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Dr. Christian Tenkhoff

Salary Partner

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Inès Tribouillet

Counsel

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Autoren

Dr. Christian Tenkhoff

Salary Partner

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Inès Tribouillet

Counsel

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30. Januar 2023

January 2/2023 – 1 von 4 Insights

The Metaverse: brands, avatars and digital fashion - Part III (interdimensional infringement)

  • Briefing

If you are familiar with our series on brands, avatars and digital fashion (see here), you may have been left wondering about one question in particular: Can brand owners stop third parties from selling digital versions of their established physical goods? Can others be stopped from registering existing physical brands for virtual items?


Brands with reputation

In some of the above scenarios, the earlier brand may already be quite established on the market. This is because alluding to something instantly recognizable is often more attractive - be it for artistic or commercial reasons. Where the owner can show that their brand enjoys a 'reputation' within the meaning of EU trade mark law, they can invoke the additional protection granted to such marks against unfair advantage being taken of their reputation or the harm caused to the well-known brand. While such cases might appear straight forward at first, the challenge for brand owners is often to actually prove that any detriment has been caused (see, by way of example, the recent judgment of the General Court in Rolex vs PWT here). That being said, the vast majority of cases before the offices and courts are not based on the brands' reputation but rather deal with likelihood of confusion.


Likelihood of confusion

In general terms, a likelihood of confusion exists if consumers might believe that the products bearing a conflicting mark originate from the owner of the original brand. This will only be the case if the allegedly infringing mark is at least similar to the earlier brand and, in addition, if the offered products are identical or similar to the goods/services for which the brand is registered. The strength of the earlier brand also plays an important role.

There is some interdependence between the above-mentioned factors (i.e. the similarity of signs, the similarity of goods/services and the strength of the earlier brand). Accordingly, a lesser degree of similarity between the goods or services may be offset by a higher degree of similarity between the marks.

Assuming a normal scope of protection and a highly similar mark being used/ applied for, the existence of an "interdimensional risk of confusion" will largely depend on the degree of similarity between physical and virtual goods.


Identity of products?

As our readers will know, trade marks are not protected in the abstract but in respect of the specific goods or services applied for (according to the so-called Nice Classification). In the world of fashion, for example, the goods "clothing, footwear and headwear" fall within Class 25. Since this specification does not explicitly state that the products are "physical", some have argued that Class 25 also covers virtual clothing.

However, it is questionable whether the courts and offices will follow this approach. First, the list of goods and services applied for is not necessarily open to include any type future technological developments. Second, there are systematic doubts as to whether virtual clothing, consisting of bits and bytes, can be categorized with their fabric counterparts in Class 25. Therefore, it is no surprise that the EUIPO declared that "virtual goods are proper to Class 9 because they are treated as digital content or images" (see our report here). So a shirt made from cotton will probably not be considered identical to a digital file or an NFT that can be equipped to an avatar (for additional information on NFTs, click here).


Interdimensional similarity

Where the products are not identical, a number of factors exist to determine whether they can still be considered similar. Those factors include the nature and method of use of the products and whether they are in competition with each other. Other criteria involve the distribution channels of the goods concerned and the usual commercial origin. So what does that mean for our interdimensional comparison?

  • The nature of physical and virtual goods is arguably different as one is made from fabric and the other exists merely digitally.
  • The purpose could be considered similar, since both items are intended to cover a (physical or digital) body. But of course, only one of the items is meant to provide warmth or protect from weather conditions.
  • The method of use also differs slightly because, in real life, we have to tediously put on the clothes we want to wear, whereas in a virtual surrounding we choose and select the look of the avatar by the click of a mouse.
  • For most intents and purposes, virtual and physical clothing are probably not in competition with each. However, it may well be that a consumer chooses a virtual sneaker over a physical one when feeling the urge to express a new style or the desire to treat themselves to a new gadget.
  • For the time being, the distribution channels largely remain different. Offline purchases of clothing in local stores, especially, differ from purchases of virtual clothes in options menus in one of the virtual worlds. But even online purchases of IRL clothing is not the same thing as downloading a new 'skin', as shipping is a necessary intermediate step. Nonetheless, it is fair to assume that with the emerging Metaverse, the separation between the digital and the physical will be blurred. Already today, there is a trend allowing consumers to purchase a virtual good and receive a corresponding physical good and vice-versa (so-called "digital twins" or "phygital" experiences).
  • The 'usual commercial origin' of physical vs. digital clothing may experience an important shift as well. As established fashion brands continue to explore the virtual space and launch collaborations with digital artists or gaming platforms, there may be a point in time when digital and physical fashion items indeed "typically" originate from the same source.

But will consumers really believe that the owner of the original (physical) brand is responsible for the quality or controls the issuance of virtual items bearing the same brand or being offered under a comparable mark? As you might expect, this will depend on a case by case analysis.


Recent cases of trade mark offices and courts

There are several pending trade mark cases concerning a clash of the physical with the virtual world (see, for instance, our take on the "Metabirkin" case from here). But the case law is only slowly emerging. Below are two recent highlights that our readers should have on their radar:

Last year, the Rome Court of First Instance made one of the first European rulings on the likelihood of confusion in infringement proceedings concerning NFTs.

  • The defendant offered NFTs representing collectable cards, which contained / were offered in connection with, among others, the mark "JUVE". According to the Court, this activity infringed the trade mark rights of the Italian football club. The Court held that the marks owned by Juventus were well known not only in Italy but also worldwide. As such, there was a high risk that the public might believe that the unauthorised NFT cards were associated with the football club, especially in light of the club’s recent expansion into the field of crypto and blockchain games and subsequent activity in the same commercial sector as the contested goods.
  • The defendant’s claim that the depiction of the jersey was justified by the club’s notoriety was rejected by the court on the grounds that the NFTs did not serve any scientific, educational or other necessary purpose.
  • While the Court seemingly had no concerns assuming similarity of goods, it is important to bear in mind that (a) the earlier marks have been regarded as well-known (which results in a broad scope of protection), (b) the earlier marks also covered downloadable electronic publications and (c) Juventus had already taken on commercial activities in the web3 space.

The U.S. Patent and Trademark Office (USPTO) issued an office action against the application for the mark "GUCCI" by an apparently unrelated party, on the grounds that the mark was similar to the well-known GUCCI brand and that consumers would likely be confused.

  • The mark in question had been applied for, inter alia, "Downloadable virtual goods, namely, computer programs featuring footwear, clothing, headwear, eyewear, handbags, laptop bags, backpacks, luggage, briefcases, art, toys, jewelry, watches, hair accessories, pet collars, accessories and charms for use in online virtual worlds" in Class 9 and "Retail store services featuring virtual goods, namely, footwear, clothing, headwear, eyewear, handbags, laptop bags, backpacks, luggage, briefcases, art, toys, jewelry, watches, hair accessories, pet collars, accessories and charms for use in online virtual worlds" in Class 35.
  • The Office cited several prior "GUCCI" trade marks with protection for, among other things, shoes and boots” in Class 25, "watches" in Class 14 and "retail store and retail outlet store services featuring clothing, footwear, handbags, luggage, small leather goods, jewelry, watches, eyewear, fragrances, and accessories; online retail stores featuring clothing, footwear, handbags, luggage, small leather goods, jewelry, watches, eyewear, fragrances and accessories.” in Class 35.
  • As regards the comparison of products, the Office noted that the retail services of the earlier marks "presumably encompasses all services of the type described, including applicant’s more narrow retail store services featuring virtual goods in these categories"
  • Moreover, the Office recognised that luxury brands, including Gucci, are selling virtual versions of their physical goods in virtual worlds. The Office quoted an article, according to which Gucci has been "particularly active in the metaverse, most recently with the release of a set of NFTs called Gucci Grail. Minted on the ethereum blockchain, this is the result of a collaboration between" the brand's creative director and a “fictional 'famed digital craftsman' Wagmi-san".

For the time being, it seems that the strength of the earlier mark as well as the market activity of its owner will be among the decisive factors in cases of interdimensional confusion. This is in line with comments from the EUIPO, according to which the Office will rely particularly on the factual submissions filed by the parties in cases involving less known virtual territories. If brand owners decide against filing specific trade marks covering virtual products, they should nonetheless devise a strategy on how to effectively combat infringers in the web3 space and the broader Metaverse.

The authors would like to thank Ms. Sylvia Burgess-Tate and Mr. Philipp Grotkamp for their assistance in preparing this article.

If you enjoyed this content, please consider subscribing to our regular updates. We provide Taylor-made news on the Metaverse, Web3, NFTs, blockchain technology, cryptocurrencies and much more.

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