Trade Marks in the Virtual World

Introduction

Digital technologies such as the metaverse, non-fungible tokens (NFTs), blockchain and augmented realities are directly influencing how we cultivate and protect various forms of intellectual property, including trade marks.

We have previously written about key steps for brand owners to consider for their trade mark strategy in the metaverse and since then, earlier this year, the 12th edition of the Nice Classification came into force. The Nice Classification is a globally recognised system used to classify trade mark registrations across 92 countries, including Australia.

In the latest edition, the Committee of Experts made several amendments to the classification, including adding express references to virtual goods and services. For example, class 9 now includes references to ‘downloadable digital files authenticated by [NFTs]’ and even ‘humanoid robots with artificial intelligence for preparing beverages’ (which may seem like a niche area of interest, but has already been utilised by Kendall Jenner, who used a robot mixologist to promote her tequila brand!).

The new edition led many IP offices around the world, including the European Union Intellectual Property Office (EUIPO), the United Kingdom Intellectual Property Office and United States Patent and Trademark Office to issue guidance on the trade mark classification of emerging technologies.

In August, IP Australia released its own guidance on ‘Virtual goods, metaverse, NFTs, and blockchain’ (Guidance). The Guidance and recent developments of the Nice Classification demonstrate how brands can enhance their digital footprint and protect their trade marks in the virtual world.

Unpacking the Guidance

The Guidance breaks down IP Australia’s position for registering trade marks in respect of the following emerging technologies:

• Virtual goods: Start by considering whether your virtual goods fall into class 9, which covers downloadable software and data, and so will be a good fit for many virtual goods. However, services relating to virtual goods may fall into other classes, such as class 35 for ‘online retail services of downloadable virtual clothing’. Applicants should be as specific as possible and avoid broad sweeping phrases like ‘virtual goods’ or ‘downloadable goods’, instead stipulating the exact nature of the virtual goods (such as software, image files, music or clothing).
• The metaverse and virtual environments: Colloquial terms such as ‘metaverse,’ ‘web 3’ and ‘virtual environments’ will generally be accepted, although the latter is preferred due to its broad application to multiple contexts. The impact of the service in the virtual environment plays a key role in determining the appropriate classification. Many services have a similar impact on consumers regardless of whether they are offered virtually or in person, such as retail shopping or recreational activities like chess or solitaire. However, sometimes the virtual nature of the service may serve a different purpose: a virtual bartender operating in an online environment may be considered a class 41 entertainment service, not a class 43 bar service.
• Non-fungible tokens (NFTs) and blockchain: While not considered goods or services, NFTs have significant commercial value in acting as unique digital identifiers to certify authenticity and ownership of assets, while the blockchains on which they rely are valuable digital databases, but IP regulation surrounding NFTs and blockchains has been slow to catch up. The Guidance now stipulates that trade mark applications for NFTs and blockchains must specify the exact nature of the goods or services being authenticated by the NFT or to which the blockchain technology relates. For example, an application may specify ‘downloadable digital image files authenticated by [NFTs]’ in class 9 or ‘computer programming of smart contracts on a blockchain’ in class 42. The more specificity, the better.

What does trade marking in the virtual world look like in practice?

In practice, the registration of virtual goods and services is proving to be complex, as illustrated recently by the EUIPO’s partial refusal of Burberry’s attempt to register a range of virtual products, including its iconic tartan plaid print. In an attempt to ensure we enter the metaverse in style, the luxury fashion brand tried to register its iconic figure mark for goods including ‘non-fungible tokens (NFTs)’, ‘downloadable interactive characters, avatars and skins’ and ‘virtual bags’. However, the EUIPO held that the mark lacked distinctiveness, noting that the assessment of the distinctive character of the mark should be based on the same principles applicable to three-dimensional (i.e. physical) marks.

Issues of infringement in this space are also complex. It remains unclear in Australia whether physical goods and in-person services will be considered the same as or similar to their virtual counterparts for the purposes of trade mark infringement. This very issue has already come up overseas:

• In January 2023, the Court of Rome found that Blockeras, a company selling NFT digital playing cards depicting famous Italian football players, infringed the trade marks of the Italian Juventus Football Club. Blockeras argued Juventus’ trade mark registrations did not extend to classes relevant to the sale of NFTs, but the Court found there was trade mark infringement and consumer confusion because Juventus was already using its marks in crypto and blockchain games, which the Court considered were based on similar technology to NFTs.
• Nike is also engaged in ongoing infringement proceedings against StockX, an online shoe retailer who minted NFTs tied to Nike shoes. In proceedings issued in February 2022, Nike is claiming that StockX’s use of Nike’s trade marks for its NFTs led consumers to believe the NFTs were authorised by Nike (with one unlucky sneaker collector purchasing 38 pairs!). A key issue in the proceeding will be whether StockX’s goods or services are similar to Nike’s, including in respect of StockX’s use of NFTs. The case also brings to light the potential for third parties to capitalise on the goodwill of reputable brands using NFTs. It will be worthwhile keeping a watchful eye on the outcome of this one.

While Australian authorities are yet to deal directly with these issues, overseas developments should serve as cautionary tales for brand owners about the challenges in the registration and use of virtual brands – even in cases where a brand, such as Burberry, has existing registrations in respect of parallel ‘real world’ goods and services.

What does all this mean for brand owners?

The Guidance offers helpful direction, but what does it ultimately mean for brand owners? Following the publication of the Guidance, we have expanded our recommendations on what steps brand owners should be taking in their trade mark strategies: