Basics: the surge of virtual goods and NFT-related trademarks
European Union, USA October 13 2022
As the numbers surrounding digital assets in the virtual worlds continue to climb, more and more companies are turning their attention to this new and promising marketplace. The market value of Metaverse is estimated to surpass $947.1 billion by 2030 [1], and as such, both established and new brands are paying close attention to the latest trends and developments in this area. The thrilling aspects of NFTs have gradually captured the attention of a wide spectrum of celebrities, including Kanye West, Snoop Dogg, Rihanna, and, most recently, Miley Cyrus. Sports leagues are also joining in, with opportunities for purchasing NFT trading cards, or attending the next generation of fantasy league events. Top performing athletes such as King James LeBron and Kevin Durant are not missing an opportunity to further develop their brands by offering fans new ways to connect with them through ownership of unique digital assets. A wide range of industries is eager to explore the benefits offered by developing virtual spaces.
Intellectual Property Offices around the world are increasingly receiving applications containing terms relating to virtual goods and non-fungible tokens (NFTs). According to Michael Kondoudis, a trademark, and patent advocate, between January and August of 2022, the United States Patent and Trademark Office (USPTO) received 3,600 trademark applications for crypto and NFT-related goods and services. This is a 2.3% hike from the registration of 2021, which stood at 3,516. In addition, Metaverse and Web3 trademark filings have also witnessed a rapid hike in popularity, with nearly 4,150 applications since January.
This surge in applications is likely because brand owners are uncertain if their existing trademark rights in physical goods will extend to and provide adequate protection for using their trademarks on virtual goods. Although this is a relatively new issue that trademark law is yet to address in its full scope, there is an immediate question that requires an answer: Should business owners file a trademark application to protect their goods and services in the virtual world?
Why trademark virtual goods?
The rise of immersive virtual worlds, such as Metaverse, that provide digital representations of individuals, places and things makes the potential reputation risk for established brands producing physical products and services highly apparent. Recently, we have seen many cases of luxury brands such as Hermès, Gucci, Louis Vuitton and Prada being recreated and sold in the virtual realm by individuals outside the respective fashion houses. This can become quite problematic, especially if these replications will apply for their own trademarks with the intention of misleading the consumers. Combatting such bad-faith applicants comes with potentially huge legal fees and a drain on corporate resources.
These brand infringement attempts can be expected to increase in the upcoming future, and the best advice for both established and emerging brands is to consider extending their trademark application by including virtual goods and services. In order to ensure adequate protection, a key consideration should be the choice of the classes of goods and services indicated in the trademark application.
Nice Classification System and NFT adjustments
Established by the 1957 Nice Agreement, NICE Classification defines 45 categories of goods and services, providing the basis for their assessment by intellectual property offices. The first 34 classes cover physical products (goods), and the remaining 11 classes contain services categories. Each class contains several thousand specific goods and services that also need to be defined on the trademark application. The choice of the right goods and services is arguably one of the most challenging parts of the trademark application process.
The number of the required classes of goods and services varies considerably between individual trademarks, depending on the scope of the brand’s operations. On average, owners of registered trademarks tend to register 2-3 classes; however, numerous well-diversified brands have registered their trademarks in over ten classes.
Virtual goods are most proper to Class 9 because they are treated as digital content or images. However, the term virtual goods on its own lacks clarity and precision, so it must be further specified by stating the content to which the virtual goods relate (e.g. downloadable virtual goods, namely, virtual clothing). The 12th edition of the Nice Classification is set to be adapted to this issue. In the new version, these new goods will be incorporated in class 9:
Experienced trademark lawyers can help you select the correct classification categories to protect your brand as you enter the digital marketplace. To learn more about trademark options for NFTs and other digital assets, contact an experienced trademark attorney today.
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