While society cannot yet live on different planets, we continue to create parallel [virtual] realities. The most recent of them is the metaverse, and similar to what has happened to other parallel realities such as video games and social media, the metaverse is being invaded by fashion brands. The new gems being mined are the non-fungible tokens (NFTs), which are already at the center of several trademark battles.
On an administrative level, unaffiliated individuals, aware of big brands’ interests in expanding their business to the metaverse, have reportedly engaged in trademark squatting by filing trademark applications with national trademark offices for virtual goods and services (mainly, in classes 09, 35, and 41). This is a bigger concern in countries where there is no “commercial use” requirement for registering a trademark, but this is nothing new for brands’ legal counsels who are already prepared to handle such cases, especially if the brand is already titleholder of similar trademark registrations in the same or similar classes.
It gets more challenging when brands take the battle to the judicial field, as the metaverse is quite speculative and the commercial nature of NFTs (art, certification, or product) has yet to be defined. This creates room for intricate legal arguments and leaves the parties at the mercy of the court. Although brands cannot afford a trial-and-error strategy, it is most likely that they will better understand how to properly enforce their trademark rights in this new virtual world as initial lawsuits run their course. Therefore, it is essential for anyone interested in the business of trademarks to pay close attention to the following first cases on the matter.
Hermès, one of the most exclusive luxury brands, has recently filed a trademark infringement and dilution lawsuit against the artist Mason Rothschild for creating and selling “MetaBirkins”, a collection of 100 NFTs depicting furry Birkin bags, and for extensively using the BIRKIN trademark in connection with the NFTs. Hermès asserts that the collection, which has already achieved a total of $1.1 million in sales, infringes the well-known BIRKIN trademark and trade dress. Mr. Rothschild, in defense, calls himself an artist and alleges that he is protected by fair use, based on the precedents set forth by Rogers v. Grimaldi and Dastar Corp. v. Twentieth Century Fox Film Corp. Hermès International, et al. v. Mason Rothschild, 1:22-cv-00384 (SDNY).
Moreover, Nike, a brand on the forefront of the metaverse with NIKELAND, has claimed trademark infringement and dilution, and unfair competition, in a lawsuit against StockX for the unauthorized offer of NFTs tied to images and physical versions of Nike sneakers. According to a statement from StockX, the NFTs would only represent proof of ownership of physical goods that customers can trade on their platform. However, for Nike, the NFTs would significantly differ from paper receipts because its trademark is not being used only in connection with the purchased shoe, but as a source designator. Nike, Inc. v. StockX LLC, 1:22-cv-00983 (SDNY).
Both Hermès’ and Nike’s claims touch upon the fact that, in addition to creating a likelihood of confusion among consumers, this unauthorized use by third parties could also undercut brands’ market for virtual goods. Additionally, although Nike mentions new trademark applications related to the metaverse, both brands also base their lawsuits on previously registered trademarks for physical products and retail services, which according to The Fashion Law, may indicate that, at first, “brands will likely be able to rely on existing rights in order to bring enforcement actions.”
It is too soon to tell how much of the population will participate in the metaverse. However, what we’ve seen from the past couple of years is that people are already consuming digital products bearing big brand names but which were created by unaffiliated individuals. Therefore, either more brands must start claiming their space in our new virtual realities—especially those based in countries with a commercial use requirement—or their efforts to enforce their trademark rights in the physical world may no longer be enough.