More guidance on trade marks and NFTs in the metaverse: INTA publishes white papers, UKIPO provides guidance for classification

Brand owners and legal practitioners all over the world still seek clarity concerning trade mark protection for metaverse and web3 related goods and services. Both the International Trademark Association (INTA) and the UK Intellectual Property Office (UKIPO) have recently provided guidance on how to deal with trade marks in the metaverse and non-fungible tokens (NFTs).

The INTA white papers

On 14 April 2023, the INTA published two white papers: “Trademarks in the Metaverse” and “Non-Fungible Tokens”. First and foremost, both white papers stress the need for harmonisation of the classification of trade marks in the metaverse and of NFTs. The papers further examine the challenges for brand owners in the context of the metaverse and recommend measures to address these challenges such as:

• guidelines for the courts (which include the possibility for courts to remain flexible in enforcing rights in the metaverse),
• educational materials,
• a call for new legal frameworks to be developed concerning NFTs as NFTs no longer fit into existing legal specifications.
  
  

The INTA‘s efforts are much to be welcomed, as the handling of trade mark protection for metaverse and web3 related goods/services is a global phenomenon. Legal practitioners and above all, trade mark owners, seek clarity. They have an interest in building up their international protection across jurisdictions in an orderly fashion. Nonetheless, it will take time for the cases to reach the courts before actual legal certainty can be obtained - and even then, views may differ between courts. In the meantime, getting specialists together to exchange views and establish the best preliminary practices is essential.

As far as harmonisation is concerned, the European Intellectual Property Office (EUIPO) made a start in June 2022, when it released some guidance on the classification of items relating to “virtual goods” and NFTs (see our insight here). The EUIPO's approach has now been set out in the 2023 edition of the “Trade mark and Design Guidelines”, which came into force on 31 March 2023 (Annex 6.25 “Downloadable goods and virtual goods”). The Guidelines state: “The terms downloadable goods and virtual goods lack clarity and precision per se and must be specified further, whether in Class 9 as goods or in relation to retail services in Class 35.”

The UKIPO guidance on NFTs and virtual goods

On 3 April 2023, the UKIPO published Practice Amendment Notice PAN 2/23 on “The classification of non-fungible tokens (NFTs), virtual goods, and services provided in the metaverse” (see here). The UKIPO, like authorities all over the world, saw a need for clarification: “Along with many other registering authorities, we have seen an increasing number of applications for trade mark specifications containing these terms. We have also received requests for guidance on the acceptable ways in which these terms can be framed and the correct class in which they fall. This PAN aims to provide that clarity, albeit recognising that the terms are representative of new forms of goods/services in a fast-moving technological field; we aim to update this guidance as and when new developments arise.”

The UKIPO classifies - like the EUIPO - “virtual goods” (“unlike their physical counterparts”) in Class 9, because the related goods consist, essentially, of data. The UKIPO points out that the term has to be specified and will otherwise not be accepted (examples are “downloadable virtual clothing, footwear or headgear” and “downloadable virtual handbags”).

Likewise, NFTs will not be accepted as a classification term alone without an indication of the asset to which they relate. The Office also provided examples as to what will be accepted in Class 9:

• digital art authenticated by non-fungible tokens [NFTs]
• downloadable graphics authenticated by non-fungible tokens [NFTs]
• downloadable software, namely [list the type of goods], authenticated by non-fungible tokens [NFTs]
• digital audio files authenticated by non-fungible tokens
• downloadable digital files authenticated by non-fungible tokens [NFTs]
  
  

As NFTs can not only be related to digital assets, but also be used to authenticate physical goods, the UKIPO states that the physical goods authenticated by NFTs will also be accepted in the appropriate goods class, for example:

• artwork, authenticated by non-fungible tokens [NFTs] [Class 16]
• handbags, authenticated by non-fungible tokens [NFTs] [Class 18]
• Training shoes, authenticated by non-fungible tokens [NFTs] [Class 25]
  
  

For services, the Office provided specific terminology for Class 35. However, if membership of a club or entry to an event is linked to an NFT, this would be an entertainment service and classified in Class 41.

The UKIPO pointed out that the “terms are representative of new forms of goods/services in a fast-moving technological field” and that they aim to update the guidance, as and when, new developments arise. Undoubtedly, practice and case law will develop over the coming years and the UKIPO will have to adapt to these developments.

What does that mean for brand owners?

Owners need to take the virtual world seriously. Consumer facing brands need to be where their consumers are and that is, increasingly, the virtual space. That means brands need to seek protection now, build up know-how regarding web3/metaverse, and engage with their consumers virtually, rather than leaving the field open to counterfeiters, as consumer demand for virtual goods evidently already exists.

As far is classification is concerned: Under the current system, it makes sense to put virtual goods in Class 9. This approach currently seems preferable to the alternatives that are being discussed (e.g. classifying them with their real-life counterparts in other classes). However, there are challenges ahead for trade mark lawyers. Clearance work involving Class 9 is becoming increasingly challenging, as Class 9 is becoming more and more crowded. If society at large moves ever-more towards the digital future, Class 9 will become the new battle ground, and future conflicts are certain, e.g. between „Class 9 native“ brands and the newcomers. If additional companies start offering their existing “real life” goods also as virtual products in the metaverse (e.g. for avatars), these brands may well end up seeking protection in Class 9. There will need to be clear guidance on similarity (or lack thereof) between different types of virtual goods (as is already the case with e.g. different software types). Also of interest will be conflicts between virtual and real life goods, e.g. in the area of fashion. Whether Class 9 will become too narrow or crowded at some point so that alternative solutions might become necessary remains to be seen.

In any case, the drafting of the list of goods and services will require very careful consideration. It has to be taken into account, where and how the goods or services are provided and what impact they have on the real world. In addition, it is important to monitor developments and to adapt the approach taken if necessary.

The authors would like to thank Sylvia Burgess-Tate for her assistance in preparing this piece.