Navigating the Chinese Trademark Filing System For the Metaverse | #itsecurity | #infosec


The Metaverse trademark hype is on. Companies are increasingly focusing their attention on developing Metaverses, and big brands are entering the Metaverse through gaming, social networks and virtual commerce. They need to also secure the appropriate IP rights to protect their brands in this emerging new virtual market place. Fashion brands are thus filing trademark applications in the US and the EU to secure protection for the digital projection of their shoes and accessories. Their goal is to position themselves and secure IP rights in time to reap the economic benefits of this virtual commerce space.

While the technological and commercial developments around the Metaverse are moving at a fast pace, the law is lagging. The trademark systems of the US and the EU are somewhat malleable to adaptation, allowing new filings to cover the exact goods and services to be offered and protected in Metaverse, but China struggles to cope with change. The reason is all in the DNA of the Chinese filing system. The Chinese trademark system is characterized by first-to-file and strict formalism in the selection and designation of goods and services from a classes/sub-classes structure with rigid descriptions. This formalistic system does not provide room for quick adaptation. Filing trademarks in China for the Metaverse can therefore be very challenging, because there are no goods or service descriptions that clearly suit the purpose.

This blog post highlights some of the challenges, strategies and goals of foreign fashion brands seeking protection of their trademarks in the Metaverse in China.

Challenges in Filing Marks in the Metaverse

Foreign brands, compelled by the need to secure a consistent global portfolio for their Metaverses, are filing new trademarks in China for that purpose. Aside from the need for portfolio consistency, they also need to obtain legal protection in order to fully exploit the additional marketing opportunities that the Metaverse provides, especially when targeting younger consumers.

The most common classes for these new filings are classes 9, 35, 36, 41, 42, etc., covering goods and services related to Metaverse. Most of these filings are still pending because the first wave of filings for the Metaverse in China started only around the spring of 2022. Most filings are national Chinese filings rather than international ones.

The problem is that the goods and service descriptions must be chosen from those available in the Chinese Classification system. Currently, this system does not provide any description that would fully fit goods and services for the Metaverse. For example, you would not be able to get a trademark registered in class 9 in China with a description including wording like: “Downloadable virtual goods, namely, computer programs featuring footwear, clothing, headwear, eyewear, bags, sports bags, backpacks, sports equipment, art, toys and accessories for use online and in online virtual worlds.” Therefore, applicants would have to choose those standard descriptions that may be most abstractedly close to what they really would like to protect. Common Chinese filings for fashion marks in the metaverse in class 9 in China contain specifications like: “Software, head-mounted virtual reality device, electronic wallet, downloadable videos, virtual reality game software” — just to give a brief example.

It may be a challenge to make such filings work in formal trademark opposition, invalidation or infringement proceedings in China. Also, we do not really know whether the current trend of fashion brands to file standard goods/services from the Chinese classification that are abstractly close to possible metaverse usages of the client brands will indeed offer an extra and better protection. There is no clear direction or indication as to what examiners and enforcers will do with these new filings.

There are, however, a number of compelling reasons for foreign brands to keep filing in spite of these challenges.

Reasons for Filing Marks Customized to Brand Protection in the Metaverse

There is not as yet any decision to guide us, as most Metaverse decisions in China have so far concerned NFTs and copyright rather than trademarks. But there are reasons to believe that Chinese trademark examiners and judges will be more likely to use the new filing in class 9 (software and computer programs, online gaming, virtual reality devices) to protect a metaverse shoe for example, than the corresponding mark in class 25 (clothing, shoes and apparel). A metaverse shoe, for example, is essentially a computer program, so it is doubtful that an examiner or a judge would stretch the protection of a class 25 registrations to cover Metaverses. Considering that the trademark infringement lawsuits related to clothing and equipment in online gaming are normally based on trademarks in class 9 and/or 41, it is likely that the judge may also rely on the mark in class 9 and/or 41 for the infringement claim related to metaverse shoes and accessories.

Furthermore, considering the number of Metaverse-related trademark filings and the quick development of the Metaverse industry in China (at the end of 2021, over 12,000 trademarks related to the Metaverse were filed in China by over 1,500 companies), we are of the view that a foreign fashion brand may face significant disadvantages if it chose not to file such marks in China. Given that trademarks serve as a tool to market products in the Metaverse, their filing and registering will inform consumers that the brand is active in this new market segment and ready to compete. At the same time these filings will put up barriers against grabbers and infringers. Neglecting such filings will allow grabbers and infringers to occupy that open space, especially in light of the first-to-file rule in force in China. In China, it costs much less to file and prosecute a mark than to recover it.

Conclusions

Even if it is not yet clear whether new “Metaverse”-focused trademark filings in China will effectively work, given the formal rigidity of the Chinese trademark classification system, there are compelling reasons for a foreign fashion brand to file such trademarks. In the author’s experience, grabbers are already at work and will surely occupy the open space left by a reluctant foreign brand owner. This will delay the latter’s filings and will put them at a commercial disadvantage towards their foreign competitors with already secured filings. The cost and risk of filing marks that may not offer a full and perfect protection is much lower than the risks associated to not file such marks at all. The race is on.


© Copyright 2022 Squire Patton Boggs (US) LLP
National Law Review, Volume XII, Number 214



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