Indonesia - Questions Brands Should Be Asking About Trade Mark Protection In The Metaverse.

Trade marks protection in the metaverse

With an estimated value of USD$800 billion by 2024[1] and set to generate U$S1 trillion in revenue[2 ] the metaverse is seen as the ‘New Internet’ and an innovative medium for brands to connect with consumers. For businesses keen to capitalise on the commercial value of the metaverse, this note aims to highlight what the metaverse means for brands and whether additional trade mark rights are needed to exercise brand control.

What are the opportunities for brands?

The metaverse is still relatively new and consumers and companies are both experimenting with engagement across various platforms including Decentraland, The Sandbox and Roblox. With the latter reportedly attracting nearly 50 million daily active users and more than 5.8 billion virtual items being acquired (paid and free).[3]

Enabled by virtual and augmented reality technologies, consumers can experience brands through virtual concept stores, sports and musical events. For example, Decentraland’s Metaverse Fashion Week in March 2022 received more industry attention than any previous digital fashion event.[4 ] NFTs have also become mainstream digital assets, despite the crypto volatility, with some commanding higher prices than the physical equivalent. Beyond fashion, IKEA’s ‘Studio’ allows shoppers to visualise how products look in their homes[5 ]. Brands like iTechArt and Oculus VR which produce VR headsets for immersive use in digital spaces aim to improve user experience, to encourage experiences like that of IKEA.

Even governments have jumped on board the metaverse bandwagon, with Seoul’s metropolitan government planning to build a 3.9 billion-won metaverse platform to allow citizens to access public services virtually.[6 ] In Thailand, the Tourism Authority launched the Amazing Thailand Metaverse for tourists to explore virtual durian orchards, collect NFTs and vouchers that can be used in the real world[7 ].

With inflationary pressures in 2022 and wild fluctuations in cryptocurrency, some may ask if the interest in the metaverse is sustainable in the short to medium term. In the longer term, if public services and infrastructure improves, allowing more everyday users, then more brands beyond the fashion, cosmetic or sports segments can follow suit with the likes of the above examples. According to McKinsey, the economic value of the metaverse could potentially be worth $5 trillion by 2030.[8]

Who controls a metaverse and in which jurisdiction?

As brands are deciding their IP strategy in entering the metaverse, the preliminary questions to ask are who has control of the metaverse, and which jurisdictions are relevant?

With regards to control, this refers to the extent a metaverse is centralised. The more control an organising entity, potentially such as Meta in Horizon Worlds, the more likely policies such as takedown mechanisms will be in place to enforce against IP infringers. In contrast, in a decentralized metaverse such as Decentraland, there is no single ownership, which may make it harder to formulate policies which allow brand owners to participate whilst ensuring that their IP is protected, and brand infringements can be dealt with.

Will the metaverse in the future will be a single digital universe? A user ideally should be able to travel between the Meta version of the Metaverse into the Microsoft version seamlessly. [9]The Metaverse will be something like the Internet is today, without boundaries. The question then arises how brands protect themselves in this new single digital environment? Will brands be offered a single takedown mechanism for the whole Metaverse? Which service providers will be responsible for the potential infringing actions taking place in the Metaverse?

Currently, some platforms have takedown mechanisms for enforcement against infringements – for example OpenSea has been quick to take down listings based on brand owners’ complaints. However, the infringer may continue to sell the virtual items and list the virtual items under different names or on other platforms. If one can trace the infringer to the home country, would traditional court action be possible in that home country? In addition, can brand owners sue the owner or controller of a metaverse for intermediary liability? If so, which jurisdiction is the controller of the metaverse situate, if centralized? There are many questions to be considered for brand owners at the moment.

Do brands need new metaverse-focussed trade mark applications?

Can brand owners simply rely on their existing trade mark rights to enforce in the Metaverse without making a separate filing for the virtual goods and services? While there are ongoing cases in the US relying on traditional trade mark rights, there is still no clear decision in many jurisdictions, although there is an argument with the blurring of the physical and digital space, one should be able to rely on existing rights. Despite this uncertainty, there has been an increase in metaverse related filings.

In February 2022, it was reported that there were 16,000 Chinese applications for trademark containing “METAVERSE” or “元宇宙” (YUAN YU ZHOU/Metaverse in Chinese) in every classes[10 ]. It is clear that the CNIPA decides to prevent abuse of the registration containing the terms, which can be further reflected in the consequent rejection in May 2022 to the applications for trademark containing the Chinese term “元宇宙” (YUAN YU ZHOU /Metaverse in CC) filed by the leading technology companies such as Tencent, Alibaba, iQiyi, and NetEase. [1 1 ] It is very clear that the CNIPA only allows the” real” trademark with distinctiveness equivalent to that in virtual world for registration to protect the interests in Metaverse. In the US, over 4,000 NFT-related trade mark applications were filed with the USPTO in the period 1 January to 31 May 2022. At the EUIPO, there has been a similar increase in interest with new applications filed in 2022 by football club Inter Milan, luxury sports car Maserati and energy drink brand Red Bull.

These applications are typically filed in class 9 for “downloadable virtual goods including NFTs”, class 35 for “retail stores for virtual goods”, class 41 for “entertainment services in virtual environments”. Depending on the level of brand engagement, broader protection may also cover class 36 for financial services relating to virtual currencies, class 38 for telecommunication services in relation to virtual communities, class 42 for non-downloadable computer software for virtual goods creation/trade in NFTs.

With the rise in metaverse related filings, local trade mark registries are also reviewing and updating the new classification of goods and services. For example, in Thailand, the Trade Marks Office Guidelines has been updated to reflect some of these new terms and in practice the Vietnam Trade Marks Office has also accepted such specification. However, in Indonesia, metaverse related goods and services are not yet standard items. Therefore, one option is to try and fit the terms into locally accepted specifications until new specifications are made locally. In China, as long as a brand’s Chinese national registration covers all the subclasses of traditional goods and services that align with the relevant Metaverse classes, this should provide sufficient coverage without incurring extra costs from new filings.

Generally, for a brand to future proof their trade mark portfolio, it may make sense to extend trade mark rights in the key business markets and/or where the IP enforcement regime may not be as developed such that you would need to rely on trade mark registration for specific virtual specification. Brand owners should also continue to actively consider protection for 3D shape marks, sound marks (i.e., MP3), holograms, motion marks and multimedia marks as these may be more relevant in the audio visual sensory environment of the metaverse.

Brands will no doubt be keen on watching future developments in the metaverse and ensure their IP is protected. Having the correct strategy in place will be crucial for any brand looking to thrive in the ‘New Internet’ and exercise brand control.