The Situation: The metaverse provides new commercial opportunities for businesses to reach consumers and creates new challenges to protect and enforce brands in a virtual environment.
The Result: Brand owners should consider seeking relevant trademark protection for potential uses of trademarks in the metric to best position brands to leverage and execute in this virtual space.
Looking Ahead: US courts are still evaluating how traditional trademark law principles apply in the metric, but early cases suggest that courts will apply real-world rules to the virtual world.
The metaverse is a technological infrastructure that allows users to experience online networks in 3D space or virtual reality. Called the next generation of the internet, a fully developed metaverse could connect all users across virtual online environments to socialize, share information or do business. Currently, the metaverse consists of various siled platforms that offer users different online experiences – from video games to online virtual reality social networks.
The ability to attract customers into an interactive virtual space offers new business opportunities for brand owners, to advertise, test and sell virtual and real-life goods. For example, Nike sells digital sneakers to online players on the Roblox platform to customize their avatar’s footwear. And KFC announced plans to launch virtual restaurants, where users can join a digital KFC online and order real food for delivery. In short, the metaverse is open for business.
At the same time, the metaverse presents legal challenges. The use of a brand owner’s trademarks by third parties in a virtual world may lead to consumer confusion or brand tarnishment, thereby violating real-world laws prohibiting trademark infringement and dilution. The metaverse represents not only a changing commercial landscape but also a new location for the development and application of trademark law.
New Life, Old Laws
The metaverse includes a virtual marketplace that allows users to purchase virtual and real-world goods and services. In the virtual marketplace, as in the real world, trademarks act as source identifiers and distinguish the trademark owner’s goods and services from those of others. The way goods and services are offered and sold in the virtual world, which mimics real-world transactions, justifies the conclusion that real-world trademark laws should apply to virtual commerce.
The limited cases alleging trademark issues in virtual spaces support this reasoning. The developer of “Second Life”, an early metaverse platform in which online “residents” control 3D avatars to simulate real-life activities, faced several infringement suits by trademark owners of real-world and virtual goods. For example, Taser sued Linden Research after discovering that residents were using the trademarked word “taser,” including in advertisements for similar products, resulting in Linden Research removing all cases of the word from the platform. Taser Int’l, Inc. v. Linden Rsch, Inc., No. 09-CV-00811 (D.Ariz. 2009). Linden Research also settled a suit by a “Second Life” resident who alleged that the developer facilitated the counterfeiting of its virtual goods by charging fees to access the in-game marketplace. Eros, LLC v. Linden Rsch, Inc., No. 09-cv-04269-PJH (N.D. Cal. 2009). These cases demonstrate that trademark owners are using traditional trademark laws to address virtual infringement issues.
Defenses in the Metaverse
As in the real world, there will be protections against infringement related to uses of virtual trademarks. But how these defenses are implemented and whether they succeed may vary depending on the context.
First, traditional infringement claims must satisfy the commercial use requirement, while virtual infringers may allege that their use of a mark is non-commercial. To determine commercial use, the courts consider whether the use of a mark is related to the sale of a good or service. The sale of real and virtual goods and services should meet this standard.
But what if virtual goods are given away for free? On platforms where users are encouraged to generate free content, this dilemma can be a particular problem. Some courts have held that actual sales are not required for commercial use, but proof that an infringer provides a competitive service to the public using the mark. In the metaverse context, however, it may not be clear whether a digital hobby is a competing real-world good or service, especially if the trademark holder has no presence in the metric or fails to produce the same type of good or provide a virtual service to. users.
Alleged infringers in the metric are also expected to raise a First Amendment defense, as this defense has been successful in cases involving infringement claims in the video game context. Under this protection, courts allow the use of a trademark owner’s mark for express purposes if the use has artistic relevance and consumers are not expressly misled. I AM General LLC v. Activision Blizzard, Inc., 450 F.Supp.3d 467 (SDNY 2020), the court held that the video game publisher for “Call of Duty,” a story-heavy military shooter game, did not infringe on Humvee’s trademark based on First Amendment protection. The use of Humvees was artistically relevant because it gave a sense of military realism, and was unlikely to confuse players for a variety of reasons, including the different uses of the parties and the differences in the parties’ affairs.
This analysis does not necessarily apply to a more open platform, like “Horizon Worlds.” Driving virtual Humvees may be a fun experience but has questionable artistic relevance in a general online social network. Additionally, as more companies advertise, engage and sell to metaverse users, the likelihood of consumers being misled also increases. Thus, this defense may pose challenges outside of the context of the video game or niche metaverse spaces.
Fair use could also be raised as a defense to mesoscopic infringement claims. There are two types of fair use: classic and nominal. Classical fair use allows trademarks to be used to describe a defendant’s goods or services rather than to identify their source. In contrast, nominal fair use involves the use of a trademark to describe the plaintiff’s goods or services, but the defendant does not need to use it as much as necessary and without any sponsorship or endorsement from the trademark owner. Either could apply in the metric and should be subject to the same analysis as in real life.
Finally, an alleged infringer in the metaverse may contest whether a claimed mark covers a good or service. For example, i Brantley v. Epic Games, Inc., 463 F.Supp.3d 616 (D. Md. 2020), the plaintiffs alleged that the publishers of the online multiplayer game “Fortnite” committed false brand designation by selling custom dance moves for players that incorporated the plaintiffs’ trademark ” Run Man” dance. The court found that the plaintiffs did not have a valid trademark because their dance defined a basic choreographic concept, not a good thing. This protection may have appeal in certain meta situations due to the amorphous nature of commercially viable virtual goods and services on online platforms.
When developing a trademark protection strategy for the metaverse, brand owners should first assess their trademark portfolios and determine whether key brands will be used in a virtual setting. If so, brand owners should file applications that specifically cover the relevant virtual goods or services to be distributed or sold in the metric.
Additionally, brands likely to face virtual breaches should consider developing a comprehensive policing strategy to identify a breach across multiple platforms. The strategy should include important differences in the various platforms. For example, while “Horizon Worlds” applies traditional takedown protocols to combat infringing activities, “Sandbox” requires users to exhaust all self-help options before the platform becomes involved in any dispute. The policing strategy should also consider prioritizing unauthorized uses to determine which would warrant involvement to effectively manage enforcement costs.
As mobile platforms and their underlying technology evolve, the trademark issues facing companies will also evolve. Regardless of fate or fate, brand owners should be prepared to respond to existing and future legal issues related to the metaverse by understanding how traditional trademark doctrines will operate and by developing practical measures to protect and enforce their trademarks in the metric.
Three Key Takeaways
- The metaverse offers a commercially viable digital marketplace that provides new opportunities for existing brands to advertise, engage and sell to consumers. Many brands have already leveraged their trademarks within virtual environments to build new business, selling both virtual and real-world goods and services.
- Traditional principles of trademark law will likely remain applicable to new infringement issues in the metaverse, but future court decisions will clarify how the analysis of infringements in the virtual world will shift within the current real world framework.
- Brand owners should consider assessing their trademark portfolios and developing a comprehensive strategy to protect and enforce their trademarks across multiple platforms.