Protecting Your IP in the Metaverse | Fox Rothschild LLP | #itsecurity | #infosec


“Danger, Danger Will Robinson!” That was the warning of the guardian robot in the 60’s television show, Lost in Space. Intellectual property lawyers are giving similar warnings when it comes to protecting intellectual property assets in the Metaverse. The lines between fair use and infringement are being drawn by the courts now. See Judge Rackoff’s memorandum in Hermes Int’l v. Rothchild, Case No. 22-cv-384 (May 18, 2022) involving NFTs (non-fungible tokens) sold in the virtual world, which is discussed below.

The Metaverse in its most narrow sense is used to describe a network of 3-D virtual worlds where humans can socialize, learn, interact, experience and conduct business. Sometimes it is described as Web 3.0 because it is a virtual reality version of the internet. Sometimes it is used to capture other new technologies, such as NFT’s (non-fungible tokens) and blockchain. Lawyers need to learn more about the Metaverse and protect our clients’ assets.

The Metaverse allows us to enter a virtual world without leaving our homes or offices, and with new technology, without even leaving our computer screens. We are able to have a life like experience strolling through a virtual art gallery, attending a live concert, or shopping at a virtual mall. The clothing or food you purchase at the virtual mall today can be delivered in real time to your front door by drones or driverless vehicles. Today, you can wear a 3-D virtual reality headset to stroll through the virtual world, and use haptic gloves to experience the touch, heat, cold, movement, textures and pressures of the virtual world. In the near future, holographic technology through your computer will replace the special headsets.

Gamers often are well acquainted with the Metaverse through the growth of Fortnite and other universes into the Metaverse. Surgeons may experience the Metaverse as part of their learning with artificial intelligence enabled technology. Hotel workers during training may also learn though virtual reality platforms. For entertainment purposes, you are able to virtually experience walking on another planet, experiencing the creatures there, or even taking one home virtually as a pet requiring daily feeding. But lawyers are looking at the branding applications to replicate the commercial activity experienced in real life, but enhanced in virtual reality.  

Stroll through the virtual shopping mall with your pre-selected avatar programed with your seam length, shoulder and hip measurements for perfect sizing. You can even post your face or your enhanced image for the leisurely shopping spree. Whether you shop at a department store or a boutique, your favorite brands are calling you with discounted coupons and trademarked items. Enter a store and try on that stylish blazer or dress. See how it fits on the avatar and matches your flesh tones in the privacy of your home library. Pay for it in Google pay, cryptocurrency or credit card. Then have it delivered same day by the fulfillment side of this virtual world. Fulfillment may be by a franchisee who has that territory and delivers by drone or, in some planned communities, driverless vehicles. The warehouse closest to you inventories the item, or perhaps it is sent overnight by Amazon. This seamless transaction occurs over the brand name but involves many algorithms, patents, copyrights and trademarks to protect the integrity of they supply chain and fulfillment.

While still in the virtual mall, you and the friends you met there have worked up an appetite. You choose to try the virtual McDonald’s for their new special sandwich (especially if you are an 18-24 male, although that is changing). As a lawyer, you made a good legal decision because McDonald’s Corporation has recently filed at least 12 applications with the U.S. Patent and Trademark Office for Metaverse goods and services, including digital restaurants, cafes, and trademark applications for digital-physical products and services. Meta, the parent of Facebook, Microsoft, Epic Games and Roblox, among others, are filing to protect the virtual worlds they are creating.    

What are the best practices in protecting these rights and how can they be enforced?  Those on the cutting edge believe that while legislative changes follow the business practices, here the new business practices do not warrant new legislation. The existing statutory protections and common law decisions give the brands the protections they need to boldly go where no one has gone before. But then I asked the question, how to you catch copycats and infringers? Suppose someone in a rouge country establishes a copycat virtual universe, uses brand marks in an unauthorized way, collects payment under  the marks and does not deliver the goods, or delivers shoddy or knock-off goods? Does the anonymity of the internet encourage evil infringers to lure customers to their entrapping universes?  The answer is unclear. Internet service providers and ICANN can only do so much to control and prevent this potential for IP piracy and e-commerce fraud.

The current laws seem sufficient to protect the current piracy and fraud, but the metaverse is vast and ever expanding. It is never too early to protect your IP in these fast changing and expanding universes. Witness the difficult issues in Hermes v. Rothschild before Judge Rakoff in the Southern District of New York dealing with trademark infringement of NFTs in the virtual world. In December 2021, Rothschild created a collection of digital images titled “MetaBirkins” each of which depicted an image of the famous Hermes Birkin handbag. These images are converted to NFTs, numbered 0-99, and are selling for prices comparable to authentic Birkin handbags. Consumers buying the NFTs claim confusion as to the source and approval of Hermes over the digital images and brought suit claiming trademark infringement, trademark dilution and cybersquatting. Rothschild moved to dismiss claiming that the NFTs were art, and protected by the First Amendment. Judge Rakoff applied the Rogers Test used in the Second Circuit to determine whether the NFTs, which were claimed to pay homage to the Birkin handbag, were truly art or infringement. Judge Rakoff sided with Hermes at this stage of the case, concluding on a motion to dismiss that Hermes properly pleaded that the NFTs were “entirely intended to associate the “MetaBirkins” mark with the popularity and goodwill of the Hermes Birkin mark, rather than intending an artistic association.”

The novelty of NFTs, and the technology of the Metaverse will not be limited to this case. Look forward to many more judicial decisions in virtual universes where no one has gone before.

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