HOW TO FUTURE-PROOF YOUR BRAND IN THE METAVERSE

This article is written by Kimaya Anavkar, a T.Y.LL.B. student at Kishinchand chellaram Law College.

Keywords: NFTs, Metaverse, Trademark Protection, Intellectual Property, Brand Protection, Digital Infringement, MetaBirkins

Abstract

The rapid expansion of the Metaverse and the proliferation of NFTs (Non-Fungible Tokens) present unprecedented challenges for traditional trademark protection. This article explores the critical intersection of digital assets and intellectual property law. We delve into how trademark infringement occurs in virtual worlds, analysing the concept of “likelihood of confusion” with digital goods. A detailed examination of the landmark Hermès v. Rothschild (“MetaBirkins”) case provides crucial insights into current legal thinking and the application of established legal principles to new technology.

Finally, we outline proactive strategies, including updating trademark classifications, to offer a practical guide for brands seeking to safeguard their identity in this new digital frontier. This is an essential analysis for understanding the future of brand protection in an increasingly virtual economy.

Introduction: What Are NFTs and Why Should Brands Care?

Imagine a digital world where you can walk around, interact with others, and even buy goods—not physical goods, but virtual ones for your digital avatar. This is the promise of the Metaverse. Now, imagine a unique, un-forgeable digital certificate that proves you own one of those virtual items. That’s a Non-Fungible Token, or NFT.

At its simplest, an NFT is a unit of data stored on a blockchain (a digital ledger) that certifies a digital asset to be unique and therefore not interchangeable. Think of it as a digital deed of ownership for anything from digital art to a virtual piece of clothing.

For decades, brands have built their reputation and value on trademarks—the names, logos, and symbols that distinguish their goods from others. But what happens when those trademarks enter the Metaverse? Suddenly, anyone with graphic design skills can create and sell a virtual t-shirt with a famous logo or a digital handbag that looks identical to a luxury original. This has become a major concern for brand identity. The value of a trademark lies in its exclusivity and the goodwill associated with it. When unauthorized digital copies appear, it can dilute the brand’s value, confuse consumers, and divert revenue, creating a new and complex frontier for trademark protection.

Virtual Goods, Real Infringement

Trademark infringement, at its core, happens when the unauthorized use of a mark is likely to cause confusion among consumers about the source or sponsorship of the goods or services. The legal principles are old, but their application in the Metaverse is new.

The central legal test is the “likelihood of confusion.” In a virtual context, this question becomes: Would a reasonable consumer believe that the official brand (like Nike or Gucci) is behind the virtual sneakers or digital handbags being sold as NFTs?

For example, if an independent creator sells an NFT of a virtual jacket bearing the iconic ‘swoosh’ logo, consumers might mistakenly believe it’s an official digital product from Nike. This not only profits from Nike’s established reputation but can also harm it if the virtual product is of poor quality or is used in an unsavoury context. This is not a hypothetical scenario; brands are already fighting these battles in court, forcing the legal system to adapt long-standing rules to digital pixels.

Landmark Litigation: The MetaBirkins Case and Its Aftermath

One of the most significant legal battles shaping this area is Hermès International v. Mason Rothschild. This case is a crucial illustration for understanding how courts are approaching digital trademark issues.

• The Background: Hermès is the famous French luxury brand known for its exclusive and expensive Birkin handbags. Mason Rothschild, a digital artist, created a collection of 100 NFTs called “MetaBirkins.” These were digital images of the iconic Birkin bag design, but covered in colourful, furry textures. He sold them for significant sums of money.
• The Legal Conflict: Hermès sued Rothschild for trademark infringement. Their argument was simple: Rothschild was using the “Birkin” name and its famous design to sell digital products, creating the false impression that Hermès was involved in this new venture. Rothschild’s defence was that the MetaBirkins were artworks, protected by free speech principles, much like Andy Warhol’s famous paintings of Campbell’s soup cans.
• The Court’s Ruling: A U.S. federal court sided with Hermès. The jury found that Rothschild was not merely creating expressive art; he was using the Birkin trademark to sell a virtual product, which directly competed with Hermès’ own potential entry into the digital market. The court determined that the use of the brand name was not artistically necessary and, crucially, that it created a likelihood of confusion among consumers.
• The Precedent: The MetaBirkins case was a landmark decision. It sent a clear message that trademark law does not stop at the edge of the physical world. It affirmed that brands have legitimate rights to control how their marks are used on digital goods and that the “it’s just art” defence has its limits when a product is being sold commercially using another’s brand identity.

Proactive Strategies for Brand Protection

For law students and brands alike, the key takeaway is the need for a proactive, forward-thinking intellectual property (IP) strategy. Waiting for an infringement to happen is no longer enough. Here are practical steps that brands should be taking:

1. Update Trademark Filings: Traditionally, a brand like a car company would file trademarks for “automobiles” (Class 12) or a clothing company for “apparel” (Class 25). To protect a brand in the Metaverse, filings must be expanded to include virtual goods and services. The key international classifications to consider are:
   • Class 9: For downloadable virtual goods, such as clothing, cars, and accessories for use in online virtual worlds.
   • Class 35: For retail store services featuring virtual goods.
   • Class 41: For entertainment services, namely, providing non-downloadable virtual goods in virtual environments for entertainment purposes.
2. Monitor and Enforce: Brands must actively monitor major NFT marketplaces (like OpenSea, Rarible) and popular Metaverse platforms (like Decentraland, The Sandbox) for unauthorized uses of their trademarks. This involves using brand monitoring software and legal teams to issue takedown notices and, if necessary, cease-and-desist letters.
3. Establish a Digital Presence: The best defence is a good offence. By launching their own official NFT collections or establishing a presence in the Metaverse, brands can saturate the market with authentic products. This makes it easier for consumers to distinguish between official and unauthorized virtual goods, thereby reducing the likelihood of confusion.

Conclusion: The Future of Trademarks is Digital

The rise of NFTs and the Metaverse represents a paradigm shift, but it does not erase decades of established intellectual property law. The core principles of trademark protection—preventing consumer confusion and protecting brand goodwill—remain as relevant as ever. Cases like MetaBirkins demonstrate that courts are willing to apply these principles to protect brands in the digital realm. For businesses, this new landscape presents both challenges and opportunities. The challenge lies in the sheer scale and speed of the virtual world.

The opportunity lies in creating new revenue streams and deeper brand engagement. Ultimately, any modern intellectual property strategy that fails to account for NFTs and the Metaverse is fundamentally incomplete. Protecting a brand’s future requires protecting its pixels today.

Frequently Asked Questions (FAQs)

1. Can I create an NFT of a famous brand’s logo and sell it?

Legally, this is highly risky. If you use a brand’s trademark (like their logo or name) in your NFT and sell it, the brand could sue you for trademark infringement. As seen in the MetaBirkins case, courts are likely to view this as profiting from the brand’s reputation and causing consumer confusion, rather than as artistic expression.

2. If I buy an NFT of a virtual Nike shoe, do I own the Nike trademark?

No. When you buy the NFT, you own the specific digital token that represents that virtual shoe. Your ownership will recorded on the blockchain. However, Nike still owns the overall trademark for its brand, logo, and designs. You have purchased a single licensed (or unlicensed) product, not the underlying intellectual property.

3. What is the main difference between copyright and trademark protection for an NFT?

This is a key legal distinction. Copyright protects the original artistic work itself—the image, the music, or the video associated with the NFT. It protects the creator of the art from having it copied. Trademark, on the other hand, protects the brand elements—like the logo or brand name—that indicate the source of the good. An NFT can involve both; an infringing NFT could feature copyrighted art that also uses a protected trademark without permission.

4. How is Indian law prepared to handle trademark disputes over NFTs and the Metaverse?

Currently, India does not have specific laws for NFTs or the Metaverse. However, courts can interpret and apply the existing legal framework, primarily the Trade Marks Act, 1999, and the Copyright Act, 1957, to these new technologies. Indian courts would likely rely on established principles like “likelihood of confusion” and “passing off” to resolve such disputes. We can expect this area of law to evolve rapidly as more cases come before Indian courts.