Virtual Commerce: The Metaverse is Built on Brands & Trademarks

Image: Vans


Virtual Commerce: The Metaverse is Built on Brands & Trademarks

The value of the global metaverse is expected to reach almost $800 billion by 2024, according to Bloomberg projections. This represents more than 16-fold growth over the nearly $48 billion generated in this burgeoning space in 2020. The quickly-developing ...

February 23, 2022 - By David B. Hoppe

Virtual Commerce: The Metaverse is Built on Brands & Trademarks

Image : Vans

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Virtual Commerce: The Metaverse is Built on Brands & Trademarks

The value of the global metaverse is expected to reach almost $800 billion by 2024, according to Bloomberg projections. This represents more than 16-fold growth over the nearly $48 billion generated in this burgeoning space in 2020. The quickly-developing metaverse brings with it a host of legal challenges and opportunities, including on the trademark enforcement and branding front, by way of marketing deals, and content partnerships and collaborations, as well as market development and customer diversification. Companies – both established players and start-up brands, alike – that are intent on operating in the virtual world writ large or by building their own metaverse platform should be aware of several brand-use and trademark issues that can arise.

The Metaverse Is Built on Brands & Trademarks

Companies seeking to establish a foothold in the metaverse must be well acquainted with trademark rights, as many brand owners are looking to leverage their existing intellectual property in this new digital environment. Many brands optimistically view the metaverse as a limitless market for promoting their products and services, and are looking for ways to engage in this budding space as a result. In this vein (and potentially shedding light on future efforts in the metaverse), early-moving brand owners are taking steps to register their logos and trademarks for goods and services that are accessible exclusively in the metaverse, including downloadable virtual goods for virtual online worlds, retail stores that carry virtual goods, digital collections services, and others. 

For example, Nike filed an array of trademark applications with the U.S. Patent and Trademark Office (“USPTO”) last year, indicating the brand’s intention to sell virtual shoes and apparel in the metaverse, which it has since confirmed by way of its Nikeland venture on Roblox and acquisition of RTFKT. Those trademark applications include those for Nike’s swoosh logo, “Just Do It” slogan, and Air Jordan designs, among others. Further, luxury brands, such as Balenciaga and Gucci, are actively testing how they can use the metaverse to connect with “real-world” consumers and generate additional revenue.

The diverse commercial implications of the metaverse may prove difficult to regulate, and potential metaverse participants may have difficulty discerning which rights belong to which stakeholders. The potential issues and ambiguities that arise from the proliferation of digital brands and their intersection with the metaverse emphasize the need for companies operating in the video game, digital media, AR/VR, crypto, and other emerging tech spaces to develop comprehensive plans for protecting their assets and intellectual property while avoiding infringing upon the rights of others. 

Legal Considerations 

With the foregoing in mind, gaming, digital media, crypto/blockchain, and other tech organizations should pay particular attention to a few pertinent legal areas … 

Trademark Search and Registration – Technology and digital media companies whose primary focus until now likely has centered on Web 2.0, now may want to consider taking a page from Mark Zuckerberg’s Facebook and rebranding themselves as metaverse-first organizations. However, it is worth noting that rebranding a company to reflect this new focus may stir up a host of issues. For instance, a company seeking to capitalize on the popularity of words such as “meta” and “metaverse” by promoting sports brands in their gaming metaverse, could face stiff competition and/or infringe upon already-filed trademarks and copyrights. More than 800 marks already make use of “meta” as a word or prefix, and over 100 more applications for registration were filed in 2021 for similar marks. 

Furthermore, the USPTO might consider trademark applications – such as “BRANDS IN THE METAVERSE” or “SPORTS IN THE METAVERSE” – to be too generic or descriptive to be valid. 

Branding – Use and the misuse of brand names is likely to become even more rampant in the metaverse than in the physical world, which is a primary driver behind world-famous brands filing trademarks applications for virtual goods to coincide with existing registrations for their physical consumer product lines. Technology companies aiming to build out their own metaverse platforms should be aware that effective mechanisms exist for brand owners to enforce their rights. As a result, metaverse providers may find it necessary to engage dedicated staff to monitor user-generated content, investigate suspected violations, respond to cease-and-desist notices filed by legitimate trademark holders, and remove offers for counterfeit or infringing goods. At least some platforms are taking a proactive approach and providing a dedicated mechanism for brands to file notices and lodge complaints if they find instances of their trademarks being violated.

Obtaining the advice of an experienced intellectual property attorney can help these companies understand their responsibilities for policing infringements and ways they can protect themselves from becoming a party to them. A comprehensive, nuanced intellectual property policy is also extremely important for mitigating secondary liability. Specifically, a metaverse service provider that fails to incorporate a sound enforcement policy might be deemed liable for trademark infringement that takes place in its corner of the metaverse.

Licensing – Many brands and trademark owners are experimenting with ways to profit from the metaverse. Some hope to promote their goods and services, while others look to leverage the drawing power of other brands and trademarks. Whatever the business model, commercial metaverse participants and providers must be able to negotiate and document appropriate trademark licensing arrangements. For example, metaverse users can create avatars by using a variety of digital products (including branded ones), a functionality that can empower users to assume identities as realistic fictional characters in the virtual world. Absent appropriate trademark licenses, metaverse platform operators may find themselves at risk of being accused of trademark infringement as a result of user activity. 

It is critical that providers: (i) understand the scope of rights, duration, territory, exclusivity, sub-licensing, royalty rates, and other provisions of any licensing agreement they enter; and (ii) implement calendars and related procedures to ensure that applicable provisions are complied with and deadlines are met.

The metaverse provides both opportunities and challenges for providers, marketers, and brand owners seeking to engage with new audiences and increase brand loyalty via virtual goods and services. As more brands move forward with metaverse marketing strategies, developing a sound trademark strategy will ensure maximum protection and flexibility for all stakeholders. A strong trademark strategy can also help emerging technology companies monetize their existing intellectual property in the metaverse. 

David B. Hoppe is the founder and managing partner of Gamma Law, and a recognized authority on emerging legal issues in high-growth media/technology sectors, including video games and esports, blockchain and digital assets,VR/AR/XR, and digital media/entertainment.

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