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How brands are navigating trademark protection in the metaverse

Artist Mason Rothschild's controversial "meta-Birkins." Credit: Moomoo.

In the last few years, virtual reality has become the new reality. From the advent of cryptocurrencies to the creation of the metaverse, the virtual world has become as relevant as the physical world we live in. Now, not only can you trade virtual currency, but you can also purchase virtual pieces of land, art, and most importantly, fashion. However, as the metaverse becomes more popular among consumers than ever before, luxury brands and smaller labels alike are struggling to navigate the issue of trademark protection within this new, digital frontier.

Currently, there are few, if any, concrete regulations governing the creation of fashion-related NFTs, or non-fungible tokens, within the metaverse. As such, artists like Mason Rothschild—a freelance digital creator responsible for designing and dropping the now-infamous “meta-Birkins”—have freely used trademarked designs to create their own NFTs. And, up until recently, they faced little to no backlash from the brands they copied. However, as artists like Rothschild pocket massive profits—most of his “meta-Birkins” sold for around $20,000, the same price as a physical Birkin—luxury brands have begun frantically trying to protect not just their iconic designs and brand exclusivity, but their profits.

However, there are two massive hurdles to protecting trademarks in the metaverse.

The first is actually fighting trademark infringement by artists like Rothschild. Unfortunately, filing a trademark infringement suit against an NFT isn’t as straightforward as filing one against a tangible good. Essentially, because there aren’t currently specific trademark laws that govern the metaverse, brands and the US Patent and Trademark Office alike are forced to apply traditional trademark laws to the digital world. As such, there are inherent translation issues, making what constitutes an “actionable” trademark infringement much more difficult to define. Thus, even if an artist, like Rothschild, blatantly uses a trademarked design, like an Hermès Birkin, to create an NFT, this infringement isn’t necessarily actionable. Essentially, because Hermès only has a trademark on the tangible Birkin, that trademark doesn’t necessarily apply to the digital bag, too.

Furthermore, brands also face the issue of “secondary meaning” as it relates to the metaverse. According to Vogue Business, this is one of the central issues in fighting trademark infringement in the metaverse. Secondary meaning is a term used in trademark law that says if a mark is not classified as being inherently distinct, the mark must acquire distinctiveness in consumers’ mind in order to achieve trademark status. For example, imagine if Louis Vuitton’s ever-popular Neverfull tote fell under this category. Even though its mark isn’t “inherently distinct,” that particular bag is undoubtedly distinct in consumers’ minds, having been a part of the French luxury brand’s lineup since 2007. As such, the Neverfull would still be a protected, trademarked design because of the distinctiveness it has acquired among consumers in its fifteen years of existence.

Virtual Gucci totes in the metaverse. Credit: Bloomberg

However, “secondary meaning” may not hold up in the metaverse. Although that same Neverfull is “distinctive” in the physical world, some argue that this distinctiveness does not carry over into the virtual world. This, in turn, leaves goods that would otherwise be protected in the physical world completely unprotected in the virtual world. And, while this presents an issue for larger luxury brands, it poses an even greater threat to smaller designers who have less ability to prove the distinctiveness of their designs.

This brings us to the second obstacle: how can brands fight infringement if they aren’t able to predict which physical trademarks will translate to the digital world?

In response to this question, brands are now scrambling to apply for new trademarks across a variety of classes in an attempt to curb infringement issues before they begin. According to Vogue Business, in November 2021, Ralph Lauren, Nike, and DKNY filed trademark applications in both the US and EU across a variety of classes, with a specific eye toward “virtual clothing and accessories for use in the virtual world,” and “online, non-downloadable virtual clothing and accessories for use in virtual environments.” Larger players like Louis Vuitton, Prada, and Chanel have already filed their own trademark applications, as have certain third parties attempting to use Gucci and Prada’s logos.

Prada's trademarked logo breakdown. Credit: TFL.

Ultimately, which trademarks will be protected comes down to a new reading of the term “zone of expansion.” This term, used primarily in fashion trademarks, is the legal equivalent of a logical jump. Basically, through the “zone of expansion,” brands have the leigh way to extend a single trademark to protect new product offerings that would follow logically from a given label. For example, if an independent label, XYZ, has a trademarked logo and already makes clothing, bags, and shoes, and it decides to expand its product line to include accessories like belts, wallets, and sunglasses, through the “zone of expansion,” XYZ’s trademark would automatically extend to its new product offerings, too.

Again, while this “zone of expansion” applies to the physical world of trademark protection, it remains to be seen whether or not it applies to the metaverse. So the question remains: Are a brands’ trademarked products in the metaverse considered a logical extension of their product line? Though the metaverse seems to be the next logical “zone of expansion” for fashion labels, there is nothing legally to say that it is.

Ultimately, trademark infringement issues remain one of the biggest barriers to entry for labels looking to expand into the metaverse. In order for the metaverse to truly become an alternate reality and not a lawless platform devoid of regulation, a uniform set of trademark laws must be implemented in order to protect brands from encroaching artists and to restore to labels the designs, marks, and most importantly, the profits that are rightfully theirs.

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