We’re at another technological crossroad. Like the Internet, blockchain technology is a game-changer with tremendous market-making potential. Currently, we’re in the intermediate stage. Big players are developing blockchain teams, and some are innovating on an exciting scale. But even we, as blockchain enthusiasts, admit that some ideas bubbling their way to the top are questionable.
However, one of the more interesting and indicative threads to watch at this point, legally speaking, is how luxury brands are responding to the new technology — specifically as it relates to intellectual property and trademarks.
Big Brands vs. Metaverse Retailers
Recently, Hermes sent a cease-and-desist letter to Mason Rothschild, creator of MetaBirkins, an NFT retailer operating in the metaverse. Open Sea also removed Rothschild’s digital purses, likely due to a DMCA takedown notice.
On the less lux side of the big-brand spectrum, Darden Restaurants, Olive Garden’s mothership, also shot a takedown request to OpenSea over an NFT collection depicting 880 of the restaurant’s outposts, claiming violation of trademarks.
These incidents raise the question: who holds certain intellectual property rights in the so-called metaverse? Are we on the verge of an NFT-related IP lawsuit surge? How far do current trademark protections extend to new technological landscapes?
NFTs and Intellectual Property
The NFT market is navigating various intellectual property issues. Since it’s not a traditional ownership model, boundaries are being tested. We’ve blogged about a few cases already, which you can read about here and here, but the main issues are this:
- Ownership: Who “owns” an NFT, and who can authorize resales and royalties?
- Contractual Rights: Do current contract standards cover NFT rights? Do creators, entertainers, publishers, distributors, or anyone in the creative pipeline need to revisit old contracts and update them for the new technology?
One of the questions NFT lawyers are currently knocking around is whether a company that’s not operating in the metaverse has the necessary rights to claim trademark infringement in virtual worlds?
To avoid hassles, many brands are in the process of registering their marks in the metaverse. Others, however, are testing the boundaries of their current registrations, licenses, and contracts.
What Are Metaverse NFT Minters Arguing?
Parties minting metaverse NFTs argue that certain brand rights don’t extend into virtual worlds, a claim rooted in the idea that trademark rights are tethered to a mark’s use “related to goods or services” in a given environment. In other words: virtual products don’t compete with actual ones; plus, tokens are a substantially different medium than products, so, the reasoning goes, the NFTs aren’t causing market confusion or diluting the brand.
But is it a good argument? Meh. Technically, it’s not outrageous. But it lacks teeth.
The Current Legal Bottom Line: Trademark Law As It Stands Now
To win trademark awsuits, plaintiffs must prove they have valid marks that the defendants appropriated to sell or advertise unauthorized goods or services. Judges typically consider:
- The strength of the mark
- Similarities between the two marks in question
- Product proximity; are the two marks used in the same public spaces and advertising avenues
- The likelihood of the plaintiff expanding a product line or service
- Evidence of consumer confusion
- The defendant’s intent in using the mark
- Quality of defendants product
- Consumer sophistication
Currently, major brands are still surveying the landscape and deciding how and if they’ll participate in the metaverse. Some analysts estimate virtual worlds will soon be a $1 trillion venture; others aren’t convinced.
One thing is certain: blockchain is here to stay, alongside NFTs. Sure, the collectible NFT market may fizzle at some point, but the technology is set to revolutionize various verticals, like ticketing and brand marketing.
Connect With an NFT Intellectual Property Lawyer
The Kelly Law Firm works with individuals, startups, and businesses on various NFT-related intellectual property matters. If you’re ready to consult with an attorney, get in touch.
