The Metaverse and NFTs present exciting opportunities for businesses, creators and consumers. However, new technologies will inevitably bring challenges on the legal front. We have identified some recent decisions involving the Metaverse and NFTs and distilled below some takeaways from them.
The recent US court decision in Hermes v Mason Rothschild is the first of its kind to involve enforcement of real-word IP rights against infringements in the Metaverse.
Hermes had commenced legal action against Rothchild, a digital artist who launched a series of NFTs which he called “MetaBirkins” – a portmanteau of “Metaverse” and “Birkins”, the latter being a registered trade mark of Hermes. Each NFT was linked to a digital image of a colorful fur-covered bag which resembled Hermès’ famous Birkin bag.
Hermes’ case against Rothschild is especially interesting for two reasons. Firstly, whether MetaBirkins NFTs, which are source code-based digital items, can be considered similar to Hermes’ Birkin bags, as similarity in product is needed to support a finding of trade mark infringement. Secondly, the fact that Hermes and Rothschild are in different lines of business, as commonality in trade and consumers is needed for there to be a possibility of confusion – another factor in trade mark infringement. Despite these obstacles, Hermes succeeded in its bid (at least for now) to stop Rothschild’s use of the infringing mark “MetaBirkins”.
Success in each case turns on its facts and it remains to be seen if other trade mark owners would be able to replicate Hermes’ success in enforcing real-world IP rights in the Metaverse. The decision nonetheless suggests that IP rights would likely be enforced in the Metaverse in the same way as they would in the real world, with registration (where available for the IP in question) being an important factor to success.
Trade marks for digital goods and services
The usual method of securing brand protection in Singapore would be to register a trade mark in the relevant classes of goods and services offered under that brand. In a claim for trade mark infringement, the owner of a registered mark would then have to demonstrate that an infringer has used an identical or a similar mark to sell products which are identical or similar to those covered by the trade mark registration, and where they are similar, there is a likelihood of confusion among the relevant section of the public.
However, IP owners may find that this usual method could result in situations where the trade mark registration is insufficient against digital products, such as NFTs, which could be similar yet dissimilar at the same time.
For instance, while it could be argued that a digital image of a bag is similar to an actual bag, the assessment of similarity in the context of trade mark infringement requires various factors to be taken into account, such as customers and trade channels of the brand owner. An IP owner may therefore be caught in a situation where a court does not agree that a digital product is similar to one which exists in the real world, and that there is no risk of confusion amongst consumers.
There are other methods by which protection for a brand could extend to dissimilar or unrelated goods and services. These methods are an action under the tort of passing off, or proceedings on the basis that a mark is well-known in Singapore. However, it may not be easy for an IP owner to meet the high standards of proof that are needed to succeed in an action for passing off, or to establish that a brand is well-known.
IP owners who are keen to ensure trade mark protection and ease of enforcement against misuse of their brands in the Metaverse may therefore want to consider trade mark registrations for both physical and digital versions of their goods and services in order to ringfence and protect their brand position.
Copyright as an alternative
IP owners could also consider copyright as an alternative method of protection against unauthorized use of intellectual assets in the Metaverse.
As copyright protection does not apply to designs which can be commercially exploited, such as the design of the Birkin bag, it is likely for this reason that copyright infringement was not invoked by Hermès against Rothschild’s use of their bag design in his NFTs, resulting in Hermes’ focus on trade mark infringement in their lawsuit against Rothchild.
However, copyright is still a worthwhile avenue to consider for IP owners, as intellectual assets which constitute copyright works do not need to be registered before they can qualify for copyright protection. Furthermore, unlike trade mark infringement, legal action for copyright infringement does not require consideration of factors such as similarity of goods/services, misrepresentation or consumer confusion. It relies instead on whether or not there has been any use or reproduction of a copyright work without permission of the owner.
Jurisdiction and enforcement
Another case involving Metaverse and NFTs is the recent landmark decision of the Singapore high court in Janesh s/o Rajkumar v Unknown (“ChefPierre”).
The case involved a commercial dispute over a rare Bored Ape Yacht Club NFT which the claimant, a Singaporean NFT investor, used as collateral to borrow Ethereum from the defendant, chefpierre.eth, a Metaverse personality whose real-world identity was unknown.
The claimant had requested an extension of time for repayment which the defendant initially agreed to. The defendant later changed his mind and foreclosed on the NFT, which triggered a transaction to transfer the NFT to the defendant’s cryptocurrency wallet. The claimant made urgent applications to the Singapore courts for a worldwide proprietary injunction to stop the defendant from dealing with the NFT.
In granting the proprietary injunction to the claimant, the high court recognized that NFTs could be regarded as a form of property that can be protected by injunction. Despite the decentralized nature of blockchain and the defendant being known only by a pseudonym, the court held that it had jurisdiction to hear the claimant’s applications on the basis that the claimant was located and carried on business in Singapore and that the description of the defendant was sufficiently certain. Leave was also granted for cause papers and orders to be served out of jurisdiction on the defendant’s Twitter, Discord and cryptocurrency wallet accounts.
The court’s decision provides clarity on the nature of NFTs and its jurisdiction in relation to Metaverse-related disputes. While ease of enforcing a Singapore court order in a foreign jurisdiction will no doubt be an issue, the case nonetheless offers some certainty for parties looking for recourse in disputes involving the Metaverse and digital assets such as NFTs.