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Monday, June 17, 2024

Exploring Intellectual Property in the Realm of METAVERSE

The Metaverse is a world where you can do anything of your liking; you can shop, have fun, play games, attend events, concerts and even eat whatever you wish without having to worry about calories and cholesterol. The possibilities are endless, only catch being it’s not real. But, are the notions of reality same for everyone? As Stephen Hawking beautifully said “There is no unique picture of reality”.

The metaverse is popularly defined as an online virtual reality environment where users can interact, play games, and carry out a range of other activities. Metaverse, to put in simple words is a virtual shared space where users can interact, play games, attend events, shop, and more through digital avatars and immersive digital experiences, it is rapidly evolving and gaining mainstream adoption. The possibilities in the Metaverse are limitless, ranging from buying and selling virtual and real goods from virtual shopping malls, playing games, working, even so far as purchasing real estate, travelling, and attending concerts in the Metaverse. It is also emerging as new and profitable way of doing business. As this new digital world emerges, it raises complex questions about the scope and application of intellectual property rights in these virtual realms.

According to a Bloomberg Intelligence report, the worldwide revenue opportunity from the metaverse is predicted to hit $800 billion in 2024, up from the estimated $500 billion in revenue generated by the metaverse in 2020. In 2022, Gucci and the world’s most popular multiplayer online game platform, “Roblox” opened a permanent “Gucci Town” with the brand’s marks visible. Avatars can game, create art, shop for virtual Gucci clothing and attend events. One digital Gucci bag reportedly sold for over $4,000. Mahindra & Mahindra introduced NFTs based on their recognisable “Thar” car. The travel agency MakeMyTrip introduced virtual vacation NFTs with a price tag of INR 14,999. Numerous fashion companies like Hugo Boss, Tommy Hilfiger have started to introduce their products into the metaverse virtual environment in the post-pandemic period.

Leading companies have entered the metaverse’s expanding virtual market and sought trademark protection in India under NICE Classification Classes 9, 35, 36, and 42. These classes include financial services for supporting trade in the virtual marketplace (Class 36), retail store services that feature virtual products (Class 35), online non-downloadable virtual goods and non-fungible tokens (NFTs) (Class 42), and downloading virtual goods (Class 9). Retailers like Walmart, Tommy Jeans, Thar, Vogue, and Ajio Luxe have recently registered under class 9.

TRADEMARK RELATED CHALLENGES IN THE METAVERSE

The Metaverse offers brand owners new markets but also trademark issues, especially in gaming. The use of real-world trademarks in online games blurring virtual and physical worlds is problematic. Safeguarding trademark rights in the rapidly evolving landscape of the Metaverse encounters distinctive challenges. Traditionally, these rights aim to shield goods and services in the tangible realm against commercial exploitation by unauthorised entities. However, navigating the Metaverse introduces a nuanced dimension, as potential infringers may argue that their activities within this virtual space do not constitute commercial use.

Such a loophole defence challenges the traditional boundaries of trademark protection, necessitating a meticulous examination of the intersection between virtual and real-world commerce. In the Metaverse, the classification of virtual goods and services defies conventional norms. With the opportunity to buy virtual assets of a diverse and innovative nature, like digital collectables, works of art, digital tokens, NFTs, and cryptocurrencies, the Metaverse presents itself with a unique challenge for trademark classification. As legal frameworks adapt to the dynamics of this digital frontier, addressing these novel defence strategies becomes imperative for upholding the integrity of trademark rights.

Potential for Infringement

The Metaverse’s expansive nature gives rise to concerns of trademark infringement. The traditional protection extends to the specific class in which the trademark is registered, leaving room for potential infringements across the Metaverse. Section 29 of the Trade Marks Act addresses trademark infringement, protecting goods and services within their registered class. In instances where a trademark is well-known, protection extends to unrelated goods and services as well. 

Whereas in the Metaverse, the classification of goods and services itself poses a challenge due to which companies might find it difficult to protect and enforce their rights. In turn, this will lead to a number of Trademarks being filed in bad faith to misappropriate the goodwill and reputation of famous trademarks. As a consequence, this will impact and influence real-world perceptions, emphasising the need for a clear and concise trademark framework in this virtual realm. Navigating these intricacies is vital for effective trademark protection as the Metaverse continues to evolve and expand.

Detecting trademark violations in the metaverse is challenging as virtual goods like clothing can move across platforms. The Hermès case highlights the need to monitor for bad faith trademark registrations, even for brands not active in the metaverse. In this recent case of Hermes v. Mason Rothschild, luxury brand Hermès sued NFT creator Mason Rothschild for trademark infringement as Rothschild had created a virtual series of purses termed ‘MetaBirkins’. The NFT bags were designed similar to the popular Hermès’ BIRKIN bag design covered in various furs.

The MetaBirkin NFTs sold for huge amounts earning more than 1 million USD. Hermes won the case and the jury awarded Hermes with roughly $133000 damages out of which $110000 were profits from the sales of the NFT and the additional $23000 for cybersquatting on the website. This verdict essentially confirms that trademark rights for physical items would also apply to digital goods and NFT’s. This decision is very likely to have a significant impact on how fashion brands & individual creators approach NFT’s in the future.

Jurisdictional challenges:

Since the concept of Metaverse transcends all boundaries and is not confined to a particular territory, it poses a complex legal landscape regarding jurisdiction. Indian courts have applied “long-arm jurisdiction” to address digital network-related disputes. For example, in the case of Swami Ramdev v. Facebook, the court clarified the concept of a ‘computer network’ to include the Delhi High Court’s jurisdiction for granting a global injunction. However, if an Indian brand’s trademark is, for example, infringed in Singapore, the applicability of this approach is uncertain. In cases such as World Wrestling Entertainment v. Reshma Collection, the Delhi Court determined jurisdiction in e-commerce disputes to be based on the buyer’s place of residence, specifically for trademark and copyright disputes. The principle of ‘long-arm jurisdiction,’ as applied in the physical world, is still in its infancy in the virtual realm. Determining jurisdiction proves to be a major challenge in such cases, and only time will have to provide a viable solution.

Licensing and authorised use:

The extension of real-world trademark licences into virtual environments raises questions about the scope and applicability of such licences. It is imperative to define whether a licence for a brand in the physical world automatically extends to the Metaverse, necessitating careful contractual considerations.

Unauthorised use of trademarks:

The Metaverse is particularly vulnerable to unauthorised use of trademarks, counterfeiting, and misrepresentation. With avatars donning branded goods and services, deciphering the legal implications of these virtual products becomes a unique challenge.

Nike filed a lawsuit against StockX for trademark infringement related to StockX’s sale of NFTs representing Nike’s trademarked sneakers stored in StockX’s “vault.” The dispute expanded to include challenges to the authenticity of products on StockX. Nike revealed that a collector bought 38 pairs of sneakers from StockX, later discovering they were counterfeit. Nike sued StockX for using its trademarks in NFTs and raised concerns about fake products.

Role of intermediaries:

Metaverse creators, akin to social media platforms, may be considered intermediaries. Understanding their role, responsibilities, and potential liabilities in trademark infringement is crucial in upholding the rule of law in the virtual world.

As the Metaverse presents these multifaceted challenges, it requires a comprehensive legal framework to ensure trademark protection and enforcement. These concerns collectively demand the attention of lawmakers, businesses, and legal experts to create and maintain a robust system for the Metaverse.

SUGGESTIONS TO REDUCE THE LIKELIHOOD OF TRADEMARK INFRINGEMENT

Extending trademark protection to virtual replicas:

Proprietors of Trademarks are urged to encompass their brands in the Metaverse. This approach should mirror real-world contracts that are enforceable in the virtual realm, reinforcing their rights over virtual reproductions of their intellectual property. In order to reduce the infringement of trademarks in the metaverse the virtual duplicate of the product should also be covered by the trademark protection. The Trademarks Act, 1999 should be amended to extend the rights of the owner in the Metaverse as well.

The role of ‘Terms of Service’ agreements:

Implementing robust ‘Terms of Service’ agreements can safeguard brand protection in the Metaverse. These agreements can regulate usage, endorsement, and sponsorship functions, ensuring that trademarks are utilised in a manner consistent with their real-world counterparts.

Policing intellectual property in the Metaverse:

Trademark owners must vigilantly monitor their intellectual property within the Metaverse. Prompt detection of trademark infringements and immediate action through cease-and-desist measures can mitigate potential harm.

Valuation and management of virtual trademarks:

Valuation and efficient management of virtual trademarks become vital. Companies need to adopt comprehensive strategies to ascertain the worth of their Metaverse trademarks and administer them effectively to secure their brand’s integrity.

CONCLUSION

As we navigate the uncharted territory of the metaverse, a proactive and collaborative approach to addressing intellectual property concerns will be vital. By addressing these challenges head-on, we can unlock the full potential of the metaverse as a vibrant and innovative digital frontier while safeguarding the rights and interests of creators, brands, and consumers alike. Brands must adapt through multiclass registration, extending real-world trademarks, and proactive policing.

It is imperative for brand owners and legal practitioners to remain vigilant and adapt to the ever-changing landscape of this virtual frontier to protect and uphold the integrity of trademarks effectively. The Metaverse offers opportunities and challenges, and it is incumbent upon stakeholders to navigate these complexities while safeguarding their intellectual property rights.

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