Is UK trade mark law metaverse-ready? “Targeting” in the virtual world

Just as with the rapid emergence of the Internet around the new millennium, the foundational 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 need to play catch-up with the technology as it evolves. The metaverse is likely to offer new opportunities for businesses but it is important, as with any new venture, to consider these opportunities alongside their counterpart risks. Complex intellectual property, contractual and jurisdictional disputes are inevitable and in some cases are materialising already. In this article, we consider some of the key areas of difficulty in respect of trade mark disputes and how these issues may be addressed.

Trade mark infringement in the “virtual world”

The primary function of a trade mark is to act as a badge of origin that gives consumers the reassurance that they are purchasing goods or services from a business that they trust. It seems likely that this will remain the case in the metaverse but, instead of tangible goods, a metaverse economy will centre around the creation and exchange of new, virtual assets. These virtual assets are often (at least currently) tied to non-fungible tokens (NFTs), which in essence act as a digital receipt on a blockchain showing information such as ownership rights.

While the metaverse is still very much in its infancy, interest in NFTs has soared over the last year and, naturally, litigation relating to NFTs has followed. For example, in Nike v StockX, Nike alleges that StockX is using its trade marks and exploiting its reputation to sell new and unique virtual goods, whereas StockX asserts that its NFTs only exist to support, and link directly to, the sale of physical Nike shoes in which Nike’s rights have been exhausted.

Disputes in the virtual world are wide-ranging and pose novel issues. For example, businesses may face problems using trade mark law to stop individuals creating digital duplicates of branded content, given the requirement that any use of a trade mark be in the course of trade. Furthermore, it is by no means guaranteed that a trade mark registration for a real-world good will protect against unauthorised use of a virtual equivalent. No doubt aware of this possibility, brands have flocked to register their trade marks for virtual goods and services. See our articles on copycat NFTs and metaverse trade mark filings for further discussion of these issues.

Does the principle of targeting make sense in a borderless world?

Trade marks are territorial in nature and sit uncomfortably with a borderless world. Trade mark disputes over the Internet have, to date, been addressed via the principle of targeting. Targeting requires that for a mark to be considered used in the UK, and therefore for a UK court to have jurisdiction over any dispute, goods or services must be marketed towards UK consumers. The Court of Justice in Pammer, the Court of Appeal in Merck v Merck and later case law provides useful guidance on how targeting is to be assessed. The relevant principles can be summarised as follows:

• The key question is whether the average consumer would conclude that the trader is directing its activity towards the UK;
• Mere accessibility of a website to a consumer in the UK is insufficient;
• The court should undertake an evaluation based on all the circumstances, including considering factors such as:
  • Whether there is use of a country code top-level domain name such as .co.uk;
  • The currency for purchase of any goods/services advertised/offered to the user;
  • The language of the website;
  • Any mention of telephone numbers with an international code;
  • Any mention of an international clientele with customers based in the UK;
  • Whether any products advertised for sale can be and are shipped to the UK;
  • The number of visits made to the website by consumers in the UK; and
  • The international nature of the business.

Applied to a metaverse context, if a third party were to make virtual goods or services available for sale alongside English-language marketing with the possibility of purchasing in GBP, then – in theory – a court is likely to hold that the defendant has targeted consumers in the UK. The practical reality may, however, be far more complex. For instance:

• Existing “metaverse” platforms such as Decentraland use their own cryptocurrency independent of any one country;
• Content in the metaverse may be hosted in a decentralised way (rather than existing on the server of a top-level domain);
• There is unlikely to be any “shipping” of virtual assets in the normal sense;
• Natural language processing (NLP) advancements may lead to real-time translation of content, removing language barriers; and
• There may be an increasing 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) the relevant data on locations in any event.

The current approach to territoriality is grounded in the legal framework of today: it remains to be seen whether there is a shift towards the creation of a separate “meta-jurisdiction”. This could take the form of a multilateral agreement, perhaps akin to the UDRP (Uniform Domain-Name Dispute-Resolution Policy) which resolves disputes surrounding the registration of domain names. A similar system for the metaverse could allow for the creation of clear guidelines and the possibility of cross-jurisdictional mediation, easing issues flowing from the borderless nature of the metaverse.

Co-authored by Sean Oliver