the computer (or internet) will be no different from reality.” As a result, the perception formed in the metaverse may affect the perception in the real world. This demonstrates the succinctness and simplicity of the Metaverse’s trademarking mechanism. Their rights will be protected thanks to the metaverse brands’ trademarks.

What is the Metaverse?

Neal Town Stephenson, an American science fiction author, first used the term “metaverse” in his 1992 book “Snow Crash,” which was published 30 years ago. It included both science fiction and speculative elements. Fast forward 30 years, and this idea of a public virtual environment for everybody has evolved into a reality. Many businesses are currently working to develop the Metaverse or different kinds of mixed reality settings that integrate several technologies, including AI, blockchain, VR, and AR. The metaverse is frequently defined as an online virtual reality environment where users can interact, play games, and carry out a range of other activities. Some think of the metaverse as a virtual environment that will someday develop into a completely immersive and participatory experience, much like the virtual reality portrayed in science fiction films and books.

[Image Sources : Shutterstock]

Mega corporations like Meta, Microsoft, Google, and Apple are already placing bets that this technological age will very soon erupt into a massive and financially rewarding marketplace with immense future growth luring online game developers, social networks, and other technology professionals. This is despite the fact that the metaverse may currently be largely hypothetical and does not yet exist much beyond basic versions in video games. In order to take part in this expanding phenomenon, people will spend a lot of money there, albeit in the form of digital currency. According to a Bloomberg Intelligence report[2], the worldwide revenue opportunity from the metaverse is predicted to hit $800 billion in 2024, up from the estimated $500 billion in revenue generated by the metaverse in 2020.

The world’s most popular multiplayer online game platform, “Roblox,” hosted a virtual “Gucci Garden” for two weeks in 2021 for the well-known luxury fashion label “Gucci.” The garden was a duplicate of the actual “Gucci Garden” museum in Florence, Italy. The virtual “Gucci Garden” featured restaurants, bookstores, boutique homes, exhibition halls, and more. Visitors would change into a gender- and age-neutral virtual human character after entering the virtual environment. The digital human character was able to retain various spatial portions during the visit thanks to various visitation patterns. Each virtual person would have a distinct appearance at the conclusion of the journey.

In 2022, “Gucci” and “Roblox” opened a permanent “Gucci Town” as part of their ongoing partnership. The “Gucci” mark and its emblem can be seen all around this virtual metropolis.

Virtual characters can play themed games, create original artwork, visit exhibition locations, shop for virtual clothing for their collections or gaming outfits, and partake in social events after arriving in “Gucci Town.”  One of the digital “Gucci” bags reportedly sold for over $4,000, which is significantly more than the cost of a genuine “Gucci” bag. Numerous fashion companies like Hugo Boss, Tommy Hilfiger have started to introduce their products into the metaverse virtual environment in the post-pandemic period.

Importance of Registration of Trademarks in the Metaverse

Businesses may now reach a larger audience, increase their digital footprint, and increase profits by utilising the Metaverse. Several large corporations have already begun developing new marketing efforts for this new digital environment after realising the enormous potential that exists here. The Metaverse, like the present social platforms, requires that digital companies adopt a voice fit for the platform and act in a particular manner based on the context.

By deterring rip offs, trademarks safeguard a company’s identity and the repute of its brand(s), especially in the Metaverse. The trademark registration safeguards the owner’s rights and establishes the business’s legal standing. As a result, the owner of a trademark that has been registered will have the sole right to use it and will have access to crucial legal resources to stop unauthorised use of the trademark by other parties. To understand better, here are a few examples – In order to improve “virtual-physical interconnections,” Infosys, a pioneer in the information technology field for more than 40 years, recently founded Metaverse Foundry. The platform integrates platforms, digital accelerators, domain and design skills, and solid partnerships in a “rich creator-partner economy.” Non-fungible tokens (NFTs) have also been investigated by other Indian companies for application in the metaverse. Mahindra & Mahindra introduced NFTs based on their recognisable “Thar” car, with the proceeds going toward empowering girls. Similar to this, the travel agency MakeMyTrip introduced virtual vacation NFTs with a price tag of INR 14,999. When Tanishq introduced its “Romance of Polki” collection in 2022, it became the first Indian jewellery company to enter the metaverse. The general public could view the collection’s three-dimensional designs by scanning a QR code.

Leading companies have entered the metaverse’s expanding virtual market and sought trademark protection in India under NICE Classification Classes 9, 35, 36, and 42. These classes include financial services for supporting trade in the virtual marketplace (Class 36), retail store services that feature virtual products (Class 35), online non-downloadable virtual goods and non-fungible tokens (NFTs) (Class 42), and downloading virtual goods (Class 9). Retailers like Walmart, Tommy Jeans, Thar, Vogue, and Ajio Luxe have recently registered under class 9.

It might be more difficult than ever in the metaverse to police brands. Users are expressing their annoyance at the frauds that have already taken over the NFT market. There are constant requests for OpenSeas, the biggest NFT market, and other NFT exchanges to more thoroughly oversee their activities. Trademark dangers abound in this outlaw setting. First, sales that depend on a brand’s goodwill may flow to someone other than the brand owner. Second, clients who buy fake NFTs could be irritated that an expensive item isn’t a genuine branded one because the value they spent in the NFT is lost.

Exhaustion of Rights with respect to sale of branded virtual goods

Once an item has been physically acquired, such as clothing or a home appliance, the buyer is free to use it whatever they like. This includes making changes to the item, reselling it on the secondary market, giving it away as a gift, or even destroying it. The doctrine of exhaustion of rights prevents the owner of a trademark from continuing to have any influence over its products in the market after they have been sold. In contrast, NFTs and brands in the metaverse bring unique ownership considerations. As they want to expand in the metaverse, brand owners should think about how to build their virtual marketplace with suitable trademark registrations, a strong policing strategy, and acceptable licences and terms of use (mindful to avoid legalese to ensure users are not put off from participating). Should consumers become dissatisfied with how the branded virtual goods are promoted in the metaverse, carelessly managed trademark issues could damage goodwill. A misstep in the metaverse is likely to have instantaneous negative effects for the company, just like it does on social media right now.

Trademark related Challenges in the Metaverse

Mixed and augmented realities have offered brand owners access to a new market and clientele, but they have also created issues for the owners and users of trademarks, especially in the gaming sector. For instance, the use of real-world, third-party trademarks in online games that trigger the real world has been a recurrent issue with the junction of the virtual and physical worlds. The prospect for trademark violation is another problem. It is not difficult to spot trademark infringement in the real world. However, it is far more challenging to spot trademark violation in the Metaverse. Customers will be able to transfer virtual goods from one platform to another, like as clothes or cars. An outfit, for instance, might be bought in the virtual world and worn by an avatar on many platforms. Thus, it will be more challenging for trademark watch services to keep an eye on the metaverse for trademark infringements and unauthorised use. The Hermes case[3] aptly highlights that even if a corporation or brand is not presently active in the metaverse, its products and services may very well find their way there, therefore it may be necessary to watch the metaverse for bad faith trademark registrations by unscrupulous actors. It is more difficult to identify the source of infringement while using virtual goods and services because they are so easily replicated and spread. The problem of jurisdiction is another difficulty. In the real world, jurisdiction is typically established by the infringing party’s jurisdiction. Nevertheless, it is far more challenging to pinpoint an infringement in the Metaverse. Due to this, it may be challenging for trade mark owners to uphold their legal obligations.

Suggestions

Some of the suggestions below may be used to reduce the likelihood of trademark infringement in light of the issues mentioned above that may be encountered in the protection of trademarks in the metaverse –

• Its virtual duplicate should also be covered by the trademark protection. It ought to function similarly to how online contracts are upheld. (Information Technology Act of 2000, Section 10A.) The business may apply to register a multi-class trademark that covers both its products and services in the metaverse. Subsequently, the business will be able to defend their rights even in the metaverse if it is expanded to Class 42. Additionally, it will reduce pointless litigation and save the time of the Court and the parties involved.
• Firstly, developers of the metaverse should consider the likelihood of trademark infringement by other businesses. Brand protection should be ensured through the “Terms of Service.” Additionally, it might demand that intellectual property be monitored, valued, and managed.

Conclusion

The Metaverse’s components are developing quickly. In a market with such erratic growth and innovative new entrants, it is difficult to build a company strategy. On the other side, there are generally few risks and expenses associated with starting early and continually generating the right intellectual property, making predictions about potential future business models, and finding ecosystem partners and collaborators. The small initial expenditure needed to start and explore this new digital terrain is justified by the enormous danger of being left behind. Brand owners who want to be successful in the Metaverse should consider the advantages and hazards of intellectual property ownership.

Although Indian courts have not yet considered issues involving trade mark rights in the Metaverse, several aspects of the Metaverse, such as blockchain and cryptography, have been examined within the framework of Indian trademarks law. In light of the Metaverse, it follows naturally that the enforcement of trademark rights would change over time. Even though India’s position on the Metaverse is still developing, firms are unmistakably attempting to follow the global trend. In order to preserve trade mark rights in the Metaverse and prevent disputes, a thorough structure will soon be required given the growing interest of Indian businesses in entering the Metaverse.

Author: Meghna Sherman, a Student at Symbiosis Law School, Pune, in case of any queries please contact/write back to us at support@ipandlegalfilings.com or   IP & Legal Filing.

References

1. https://www.wipo.int/wipo_magazine/en/2002/01/article_0006.html
2. Registration Of Trademarks Operating In The Metaverse – Trademark – India (mondaq.com)
3. Through The Looking Glass: Towards A Clearer View Of Trademark Rights In The Metaverse – Trademark – Israel (mondaq.com)
4. Trademarks and the Metaverse: Imaginary Rights or Real Wrongs? | SpicyIP
5. Gucci Town [UPDATE] – Roblox

[1] Mr. Arun Jaitley vs. Network Solutions Private Limited and Ors., 181 (2011) DLT 716.

[2] Metaverse may be $800 billion market, next tech platform | Insights | Bloomberg Professional Services.

[3] NFTs and Birkin bags: A Hermès lawsuit tests the limits of trademark rights (brookings.edu)