With the emergence of the “metaverse”, the line between physical and virtual worlds is blurring. Last year, Meta’s CEO Mark Zuckerberg explained that if you hang out in the metaverse, you will need to have digital clothes, digital tools and digital experiences. If the metaverse becomes more prevalent, it will also have consequences for trademark owners.
Virtual goods and services in the metaverse
The obvious question for any products in the metaverse is what their relation to actual physical goods is. Let’s say that a person in the metaverse is wearing digital Nike clothing, and goes to eat in a digital McDonald’s. Will there be an assumption that Nike and McDonald’s actually have something to do with those goods and services? Or will it simply be the case that everybody understands that these products and services are not “real”, but rather made by artists and programmers having nothing to do with Nike or McDonald’s?
Some goods and services are more easily replicable in the metaverse than others. For example, restaurant services are challenging because the experience is dependent on the taste of the food and drink, i.e. something that cannot be sensed online. It is difficult to provide virtual goods and services that rely on smell (for example perfume), taste (for example restaurants) or touch (for example massages).
It is easy to see, on the other hand, how for example Netflix could be used in the metaverse. The experience would probably differ very little from using Netflix in the real world. Also, artists could provide very powerful concerts in the metaverse. Some physical products might also work well in the metaverse. For example, Rubik’s cubes could easily be replicated in the metaverse.
A lot will depend on how the metaverse will develop. Nike, for one, is preparing for it. It was announced in late 2021 that Nike had bought RTFTK Studios, a maker of virtual shoes. Nike also filed a trademark application for NIKE in the US for “downloadable virtual goods”.
One clear challenge is that virtual counterfeits are very cheap to make. A programmer selling Nike shoes benefits from the reputation and fame of the Nike brand even if the purchasing public knows that the goods in question do not actually originate from Nike but from an unknown programmer.
Classification of digital products
Trademark law is currently not very well prepared for this type of development. Digital goods and services are essentially computer software. Currently, at least until now, computer software is considered dissimilar to most physical products. A downloadable file of running shoes is not similar to an actual physical shoe.
There are three possible solutions. The first one is to acknowledge that with the emergence of the metaverse, digital goods and their physical embodiments are similar products for trademark purposes.
This would require a complete rethinking of how to specify software products in a trademark application. Many trademark applications include “software” without more specific details, so if that was considered similar to other physical goods, a software company could oppose later trademarks for any goods, since software covers all digital goods. The same would apply vice-versa.
Another solution would be to take the view that virtual goods are not software, but the same as physical goods. According to this approach, the term “shoes” in Nice class 25 would cover both physical shoes and virtual shoes. A similar approach already applies already in the classification of retail services, which include online retail services. Rather than having a real person and a real cashier, the online shop includes only a website or a mobile application. Essentially the same service (selling of goods), but done digitally. There should be no reasons why the same logic could not be applied for physical goods.
The third solution would be to take the view that digital goods and physical goods are not similar. At least for registration matters, this is currently the prevailing view. Software (class 9) is not similar to most other goods. For example, software (virtual shoes) are dissimilar to physical shoes.
This view fails to take into account that many companies have spent a lot of money in creating their brands, and having them completely unexposed to virtual counterfeiting would be very unfair.
Also, if the metaverse becomes more popular, the distinction between virtual and physical goods becomes less clear cut. It may well be assumed that the makers of physical goods are the same as the makers of the corresponding virtual goods.
The current state is unsatisfactory
With current trademark laws, owners of well-known trademarks, or trademarks with reputation, have some chances of preventing their trademarks from being used in the digital space because the similarity of products is not required to prevent the registration or use of a later trademark.
The owner of a trademark with a reputation can stop the corresponding virtual products if they can show that the virtual goods take unfair advantage of the reputation of the famous mark or it’s detrimental to its reputation.
Owners of “normal” (i.e. not particularly famous) trademarks are in a difficult position. As creating and distributing virtual goods is extremely cheap, it is imaginable, for example, that somebody creates a metaverse store with a selection of virtual goods dwarfing Amazon’s selection of physical goods. This will affect all trademark owners, not only the big and famous.
The metaverse might also prove to be important for smaller niche brands for a number of reasons. For example, custom manufactured skateboards could be sold in the metaverse for skateboard enthusiasts. Smaller brands could launch or test their products in the metaverse for much cheaper than in the physical world. Some might even decide to operate only in the metaverse.
As long as the metaverse exists only in Zuckerberg’s PR talking points, the trademark issue seems academic. But if companies like Nike are already preparing to have virtual goods, smaller companies will follow, and suddenly the metaverse is a real thing (or a real virtual thing?).
What’s more, production and distribution costs in the metaverse will be close to zero. It might not take long for the virtual marketplaces to be saturated with all kinds of brands and products, created by thousands of gifted programmers, designers and artists around the world. That is, at the latest, when fighting for brands and trademarks in the virtual place will escalate. That’s also when companies, national trademark offices and courts will realise that they are not ready to deal with those disputes.