The metaverse, an almost endless virtual parallel world, has only really been on the rise for a few months – but is already having a major impact on our economy. Virtual markets, like those created by NFTs, can have huge consequences for companies in terms of products – both physical and digital – and their trademark protection. And as some high-profile current lawsuits show (see C&F Blog post on the metaverse, Part 1), the risk of trademark infringement in the virtual space exists even if you do not offer NFTs yourself.
Stumbling blocks in the Nice Classification
Anyone who wants to get in on the NFT action, however, should review the legal status of their trademark protection and, where possible, extend it. This applies to logos (pictorial marks/combination marks) as well as signs (word marks) or company names (company marks). It is not enough to simply register another class of goods, however; the trademark in question must be reinterpreted for the metaverse. Good to know: the EUIPO has already responded to the rapid development and has issued guidelines for the classification of virtual goods and NFTs. The relevant terms were added to the twelfth edition of the Nice Classification.
It is important to bear in mind, however, that an NFT itself cannot be registered as a trademark, as it is merely a “token”, which is based on a blockchain and linked to an asset. The marks associated with a particular NFT, on the other hand, can indeed be registered as trademarks – provided that the trademark is also used for the NFT in question.
Problems may arise if a third party uses a trademark that has not been registered for an NFT in the metaverse – a scenario that luxury label Hermès is currently facing in a legal dispute (see C&F Blog post, Part 1). In such cases, an examination must be made of whether trademark infringement has actually occurred in the metaverse.
Infringements in a virtual space
Another important question concerns trademarks’ scope of protection in the metaverse. This is where things get really interesting: trademarks are territorially limited IP rights – but in a virtual world they are available and active worldwide. Conflicts are inevitable. Even if a company wins an IP case before a German court, how and whether the ruling will be recognized in other countries remains unresolved. Another extremely important question is who can be held liable for infringements: the owner of an NFT – who it may not even be possible to find – or the operator of the metaverse? All these points could become part of case law in the short term or long term.
Copyrights and data protection
A look at other IP rights also shows what new challenges the virtual world brings. Take copyrights, for example. It is true that NFTs as such are not an intellectual creation, merely a computer-generated string of characters, but the work belonging to the NFT may be subject to copyright protection. It is a good idea for every buyer to find out which rights he or she is acquiring in detail, whether there are any usage restrictions, and whether licenses are necessary. In an NFT transaction, certain usage rights to the reference object are usually transferred to the buyer. Here it is worth looking at the details – especially the terms of use or licensing conditions, where all rights, restrictions, and remuneration rules should be set out.
New issues are also emerging in terms of data protection. Anyone who “enters” a metaverse, for example, should know what kinds of personal data are processed and how. Since huge sums may be made here in the future – financial service institution Bloomberg Intelligence estimates that the business will be worth around 800 billion US dollars by 2024 already – the protection of sensitive payment data is also growing in importance. Legally valid contracts, deeds, certificates – all this could be stored and used on blockchains in the future. Passports, medical records, or proof of vaccination are equally suitable. San Marino is leading the way: the small state in central Italy already introduced an NFT-based COVID vaccination passport registered on a public blockchain in July 2021. The technology promises better security when verifying the authenticity of the certificate.
What other challenges, especially legal ones, will companies and consumers face? If the metaverse had stars, the answer would lie in those. As it is, however, lawyers can only watch the rapid developments carefully and, if possible, help shape them.
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