The Metaverse, Cryptos, NFTs and IP
By definition, the Metaverse is “a virtual reality space in which users can interact with an environment generated by computer and with other users.” As the metaverse continues to develop, we are quickly seeing its limitless potential. This virtual and immersive digital world parallels our own, contains digital representations of people, places and things and allows users to interact in the digital world as we have been doing in our physical world.
This includes creating a digital persona that can:
- actively engage in the Metaverse by socialising;
- sell and purchase virtual goods;
- participate in virtual marketplaces;
- enter virtual show rooms and stores;
- engage in virtual and augmented reality gaming; and
- attend virtual concerts and live events, amongst many other things.
Cryptocurrencies, being digital currencies, are used in the Metaverse as a payment method for customising avatars, investing in real estate opportunities and purchasing NFTs (unique digital assets with proof of exclusive individual ownership). While there are some challenges posed by cryptocurrency, including that it only exists digitally and there is no central issuing or regulating authority, with the system having to rely on cryptography to prevent counterfeiting and fraudulent transactions, the size of the cryptocurrency market is forecast to grow significantly.
One reason for this projected growth is the increased use of distributed ledger technology. Blockchain technology offers decentralised, fast, transparent and reliable ways to conduct financial technology.
Dynamic companies have realised the infinite opportunities brought about by the Metaverse and cryptocurrency, and are taking steps to protect their brands in this new space. The best way to do so is by way of trade mark rights, which grant the holder exclusive rights to use the brand, and to prevent others from using identical or similar trade marks.
The first step is to conduct a trade mark search to determine whether your Metaverse trade mark is clear for use and registration. Submitting your trade mark applications as soon as possible is key given that the registration timelines vary across different jurisdictions. It can take up to two years to secure a trade mark registration in South Africa.
Obtaining trade mark protection not only provides the owner with a valuable asset, but creates a rebuttable presumption that the owner holds the exclusive right to use its trade mark for its goods or services, and puts the owner in a stronger position to enforce against any unauthorised use of its trade mark in either the virtual world or the real world.
Whether you opt to use an existing trade mark in the Metaverse or create a new one entirely, it is important that your trade mark application contains the virtual goods and services of interest to your business. In June 2022, the European Union Intellectual Property Office (“EUIPO”) published classification advice. It made the point that the classes most commonly covered for NFTs and downloadable virtual goods are 09, 35 and 41. It went on to say that the terms “virtual goods” and “NFTs” on their own are not acceptable.
Rather, it is necessary to specify the relevant content for virtual goods and the type of digital items authenticated by the NFTs. The trade mark classes that feature in applications for the Metaverse, cryptocurrency and NFTs include:
- Class 09: downloadable virtual goods such as media files containing music, artwork and videos authenticated by NFTs; downloadable virtual reality and augmented reality software; cryptocurrency wallets; software and hardware for cryptocurrency mining.
- Class 35: retail store services featuring virtual goods such as virtual clothing and accessories; providing online marketplaces for buyers and sellers of block-chain based non-fungible assets; providing an online virtual environment for trading virtual art and virtual art tokens
- Class 36: financial services , namely providing a virtual currency for use by members of an online community via a global computer network; creation, issuance, distribution, trading, lending, exchange, storage and transmission of NFTs, digital assets, digital tokens, crypto-tokens, utility tokens, cryptocurrencies, digital currencies, and virtual currencies.
- Class 38: telecommunications services including electronic transmission of virtual and augmented reality content; online streaming of audio, video and digital media content
- Class 41: Entertainment services, namely providing virtual environments in which users can interact for recreational, leisure or entertainment purposes.
- Class 42: SaaS (software as a service) services featuring software for clearing, allocation, compliance, recordation and settlement of trading relating to bitcoins; on-line non downloadable virtual goods and NFTs; blockchain as a service [BaaS] for creating and managing NFTs; providing temporary use of non-downloadable software for enabling members of an on-line community to receive, access, spend and trade NFTs
It’s worth noting that although there is no consensus among IP offices worldwide regarding the description of virtual goods and related services, we have seen some guidance in response to the trends surrounding the metaverse. The 12th edition of the Nice Classification for trade marks, which will enter into force on 1 January 2023, already incorporates in class 09 “downloadable digital files authenticated by non-fungible tokens”. With regard to designs, the 14th edition of the Locarno Classification also entering into force on 1 January 2023 includes in class 14-04 ”augmented reality graphical user interfaces”.
Since the Metaverse and digital assets can be accessed from anywhere in the world, at any time, it is important to not only develop an IP protection strategy that is commercially sensible, but to also take measures to ensure that you are well prepared if a dispute arises. Implementing a watch service to monitor suspicious activity, effectively detect and timeously take down infringing content is an important layer to one’s brand protection strategy.
Some platforms have set up methods to detect, report and remove infringing activity. Not only is this an additional route that brand holders can pursue, but it is an effective method to quickly remove infringing content when compared to traditional methods of enforcement.
At a recent webinar, the EUIPO announced that in 2021, it registered 1227 applications relating to the NFTs and the Metaverse and in 2022, it registered 1157 for NFTs and 205 for the Metaverse. Looking at current trends, it appears that the industries predominantly in this space are:
- education; and
But this is likely to expand very soon.
We have seen Nike’s Jordan brand partnering with Fortnite allowing avatars to wear Nike branded sneakers as well as their partnership with Roblox, an online gaming platform, to create a virtual world called Nikeland. We have also seen Mason Rothschild successfully create and sell around 100 NFTs related to images of Hermes’ “Birkin” bags covered in fur, calling them “MetaBirkins” – which we all know Hermes’ was not too happy about. There’s Nikeland, The Sandbox, Ubuntuland, OpenSea, Decentraland – and no doubt many more metaverse platforms to come!
We know from experience that South African authorities tend to follow IP developments in the EU, UK and the USA closely. There’s no reason to think that they won’t do so in the context of the Metaverse, cryptocurrency and NFTs.
As the world enters the digital marketplace, and prepares for the limitless possibilities of the metaverse, our IP team at ENSafrica is always available to provide advice on an effective trade mark protection strategy – in whatever world the future holds.
Reviewed by Manisha Bugwandeen-Doorasamy, an Executive in ENSafrica’s IP department.
Senior Associate Trade Mark Attorney
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