The Metaverse brand hype is on. Companies are increasingly focusing their attention on the development of Metaverses, and major brands are entering the Metaverse through games, social networks and virtual commerce. They must also obtain the appropriate intellectual property rights to protect their brands in this new emerging virtual market. Fashion brands are filing trademark applications in the United States and the EU to ensure protection for the digital projection of their shoes and accessories. Their goal is to position themselves and secure intellectual property rights in time to reap the economic benefits of this virtual commerce space.
While technological and business developments around the metaverse move at a rapid pace, the law is lagging behind. US and EU trademark systems are somewhat malleable to adaptation, allowing new filings to cover the exact goods and services to be offered and protected in Metaverse, but China is struggling to cope to change. The reason is in the DNA of the Chinese filing system. The Chinese trademark system is characterized by a strict, first-to-file formalism in the selection and designation of goods and services from a class/subclass structure with rigid descriptions. This formalistic system does not allow rapid adaptation. Filing trademarks in China for the Metaverse can therefore be very difficult, as there are no product or service descriptions that clearly fit the purpose.
This blog post sheds light on some of the challenges, strategies and goals of foreign fashion brands seeking to protect their brands in the metaverse in China.
Metaverse Trademark Challenges
Foreign brands, constrained by the need to ensure a cohesive global portfolio for their metaverses, are filing new brands in China for this purpose. Along with the need for portfolio consistency, they also need to obtain legal protection in order to fully exploit the additional marketing opportunities that the metaverse offers, especially when targeting younger consumers.
The most common classes for these new filings are classes 9, 35, 36, 41, 42, etc., covering Metaverse-related goods and services. Most of these filings are still pending as the first wave of filings for the Metaverse in China did not begin until around spring 2022. Most of the filings are domestic Chinese rather than international filings.
The problem is that descriptions of goods and services must be chosen from those available in the Chinese classification system. Currently, this system does not provide any description that would fully correspond to goods and services for the metaverse. For example, you wouldn’t be able to get a class 9 registered trademark in China with a description including wording like: “Downloadable virtual goods, namely, computer programs featuring footwear, clothing, headgear, eyewear, bags, sports bags, backpacks, sports equipment, artwork , toys and accessories for use online and in online virtual worlds.“Therefore, applicants should choose the standard descriptions that might be closest abstractly to what they would really like to protect. Common Chinese repositories for fashion brands in China’s Class 9 Metaverse contain specifications such as: “Software, virtual reality headset, electronic wallet, downloadable videos, virtual reality game software” – just to give a brief example.
It can be difficult to get these filings to work in formal trademark opposition, invalidation or infringement proceedings in China. Also, we do not really know if the current tendency of fashion brands to register standard goods/services of the Chinese classification which are abstractly close to the possible metaverse usages of client brands will indeed offer additional and better protection. There is no clear direction or indication as to what reviewers and enforcers will do with these new filings.
There are, however, a number of compelling reasons for foreign trademarks to continue filing despite these challenges.
Reasons to File Custom Trademarks for Brand Protection in the Metaverse
There’s no ruling yet to guide us, as most Metaverse rulings in China so far have concerned NFTs and copyright rather than trademarks. But there are reasons to think that Chinese trademark examiners and judges will be more likely to use the new Class 9 filing (computer software and programs, online games, virtual reality devices) to protect a metaverse shoe for example , than the corresponding mark in class 25 (clothing, footwear and clothing). A metaverse shoe, for example, is essentially a computer program, so an examiner or judge is unlikely to extend the protection of a class 25 registration to cover metaverses. Considering that trademark infringement suits related to online gaming apparel and equipment are normally based on Class 9 and/or 41 marks, it is likely that the judge may also rely on the Class 9 mark and/or or 41 for the infringement action related to Metaverse shoes and accessories.
In addition, considering the number of Metaverse-related trademark registrations and the rapid development of the Metaverse industry in China (as of the end of 2021, more than 12,000 Metaverse-related trademarks have been registered in China by more than 1 500 companies), we believe that a foreign fashion brand may face significant disadvantages if it chooses not to register such trademarks in China. Since trademarks serve as a tool to market products in the metaverse, filing and registering them will inform consumers that the brand is active in this new market segment and ready to compete. At the same time, these deposits will put up barriers against hoarders and offenders. Neglecting these deposits will allow hoarders and violators to occupy this open space, especially in light of China’s first-to-file rule. In China, it costs much less to file and sue a trademark than to recover it.
While it is not yet clear whether the new “metaverse”-focused trademark filings in China will work effectively, given the formal rigidity of China’s trademark classification system, there are compelling reasons that a trademark of foreign fashion files such trademarks. In the author’s experience, hoarders are already at work and will surely occupy the free space left by a reluctant foreign brand owner. This will delay their deposits and put them at a commercial disadvantage vis-à-vis their foreign competitors whose deposits are already secure. The cost and risk of filing marks that do not offer complete and perfect protection are far lower than the risks associated with not filing such marks at all. The race is on.
© Copyright 2022 Squire Patton Boggs (USA) LLPNational Law Review, Volume XII, Number 214