& Technology Law Protecting Trademark Rights in Virtual Spaces

BY TIMOTHY G. ACKERMANN

Real-world trademark owners are already fighting over violations of their rights in virtual reality. The federal trademark registration system can help protect those rights.

One risk is businesses selling branded digital representations of products (virtual goods) in a virtual space (e.g. the metaverse) when the owner of that brand sells similar real-world products bearing that same brand. This is why companies such as Johnson & Johnson and Nike have filed U.S. trademark applications to protect their rights (NEOSPORIN for virtual antibiotics and NIKE and the Swoosh for virtual goods such as footwear).

Another concern is businesses selling non-fungible tokens (NFTs) based on such real-world products. (Such NFTs are code pointing to the location of, and authenticating, a digital image.) One example is the METABIRKIN NFT using digital images mimicking—according to Hermès—realworld BIRKIN-branded bags. Hermès has sued claiming infringement. Nike has a similar suit against StockX for NFTs concerning its NIKE trademark.

A challenge for Hermès—as in nearly all trademark claims—is the need to prove it owns rights in a trademark and that the use of the other trademark is likely to cause confusion with the first trademark. Hermès will naturally argue a digital image resembling its product is related enough, in light of its wellknown BIRKIN brand.

But confusion is easier to show when the respective goods or services are similar. Showing the differences between the respective goods (between the trademark owner’s tangible goods and the competing business’s virtual goods/NFTs) thus can be a hurdle. But trademark owners can narrow that gap.

A trademark owner could enter that virtual market by using its existing trademark on virtual goods (or with NFTs). As an example, Muhammad Ali Enterprises sells MUHAMMAD ALI-branded virtual footwear and clothing. But not all companies would want to enter the NFT market. Nor must the goods be identical to show confusion is likely.

Thus, another option is for the trademark owner to use the same trademark it uses for key real-world goods on other goods that would be similar in nature to potential virtual goods. Such similar goods could be, for instance, downloadable image files containing artwork or graphics relating to the key real-world goods. Those are not NFTs or virtual goods, but there’s a good argument they are very similar.

This kind of use would create unregistered trademark rights in those goods or related services. If the marks and goods/ services were close enough, the trademark owner could prove infringement with those unregistered rights. But real-world trademark owners can also bolster their rights by protecting those trademarks under the federal trademark registration system.

In particular, a federal trademark registration is prima facie evidence of important facts concerning those trademark rights (unless registered on the “Supplemental Register”). Those facts include showing that the trademark is a valid trademark, that it is owned by that owner, and that the owner has the exclusive right to use it for the listed goods or services.

Another consideration is that unregistered trademark rights ordinarily only accrue where and when use occurs. Importantly, priority—who used the mark first and where—is critical in resolving conflicts between users. Registration thus offers another benefit: once registered, the owner can show nationwide use and priority based on its filing date (subject to prior users or filers). And that filing date may be long before actual use occurs. Businesses can file an application based on the good faith intent to use a trademark in the future, years before any use must occur for registration.

One step in getting a trademark registration is (i) describing the goods or services that the owner wishes to be protected, and (ii) identifying the “class” of those goods or services from among the 45 available classes. The description must be tailored to the use/ intended use, but registered trademarks, pending applications, and agency statements provide guidance.

Examples for virtual goods and NFTrelated goods will fall into Class 09, and include:

• “downloadable virtual goods, namely, computer programs featuring footwear, and clothing … for use online in online virtual worlds”

• “virtual food and beverage products, namely, downloadable image files and computer programs featuring food and beverage items for use in online virtual worlds”

• “downloadable virtual goods, namely, crypto-collectibles and non-fungible tokens (NFTs)”

• “downloadable image files containing artwork authenticated by non-fungible tokens (NFTs)”

Examples for services relating to virtual goods will fall into Classes 35 (entertainment) or 41 (retail) and include:

• “entertainment services, namely, providing on-line, non-downloadable virtual footwear, and clothing … for use in virtual environments”

• “online retail services featuring virtual goods, namely, food and beverages”

Real-world trademark owners should consider extending their rights—and protection of those rights—into virtual spaces. And they can use the federal trademark registration system to help them do so. HN

Tim Ackermann has practiced trademark, patent, and copyright law at the Ackermann Law Firm since 2010, and was Co-Chair of the DBA Publications Committee from 2009-2011. He can be contacted at tim@ackermannlaw.com