30 January 2023
January 2/2023 – 1 of 4 Insights
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?
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.
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.
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).
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?
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.
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 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.
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.
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