Are virtual and real-world products similar? It depends!

What has happened?

When asked whether virtual goods and their real-word counterparts are similar, the EU IP Office recently answered as any good lawyer should: it depends!

More specifically, the Office said that whether there is a finding of similarity will largely depend on the facts presented by the parties. In the Office’s view, virtual goods and their real-life counterparts are not necessarily similar. The parties need to present evidence that allows the Office to establish a sufficient link between the specific products in question.

The case concerned, among other things, whether cosmetics are similar to retail services in respect of virtual cosmetics. Based on the evidence on file, these products were found to be dissimilar. Hence, there was no likelihood of confusion even though the marks at issue were considered highly similar.

This can serve as a warning to trade mark owners to submit suitable evidence and/or reexamine their existing protection in the field of virtual goods (more on that further below).

Want to know more?

What was the case about?

The Italian fashion boutique Vinicio SRL applied to register the below sign as an EU trade mark (EUTM) for products in various classes, including “perfumery” and “cosmetics” in Class 3 as well as retail services in relation to various physical goods and “retail services in relation to: virtual goods, namely soaps, perfumery, essential oils, cosmetics […] for use in virtual reality” in Class 35.

The EUTM application was opposed by Artessence FCZ for all goods in Class 3 and several services in Class 35 (including those in the virtual space). The opposition was based on the below EUTM which covered, among other things, “cosmetics” and “perfumery” in Class 3.

Artessence argued that the mark applied for gave rise to a likelihood of confusion. Within its statement of grounds, Artessence elaborated on the similarity of signs. However, it did not present detailed arguments as to why eg cosmetics and retail services for virtual cosmetics should be considered similar.

What did the EUIPO find?

The EUIPO found that the opposition was well-founded in respect of all goods in Class 3 and most of the contested services in Class 35 (relating to the retail of real-world products). The marks were found to be highly similar on the phonetic level, at least for the French-speaking public (a fact which might come as a surprise to UK readers). Consequently, the opposition was upheld for all identical and similar real-world products.

However, the opposition was rejected with respect to the above-mentioned retail services related to virtual goods. The Office pointed out that it could only rely on well-known facts and the arguments submitted by the parties. In the Office’s view, there was no substantive evidence on file to find whether cosmetics and their virtual counterparts (or retail services related to them) were similar.

How does the EUIPO examine similarity of virtual and non-virtual products?

The present decision is a good starting point to recap the established EU principles for the comparison of virtual and real-world products.

As a reminder, when it comes to retail services, the EUIPO’s practice is that retail services concerning the sale of specific goods are similar to an average degree to the specific goods themselves. However, there is only a low degree of similarity between retail services concerning specific goods and other goods which are either highly similar or similar to those specific goods.

In the present case, the EUIPO explained that the goods covered by the earlier mark in Class 3 were the real-world counterparts of some of the virtual goods covered by the contested retail services in Class 35. However, this finding was “not per se sufficient for a finding of similarity.”

The Office went on to say, essentially, that in opposition proceedings involving virtual goods it will heavily rely on the factual evidence presented by the parties:

• According to the Office, virtual goods are not an entirely new phenomenon but have recently been subject to rapid technological advances. Consequently, the Office does not consider circumstances related to virtual goods as “well-known facts”. 

• This is important because, in inter partes proceedings, the Office’s examination of the case is restricted to (a) facts/arguments presented by the parties and (b) well-known facts, ie “facts which are likely to be known by anyone or which may be learned from generally accessible sources”. 

• Anything that does not follow from the evidence or arguments submitted by the parties or is not commonly known “should not be speculated on or extensively investigated ex officio”, said the Office.

For that reason, the EUIPO stressed the importance of the parties’ submissions in providing specific and substantiated information. In particular, the submissions will be relevant for the assessment of the well-established factors for comparing the products covered by the marks at issue. These factors include, inter alia, their nature, their intended purpose, their method of use and whether they are in competition or complementary. Additional factors relate to the distribution channels of the products concerned, or whether they are often sold in the same specialist sales outlets.

When it comes to the goods of the earlier mark and the contested retail services for virtual goods, the Office stated that it was not aware of any specific market practices in this field. By way of example, it was not a known fact and no evidence was provided as to “whether it is usual to trade virtual and real-world goods through the same distribution channels, or to what extent they could target the same relevant public”. Consequently, the Office considered these products dissimilar.

What’s the bigger picture?

The Office’s considerations in the present case are in line with and closely mirror its general guidelines regarding the comparison of virtual vs. real-world goods, which can be accessed here. 

We have seen several recent cases before the EUIPO that follow the same logic – with comparable results. In fact, only one in ten cases we examined held a similarity between virtual goods and their counterparts in the real word. Submitting evidence on similarity is therefore key.

While this guidance from the EUIPO is helpful, additional questions will surely arise. For instance, does the “direction” of alleged confusion make a difference? As things stand today, it may be more likely for a real-world brand to also offer virtual goods than the other way round. Does that impact the assessment?

Of course, this situation may change in the future and there are already examples of digital fashion that has later been sold as physical merchandise under the same brand. But is the public aware of such trends?

There is still much to be argued. And the principles surrounding virtual goods will certainly evolve over time before they may eventually be reviewed by the EU’s General Court and perhaps the ECJ.

What does this mean for you?

Each case will turn on its own facts. While this is a truism, it seems more relevant than ever with respect to EUIPO proceedings involving virtual goods. 

In such cases, it is advisable for the parties to gather and present sufficient facts as to why, in the specific case at hand, the virtual and real-life goods involved should be found similar. The Office expressly mentioned that the “substantiated information may have a decisive impact on the outcome of the case.” The information might be provided by pointing to instances where established fashion or luxury brands have indeed made a transition into the virtual space (or vice versa). Our series on brands, avatars and digital fashion may serve as inspiration (see here).

That being said, brand owners that do not want to take their chances might be better off simply applying for adequate protection for virtual goods, assuming of course that they could also see themselves marketing such products in the not too distant future - for more on that and appropriate filing strategies regarding virtual products, see here and here.