The Metaverse and the implications for Intellectual Property rights for fashion brands

image

The Metaverse seems to be everywhere at the moment - but what is it, and what should fashion brands be doing to make sure their IP is protected in this emerging space?

The Metaverse is a virtual reality space, which allows users to interact with computer-generated environments and users and even allows them to purchase digital items in form of NFTs. This virtual space has taken the world by storm, and in doing so created a number of questions in the fashion world in relation to its impact on intellectual property rights.

To understand how the Metaverse has an effect on the fashion world it is important to understand what NFTs are.

NFT stands for ‘non-fungible token’ and is a unique and non-interchangeable unit of data stored on a digital ledger that uses blockchain technology to establish proof of ownership. This essentially means that NFTs hold information identifying the original copy of the ‘item’ in question. This is why NFTs can hold value just like any other tangible fashion item such as clothing or accessories and cannot simply be copied without being purchased.

When considering Intellectual Property, it becomes apparent that NFTs have a great potential of generating income and with Intellectual Property already being very valuable in the physical world, more fashion brands are starting to look at protection for their virtual assets as well.

Fashion already plays a big role in the Metaverse. Zepeto, Asia's biggest Metaverse platform, has acquired almost a quarter of a billion users in the 3 years since it launched. It has since created a number of so called ‘virtual influencers’, who design and sell NFTs in form of digital clothing and fashion accessories that are then purchased by users for their online avatars. Some of these influencers are already earning up to six figures with their virtual clothing, which demonstrates the user interest in fashion in the virtual world.

Even luxury brands such as Ralph Lauren and Gucci are taking part with their digital clothing already for sale and featured on avatars on Zepeto. In September, Luxury Marketplace UNXD collaborated with Dolce & Gabbana to launch its own NFT collection, Collezione Genesi, which to date has made sales of approximately $5.65 million.

The demand for virtual fashion appears to come from the ‘affordable’ price tag. NFTs of designer items tend to be significantly cheaper than their real world counterparts while still holding value. This makes them more accessible. In the Metaverse, you really can own that Gucci handbag you have always wanted but could never afford in real life.

It is not just luxury brands that are getting in on the NFT act. In the last six weeks we have seen high street brands Gap, BoohooMan and H&M all announce their own NFT clothing collections. Despite the ‘affordable’ price tag of luxury NFTs, not every user will be able to or want to afford these items. High street brands therefore open the market to those users that still want to express their love for fashion but at a more reasonable price point. This will in turn likely prompt more users to get involved in the Metaverse and increase the number of virtual influencers creating new fashion based NFTs.

One issue with the emerging Metaverse and NFTs is that practically anyone can create NFTs in the comfort of their home. This gives room to the potential copying of well-known designs in the fashion industry which involves much less effort and funds than producing real-life counterfeit goods.

Whilst we might see brands arguing in trade mark disputes that digital clothing is sufficiently similar to physical items of clothing for trade mark protection for the latter to extend to their digital counterparts, we are seeing more fashion brands choosing to update their trade mark protection now to specifically protect their virtual assets.

For example, in October 2021, Nike filed a number of new applications for their famous trade marks such as their "Just Do It" slogan the swoosh logo, its “Jumpman” logo and “Air Jordan” among others for virtual sneakers and apparel. Ralph Lauren also filed for trade mark protection in the US for items including store services featuring virtual clothing and accessories, and online, virtual clothing and accessories for use in virtual environments.

With the rapid expansion of the Metaverse, it will be interesting to see how the NFT clothing craze plays out and what fashion brands choose to do about trade mark protection for these digital assets. In our view it is however important for brands to consider actively extending their trade mark protection to the virtual space now in order to avoid potential conflicts and ‘virtual counterfeiting’ later down the line.