Is UK Trademark Law Ready for the Metaverse? “Targeting” in the virtual world

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Just as with the rapid emergence of the Internet around the new millennium, the fundamental stages of the next major technological revolution – the metaverse – may now be upon us. And as was the case with the Internet, the law will have to catch up with technology as it evolves. The metaverse is likely to provide new opportunities for businesses, but it is important, as with any new business, to consider these opportunities alongside the corresponding risks. Complex intellectual property, contractual and jurisdictional disputes are inevitable and, in some cases, are already materializing. In this article, we look at some of the main areas of difficulty when it comes to trademark litigation and how these issues can be resolved.

Trademark infringement in the “virtual world”

The main function of a trademark is to act as a sign of origin that gives consumers the assurance that they are buying goods or services from a company they trust. It seems likely that this will remain the case in the Metaverse but, instead of tangible goods, a Metaverse economy will focus on the creation and exchange of new virtual assets. These virtual assets are often (at least currently) linked to non-fungible tokens (NFTs), which essentially act as a digital receipt on a blockchain indicating information such as ownership rights.

While the Metaverse is still in its infancy, interest in NFTs has skyrocketed over the past year and, naturally, NFT litigation has followed. For example, in Nike vs. StockXNike alleges that StockX uses its trademarks and exploits its reputation to sell new and unique virtual goods, while StockX asserts that its NFTs only exist to support and establish a direct connection with the sale of physical Nike shoes to which the rights of Nike have been exhausted.

Disputes in the virtual world are very varied and pose new problems. For example, companies may find it difficult to use trademark law to prevent individuals from creating digital copies of branded content, given the requirement that any use of a trademark must be within the scope commercial activities. Further, there is no guarantee that a trademark registration for a real-world good will protect against unauthorized use of a virtual equivalent. No doubt aware of this possibility, brands have flocked to register their marks for virtual goods and services. See our articles on copy NFTs and metaverse trademark registrations for a more in-depth discussion of these issues.

Does the principle of targeting make sense in a world without borders?

Trademarks are territorial in nature and do not fit well in a borderless world. Trademark disputes on the Internet have so far been handled by the principle of targeting. Targeting requires that for a mark to be considered in use in the UK, and therefore for a UK court to have jurisdiction over any dispute, the goods or services must be marketed to UK consumers. The Court of Justice of Pamier, the court of appeal of Merck versus Merck and subsequent case law provides useful guidance on how targeting should be assessed. The relevant principles can be summarized as follows:

  • The key question is whether the average consumer would conclude that the trader is directing its business to the UK;

  • Mere accessibility of a website to a consumer in the UK is insufficient;

  • The court should make an assessment based on all of the circumstances, including taking into account factors such as:

    • If there is use of a country code top level domain name such as .co.uk;

    • The purchase currency of any goods/services advertised/offered to the user;

    • The language of the website;

    • Any mention of telephone numbers with an international dialing code;

    • Any mention of an international customer base with UK based customers;

    • Whether products advertised for sale can and are shipped to the UK;

    • The number of visits made to the website by consumers in the UK; and

    • The international character of the company.

Applied to a metaverse context, if a third party made virtual goods or services available for sale alongside marketing in English with the option to purchase in GBP, then – in theory – a court is likely to consider the defendant targeted consumers in the UK. The practical reality, however, can be much more complex. For instance:

  • Existing “metaverse” platforms such as Decentraland use their own cryptocurrency independent of any country;

  • Metaverse content can be hosted in a decentralized manner (rather than existing on a top-level domain’s server);

  • There is unlikely to be a “shipment” of virtual assets in the normal sense;

  • Advances in natural language processing (NLP) can lead to real-time translation of content, removing language barriers; and

  • There may be a growing trend of consumers concealing their location using a VPN (virtual private network) and metaverse platforms may be reluctant to disclose (or may not even possess) relevant data about locations in any case.

The current approach to territoriality is rooted in today’s legal framework: it remains to be seen whether there is a move towards the creation of a separate ‘meta-jurisdiction’. This could take the form of a multilateral agreement, perhaps akin to the Uniform Domain-Name Dispute-Resolution Policy (UDRP) that resolves disputes surrounding domain name registration. A similar system for the metaverse could allow for the creation of clear guidelines and the possibility of cross-jurisdictional mediation, mitigating issues arising from the borderless nature of the metaverse.

Co-written by Sean Olive

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