(M)ost (E)ffective (T)actics (A)vailable: Trademark Protection in the Metaverse

Posted on Sep 11, 2024 in Articles

The following content is reprinted with permission from the September 10, 2024 issue of The Legal Intelligencer. © 2024 ALM Media Properties, LLC. Further duplication without permission is prohibited.  All rights reserved.

The idea of trademarks on virtual goods mirroring identical physical goods feels a bit meta, and that’s the point.  Enter the metaverse—a growing, multi-billion-dollar industry that goes far beyond multiplayer games.  Now, with formerly brick-and-mortar businesses entering the metaverse, how can businesses protect their intellectual property—particularly the goodwill in their brands—in a transient world where goods and services are intangible?

What is the Metaverse?

To protect goods and services in the metaverse, attorneys should know what the metaverse is. The metaverse generally refers to a virtual world where users may interact with others through computer-generated avatars. [1]  The term “metaverse” first appeared in Neal Stephenson’s 1992 dystopian novel Snow Crash, where Stephenson used “metaverse” to describe a digital world where people—through their avatars—interact in a way that mirrors reality. [2,3]

Early popular examples of the metaverse dawned with the 2003 popular game Second Life® and Blizzard Entertainment’s 2004 launch of World of Warcraft®. [2, 4, 5]  The metaverse permeated popular culture even further with the 2016 launch of Pokémon Go®, 2017’s Fortnite®, and the controversial advent of non-fungible tokens (NFTs).   [6-8]

Today, the metaverse takes on a more immersive, three-dimensional experience, with those participating often using augmented reality (AR) and virtual reality (VR) headsets to access it. [2] With companies like Facebook® rebranding as Meta® and pledging to invest in the expansion of the metaverse, experts estimate the metaverse could be a $100-billion industry by 2030.  [2].

Where are Trademarks in the Metaverse?

Pop culture has shown consumers Nike® shoes and “MetaBirkins” as NFTs. [11-12]  While the need to own virtual representations of real items may not be universal, the metaverse is incorporating itself into other areas of daily life.  Consumers can attend concerts in the metaverse, with popular artists like Travis Scott and Arianna Grande partnering with Fortnite® to host virtual, immersive events featuring virtual concert merchandise, not to mention other areas of intellectual property such as copyright that are implicated with song performances. [13-14].  The NFL recently released NFL Pro Era, allowing attendance to an officially NFL-licensed virtual reality football game featuring NFL trademarks. [15]  Meta (formerly Facebook)’s metaverse pursuits center around social networking, featuring Meta Platforms, Inc.’s service marks. [16]  With possibilities like shopping with virtual storefronts, gaming, and socializing in the metaverse, trademarks are set to become just as prevalent in the metaverse as they are in our everyday lives.

Protecting Trademarks in the Metaverse

If trademarks are appearing in the metaverse, trademark owners will want to seek federal protection for them, especially because a local business is never truly just “local”  in the metaverse.  The possibilities for monetization—but also the possibilities of infringement—are far-reaching.  To acquire federal registration protection, it is important to factor in the proper classifications for virtual goods and services, whether the type of use is federally protectable, proper display of marks for specimens, and clearance of the mark for use and registration.

1. Classifications

The USPTO’s trademark ID Manual already has classifications for downloadable virtual goods in Class 9, as well as virtual services such as “simulated hair cutting services for avatars provided in virtual environments for entertainment purposes”, “simulated restaurant services provided in virtual environments for entertainment purposes”, and “simulated banking services for in-game currencies provided in virtual environments for entertainment purposes” in Class 41.

Generally, the main international classifications for goods and services in the metaverse are as follows:

• Class 9 – downloadable virtual goods;
• Class 35 – retail store services for virtual goods;
• Class 36 – virtual banking and digital token services;
• Class 41- simulated services related to entertainment; and
• Class 42- NFTs and non-downloadable virtual goods. [9].

2. “Use in Commerce”

However, the greatest hurdle to seeking registration is establishing the “use in commerce” required for registration in the United States. “Use in commerce” refers to “interstate commerce”,  meaning sales of products or services under the mark must be made 1) between citizens/entities of different U.S. states; or 2) between a citizen/entity in the United States and a citizen/entity from another country. [10]

Therefore, for a trademark used in the metaverse to be registerable with the USPTO, a virtual good must be sold or a virtual service offered for sale under the trademark in the metaverse.  Then, this sale must at least indirectly be made with real currency to a citizen of a different U.S. state or different country.   A proper sale could be an individual using real currency to purchase virtual currency, which is then exchanged to purchase a virtual good or service, or the virtual good or service may be purchased directly with real currency.

Using the hair cutting example above, if a U.S. company opens a virtual hair salon operating under the hypothetical mark SHEAR REALITY for avatars to receive haircuts in the metaverse, and an individual in Germany uses real euros to purchase virtual currency to then use the virtual currency to purchase a haircut for their avatar from the virtual hair salon, a virtual service was provided under the mark SHEAR REALITY in U.S. commerce.

3. Proper Use and Display

However, the mark would also need to be properly displayed in the metaverse, such as on a virtual sign stating SHEAR REALITY outside the virtual salon, on a virtual advertisement, etc.  To achieve registration, trademark and service mark applicants must submit a specimen showing proper use in commerce of their mark with the original application in a use-based application or in a later-filed Statement of Use filed with intent-to-use applications.  [17]  For a use to be acceptable, the use must show the mark exactly as it was applied for, and the specimen of use must be proper. [17]  For proper display allowing an applicant to submit a valid specimen the same rules apply for goods and services in the metaverse as they do in reality.   Advertisements displaying the mark are proper specimens for services, but not for goods. [17-18] Proper specimens for goods may include virtual versions of product packaging displaying the mark, tags or labels affixed to the product displaying the mark, or product displays featuring the mark. [17-18] While the usual webpage screenshot showing an ability to purchase a product under the mark may not apply in the same way in the metaverse—assuming online platforms within online platforms may even be too meta for the metaverse—if use of the mark in reality can be replicated in the metaverse, there is currently no distinction stating that whether the use is in the metaverse, a website, or a physical store has any impact on specimen acceptance as long as the illustrated use meets USPTO requirements.

4. Clearance

While trademarks have been part of the metaverse since its inception, it is unclear where the USPTO will draw the line between virtual and non-virtual goods and services as consumer interaction within the metaverse increases.

For businesses seeking to protect their trademarks in the metaverse, it is recommended to pursue clearance searches and opinions on proposed marks before their use in the metaverse if possible and before filing a trademark or service mark application.  When searching for goods and services in the metaverse, attorneys should not limit their searches to only virtual goods and services and should also include relevant non-virtual goods and services when evaluating mark clearance.

To illustrate why non-virtual goods should be included in searches, imagine a business sells virtual downloadable goods in the form of virtual ice cream in the metaverse in Class 9.  A search of virtual goods and services in Classes 9, 35, 41, and 42 for the mark comes back clear.      An application for the mark is filed, and an Office Action is issued, refusing the mark under Section 2(d) of the Lanham Act for an alleged likelihood of confusion with a mark registered in Class 30 for ice cream.  Why?  Because a consumer could likely believe that an ice cream chain, to increase public exposure and brand recognition, started selling NFTs of ice cream, or opened a virtual ice cream store under the same name in the metaverse, allowing avatars to purchase ice cream.

However, the above example also presents a conundrum for the USPTO.  In the above example, the virtual goods are related in ownership to the provider of the identical goods in real life.  However, what if that is not the case?

Opening a business in the metaverse may not take the same monetary investment and have the same labor concerns as a non-virtual business. As a result, business expansion in the metaverse could be limitless, and millions of virtual goods and services could be offered in U.S. commerce with minimal effort.  With that may come millions of new applications.  If goods in the metaverse do not have a non-virtual counterpart, and potentially would not have the same consumers, could finding downloadable ice cream and physical ice cream to be “related” goods open the floodgates of allowing the metaverse to overcrowd trademark availability?  Could a metaverse-based business that is opened in a matter of hours prevent the local ice cream parlor that took years to become profitable from obtaining a registration on the name of their business?  While the argument can certainly be made that the goods, marketing channels, and target consumers differ, this is not without cost to the applicant who must now invest in the time and expertise to file an Office Action response with an uncertain outcome.  For now, however, submitting argument outlining these differences is the best defense against this problem.  To help prevent this problem on the pre-filing end, searches should be as comprehensive as possible until the USPTO issues further guidance, factoring in virtual and tangible goods and services.

5. Strategy

With so many events entering the metaverse, it is only a matter of time before attorneys attend legal conferences in exotic locations to network and enjoy local sights, while still returning to their own beds each night.  While the legal community may not be at this point yet, it is clear the metaverse is here to stay.  With that knowledge, trademark owners and attorneys should proceed cautiously, 1) evaluating the availability of marks for the proposed goods and services with comprehensive clearance searches; 2) confirming that the use of the mark is “use in commerce” within the meaning of 15 U.S.C. §1051(d)(1); 3) confirming the mark’s use in the metaverse will produce an adequate specimen;  and 4) choosing the appropriate class for the virtual goods and services prior to filing the application.  The metaverse is expanding every day, and with it comes another world attorneys must consider when protecting their clients’ trademarks.

References:

1. Steven Ehrlich, The Metaverse Explained, Forbes (March 10, 2023), https://www.forbes.com/sites/digital-assets/article/the-metaverse-explained/.
2. Alex Clere, Timeline: looking back through the making of the metaverse, Magazine (February 13, 2023), https://fintechmagazine.com/articles/timeline-looking-back-through-the-history-of-the-metaverse
3. Rick Howard, Book Review: Snow Crash, The Ohio State University Institute for Cybersecurity & Digital Trust, https://icdt.osu.edu/snow-crash (last accessed Aug. 22, 2024).
4. Simon Parkin, Who needs the Metaverse? Meet the people still living on Second Life, The Guardian (June 10, 2023), https://www.theguardian.com/technology/2023/jun/10/who-needs-the-metaverse-meet-the-people-still-living-on-second-life.
5. Johnny Wood, Second Life: What this 20-year-old virtual world can tell us about the future of the metaverse, World Economic Forum (Oct. 13, 2023), https://www.weforum.org/agenda/2023/10/second-life-virtual-world-metaverse/.
6. Eric Johansson, Pokémon Go firm enters the metaverse: Niantic’s alternative to Meta’s “dystopian nightmare”, Verdict ( 23, 2021), https://www.verdict.co.uk/pokemon-go-metaverse/?cf-view.
7. Paul Tassi, ‘Fortnite’ Has Actually Made The Metaverse After Everyone Else Quit, Forbes (Dec. 10, 2023) https://www.forbes.com/sites/paultassi/2023/12/10/fortnite-has-actually-made-the-metaverse-after-everyone-else-quit/.
8. NFTs: The metaverse economy, The Financial Times, https://www.ft.com/partnercontent/crypto-com/nfts-the-metaverse-economy.html (last accessed Aug. 22, 2024).
9. Trademarks in the Metaverse, WIPO Magazine (March 2022), https://www.wipo.int/wipo_magazine/en/2022/01/article_0006.html.
10. 15 U.S.C. §1051(d)(1).
11. Khristopher J. Brooks, Nike’s new NFT sneakers selling for more than $100,000, CBS News (Apr. 28, 2022), https://www.cbsnews.com/news/nike-cryptokicks-nft-blockchain-metaverse-rtfkt/.
12. Reuters, Hermes wins US trademark trial over ‘MetaBirkin’ NFTs, CNN (Feb. 9, 2023), https://www.cnn.com/style/article/hermes-metabirkin-trial-nfts/index.html.
13. Fortnite Presents… the Rift Tour Featuring Ariana Grande, Fortnite (Aug. 9, 2021), https://www.fortnite.com/news/fortnite-presents-the-rift-tour-featuring-ariana-grande.
14. Fortnite and Travis Scott Present: Astronomical, Fortnite, https://www.fortnite.com/news/astronomical (last accessed Aug. 26, 2024).
15. NFL Pro Era, Meta, https://www.meta.com/experiences/4193975210678121/ (last accessed Aug. 26, 2024).
16. We believe in the future of connection in the metaverse, Meta, https://about.meta.com/metaverse/ (last accessed Aug. 26, 2024).
17. Trademark Manual of Examining Procedure (TMEP) § 904.
18. Specimens, United States Patent and Trademark Office, https://www.uspto.gov/trademarks/laws/specimen-refusal-and-how-overcome-refusal (last accessed Aug. 26, 2024).