Early-Movers Are Facing Challenges Over Metaverse Trademarks in China

Image: Alibaba


Early-Movers Are Facing Challenges Over Metaverse Trademarks in China

Trademark applications for marks that companies are using – or planning to use – on virtual goods and/or non-fungible tokens (“NFTs”) have been rising in the United States. According to data released early this summer, 4,049 “NFT-related” trademark applications ...

August 3, 2022 - By TFL

Early-Movers Are Facing Challenges Over Metaverse Trademarks in China

Image : Alibaba

Case Documentation

Early-Movers Are Facing Challenges Over Metaverse Trademarks in China

Trademark applications for marks that companies are using – or planning to use – on virtual goods and/or non-fungible tokens (“NFTs”) have been rising in the United States. According to data released early this summer, 4,049 “NFT-related” trademark applications for registration – and 2,717 applications for virtual goods/services – were filed with the USPTO between January 1 and May 31 by brands ranging from retail titans like Walmart to famed luxury goods brands. Metaverse-related trademark filing numbers are also on the rise in the European Union, where companies are readily lodging similar applications, primarily, in Classes 9, 35, 41, and 42. The momentum of companies looking to shore up their existing trademark rights for use on NFTs and/or in the virtual world is, of course, not limited to the U.S. and EU, and in fact, companies have been filing applications centering on metaverse trademarks in China, looking to secure registrations of their own.

As of early this year, tech giants like Alibaba Group Holding, Tencent Holdings and ByteDance, as well as smaller local rivals, were making headlines in connection with trademark applications they lodged with the Chinese trademark office, guided by big ambitions in this burgeoning space. (Tencent president Martin Lau, for instance, told Wired that “the company has the technology and know-how to build the metaverse, thanks to its enormous gaming and social media credibility.”) According to early figures released in January, more than 1,360 Chinese companies in the tech space and beyond had applied to register more than 8,500 metaverse-related trademarks. Chinese media outlet The Paper cited the Chinese National Intellectual Property Administration (“CNIPA”) a month later, revealing that as of February, 16,000 trademark applications for trademarks that included the term“metaverse” had been filed with the trademark office. 

The push to register metaverse and crypto-related trademarks in China has not been smooth sailing for early-movers. In addition to a number of these applications being subject to pushback from the CNIPA, which was reportedly acting on “a deliberate strategy” to deal with the rush of metaverse-related applications and prevent trademark squatting, even good-faith filing parties are likely to face challenges in amassing registrations for metaverse trademarks in China due, in large part, to the novelty at play. 

Unlike the trademark systems in the U.S. and the EU, which are “somewhat malleable to adaptation,” and thus, enable parties to file applications for the use of their marks on relatively novel goods/services and “allow new filings to cover the exact goods and services to be offered and protected in metaverse,” Squire Patton Boggs’ Paolo Beconcini says that there is less wiggle room when it comes to filing for metaverse-related marks in China. Brands may face something of an uphill battle for now, as the goods and service descriptions that they are required to list in their applications “must be chosen from those available in the Chinese Classification system,” per Beconcini, who notes that the Chinese system – complete with “strict formalism in the selection and designation of goods and services from a classes/sub-classes structure with rigid descriptions” – does not provide “goods or service descriptions that clearly suit the purpose” of brands’ metaverse-focused endeavors. 

Currently, he says that the system in China “does not provide any description that would fully fit goods and services for [trademarks used in] the metaverse.” 

That is not to say that brands are not trying to make it work with the class/sub-class designations that are available to them – much as companies are doing in the U.S., in the wake of guidance from early applications filed by the likes of Nike. According to Beconcini, common filings for fashion-related trademarks in the metaverse in Class 9 in China contain specifications, such as, “Software, head-mounted virtual reality device, electronic wallet, downloadable videos, [and] virtual reality game software.” 

Early-filers are also expected to struggle, as while companies are beginning to get a sense of how the U.S. Patent and Trademark Office, for example, will treat trademark applications for registration for marks for use in the metaverse and/or in connection with NFTs thanks to a growing number of Office actions and proposed amendments, the CNIPA has not yet provided similar guidance. “There is no clear direction or indication as to what examiners and enforcers will do with these new filings,” Beconcini contends, asserting that “there is not yet any decision to guide us, as most metaverse decisions in China have so far have concerned NFTs and copyright rather than trademarks.” 

Even with such uncertainty at play, companies are being encouraged to lodge NFT- and metaverse-related applications in China (and to do so sooner rather than later) given that the Chinese trademark office issues registrations on a first-to-file basis, a system that weighs heavily in favor of local entities that act fast. 

Beginning to file for registrations in China, big-name Western companies are likely aiming to beat such trademark-squatters to filing, which would enable them to avoid lengthy and costly proceedings before the Chinese trademark office and courts in order to invalidate registrations for their marks that were amassed by others in bad faith. Against this background and with a clear view from a number of cases of how long it might take to prevail in a trademark fight against a squatter (the recent Manolo Blahnik decision comes to mind, as does Michael Jordan’s lengthy legal battle), Beconcini says, “We are of the view that a foreign fashion brand may face significant disadvantages if it chose not to file such marks in China.” 

Beyond the impetus provided for both native and non-native companies by the first-to-file trademark system, and even in the event that Beijing takes a hard stand against the metaverse on the mainland (as has been suggested in the past), Western companies should still be thinking about China when building out their web3 trademark registration portfolio. Having a China-specific strategy in place is important, according to Aaron Wininger, the director of Schwegman Lundberg & Woessner’s China Intellectual Property Practice. “Even though foreign companies’ metaverse ventures are not available to Chinese netizens, it is still possible that China will generate significant revenue for foreign companies [in this realm], making it an important market.” 

Ultimately, it is early-on in the development of individual metaverses – in China and beyond – and the notion of one, interconnected metaverse is not yet even in sight. Executives at Tencent – which already has an advantage, according to Wired, as it is “the Chinese local publisher for Roblox’s gaming platform, which allows users to create virtual worlds and is regarded by many as a viable early iteration of the future metaverse” – are projecting that the industry needs “at least another five years to get to the point where people will consider the [metaverse] technology legit.” Even so, the spike in trademark filings by native Chinese companies and the inherent risks at play for companies on the trademark filing front in China and other similar jurisdictions make it so that even if it is still early days, a consideration of China makes sense as companies rush to hedge their bets when it comes to the metaverse and their valuable marks. 

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