Fashion disputes in the Metaverse

The “Metaverse”: we have heard about it, we may know about it, but what happens when brands from the physical world start to appear without permission in a network of 3D virtual worlds?

Following on from our colleagues’ article concerning the Metaverse and implications for fashion brands, we take a look at the disputes arising from the use and sale of virtual fashion in the Metaverse.

A number of fashion brands are already engaged in this virtual world, producing wearable NFTs that users can purchase through individual avatars. Others, including Burberry and Louis Vuitton, have launched a collection of exclusive NFT wearables within their own online game in the Metaverse. However, whilst the use and sale of virtual fashion in the Metaverse creates a number of opportunities for brand owners, it also opens the door to a new kind of dispute concerning unauthorized virtual goods.

recent investigation conducted by the World Trade Mark Review has uncovered a large number of brands/ logos being sold for thousands of dollars on NFT marketplace OpenSea, without authorization. This is not the only platform brand owners need to be wary of in the Metaverse. Chanel, Cartier and Supreme have also encountered unauthorized luxury products for sale in the Roblox Metaverse, a platform where users can buy accessories, including unauthorized Chanel blazers and Cartier “love bracelets”.

Luxury brands are no strangers to the ongoing battle to tackle unauthorized and counterfeit goods in the physical world. However, copycat virtual products, if left unchallenged, also have the potential to dilute or tarnish a brand in the physical world – particularly given the accessibility of digital designer items in the Metaverse, which can be significantly cheaper and easier to acquire than their real world counterparts.

That said, not all NFTs are cheap. Luxury fashion house Hermès recently experienced an issue with NFTs inspired by their well-known Birkin bags. The “MetaBirkins” have accumulated a profit of around $450,000 to date, with the virtual bags selling for about 8 Ethereum on average (around $3,000). In a statement, Hermès said ”These NFTs infringe upon the intellectual property and trademark rights of Hermès and are an example of fake Hermès products in the Metaverse.”

These disputes raise questions about what activities in the Metaverse are actionable. Does current trademark protection for tangible goods cover virtual goods as well, or more specifically, does the legal protection of a physical bag extend to the virtual image of one online?

Famous fashion brands such as Hermès, Gucci or Louis Vuitton are likely to be able to rely on their widely recognized marks in a trademark infringement dispute. However, smaller fashion brands may struggle to do the same. In view of this, brands will want to ensure that the protection they have in the physical world is also enjoyed within the virtual Metaverse. Brands should keep one step ahead by protecting their marks for virtual aspects before any disputes can arise. This should make the process of challenging infringing use in the Metaverse much simpler.

Speed is of the essence, as Gucci and Prada have already seen. Unrelated third parties have filed trademark applications in the US for their well-known logos, seeking coverage for virtual goods. Both brands have stated that they will be challenging these applications. However, it is very clear how rapidly the virtual world is expanding and how quickly people are moving to purchase and protect these digital assets.

In most cases, the sale of a NFT does not give the purchaser any rights in the underlying asset or intellectual property. Whilst UK copyright legislation has not yet specifically addressed NFTs, it would appear that a digital fashion item which is the subject of a NFT could be protected as an “artistic work” provided all other requirements, including originality and authorship, are met. A creator’s ability to sue for copyright infringement will vary depending on the type of NFT concerned and whether the infringing NFT incorporates a digital copy of the underlying asset or not. These approaches are yet to be discussed in the UK courts.

Brands should also monitor virtual platforms as part of their online brand protection strategy, so as to be aware of infringing digital uses within the Metaverse. It will be interesting to see if Metaverse operators implement internal rules and policies to tackle infringing activity, as other online platforms such as YouTube and Amazon have done, to help shut down infringing digital uses promptly.

The Metaverse is still very much developing and it will be interesting to see the outcome of these disputes in practice. In any event, there is no doubt that the Metaverse will impact brand owners, whether or not they choose to engage in both the physical and virtual world!

Reposted with permission