Web 3.0 provides brands with a fresh opportunity to engage with existing consumers, and to reach new audiences and sectors. However, the potential for widespread infringement in the metaverse means that brands must ensure their intellectual property portfolios are fit for purpose to preserve their position in this environment.
Two key areas to consider are trade mark and design rights. Brands should consider taking steps to protect their trade marks and designs in the metaverse expressly, given the increasing prevalence of virtual equivalents to physical goods and virtual store or entertainment services.
In response to the recent surge in trade mark applications containing terms relating to services in the metaverse, virtual goods and non-fungible tokens (NFTs), the European Intellectual Property Office (EUIPO) has issued guidance relating to trade mark specifications, and has also issued for consultation updated versions of its guidelines relating to trade mark and design practice. Stakeholder associations have until 3 October 2022 to submit comments. The EUIPO expects any changes to its guidelines to come into force in Q1 2023.
This is part of a wider exercise by the EUIPO in seeking to ascertain how to approach the many questions that arise in relation to the metaverse and IP rights. Some of these will require a legislative response or, in the meantime, case law clarification, which may also interpret and apply updated guidance from the registries. The EUIPO considered a number of these issues specifically relating to trade mark and design protection in a recent webinar.
What can brands take away from the EUIPO's guidance and webinar?
- When filing trade marks relating to virtual goods and NFTs, the EUIPO has confirmed that these fall under Class 9, with services relating to such goods being classified in line with current practice.
- The EUIPO considers that the terms “virtual goods” and “NFTs” on their own lack clarity and precision and will therefore be unacceptable:
- “Virtual goods” must be specified by stating the content to which the virtual goods relate (e.g. downloadable virtual goods, namely, virtual clothing).
The type of digital item authenticated by the NFT must be specified. For example, the EUIPO indicates that 'downloadable music authenticated by non-fungible tokens' would be accepted. In the 12th Edition of the Nice Classification due in 2023, the term "downloadable digital files authenticated by non-fungible tokens" will be added to Class 9.
- The EUIPO recognises that there are a number of important questions to resolve relating to, for example:
- The criteria for assessment of absolute grounds of refusal – is the perception of the average consumer the same in the metaverse? How should virtual goods and services be treated when assessing distinctive character / descriptiveness?
The assessment of use of a virtual trade mark – this is relevant in a number of areas, including assessing acquired and enhanced distinctiveness, use in the course of trade and genuine use. The all-encompassing territorial aspect of the metaverse raises particular issues, as does the question of whether only use in a virtual environment can be taken into account, or whether combined use in the real world is acceptable.
Comparisons of goods and services i.e., physical vs virtual – how should the criteria be applied?
- Questions have arisen as to whether 'use' of a registered virtual design (or 'disclosure' of an unregistered design) which is not embodied within a physical product falls within the relevant statutory definitions for the purpose of design protection. In its recent webinar, the EUIPO stated its view that such use is within the scope of the existing legislation, but it recognises the position is not free from doubt in the absence of case law.
- In its webinar, the EUIPO also recognised that the current representation requirements for designs may be outdated for virtual designs, as it is only possible to file up to seven static views of the design. This may cause particular difficulties for animated or transformative designs. This is something that the EUIPO is considering further.
- The EUIPO has recommended that, when applying to register a design for use in the virtual world (either alongside the physical world, or entirely in the virtual world), applicants should select both the physical and virtual product indication for that design. For example, when registering a design for a virtual handbag to be used in the metaverse, the applicant should indicate both "handbags" and "graphic symbols". Whilst a design can be used on any 'product', giving a product indication assists with searching.
What is the UKIPO's position?
Unlike the EUIPO, the UKIPO has not yet issued guidance in relation to its approach to the metaverse. However, in relation to "virtual goods", the UKIPO appears to be taking a similar approach, requiring “virtual goods” to be specified by stating the content to which the virtual goods relate. In relation to NFTs, the UKIPO has accepted trade mark applications that do not specify the type of digital asset authenticated by the NFT, instead simply accepting the term "non-fungible tokens (NFTs)". Nevertheless, for any future UK applications, it may be advisable to specify the digital item authenticated by the NFT.
What steps should brands take to protect their IP in the metaverse?
Brands may also wish to register blockchain domains. Whilst these are currently used most frequently to replace the long addresses used to send and receive crypto, they can also be used to link to a decentralised website. Being pro active and registering for such domains will also prevent ethersquatting. Blockchain domains differ from traditional domains in the following respects:
- They are independent from ICANN meaning there is no need for the owner to provide WHOIS data.
- They are independent from UDRP meaning UDRP complaints cannot be brought.
- They are held on publicly accessible blockchains rather than on a server– thus improving transparency.
In addition to ensuring intellectual property portfolios are fit for purpose, brands should develop a suitable enforcement strategy, which also takes into account the risk of reputational issues. They should identify the types of use they want to oppose, the types of use that can be tolerated and perhaps even the types of use that can be embraced. Brands should consider setting up a watch service to monitor and track infringing use in the market. Where brands have existing watches in place, they should liaise with their provider to ensure the watch is scraping not only websites but also marketplaces (such as OpenSea and Decentraland), 3D printing sites (such as Thingiverse), social media, app stores and targeted advertising.