Metaverse is a new name for an existing idea. This was recently claimed by Geneviève Bell in an article for the MIT Technology Review, noting the graduation of the “metaverse” – that is, the combination of aspects of social media, games, augmented reality and virtual and the Web that form “an immersive digital world”. – from “niche term to household name in less than a year”. In fact, Bell states that “conversations around the metaverse today” reflect “a lot of conversations [that were had] nearly 20 years ago about Second Life,” the 3D virtual world that Linden Lab launched in 2003.
Just as the metaverse is not a new concept, many of the legal issues that arise in relation to this nascent virtual world have also been seen before, including in conjunction with the rise of Second Life. In an article in the May/June 2009 issue of IP Litigator, Simon Holzer, a partner in the IP team at Meyerlustenberger Lachenal, looked at the unauthorized use of “real world marks” of trademarks on the virtual offers of others. He noted that this turns out to be “an often-seen phenomenon” on Second Life, “particularly when a top brand decides to refrain from entering [the] virtual world.”
Pointing to Nike, Holzer revealed that in March 2007 searches for the sportswear titan’s name generated almost 200 visits to third-party Second Life stores (Gucci wasn’t too far behind with over 150 results ). While “most of these successes were related to virtual shoe offers for Second Life avatars wearing Nike’s distinctive swoosh, none of the virtual shoes were sold or licensed by Nike.”
Another “notorious” example cited by Holzer was the many versions of Cartier’s Himalia necklace, which were offered for sale in Second Life stores for 10,000 Linden Dollars (equivalent to about $37 in early 2007) – although without Cartier’s approval. Similarly, Holzer noted the “ubiquity of virtual Swiss luxury watches”, such as those that replicated offerings from Rolex, Patek Philippe and Blancpain – again without the watchmakers’ permission. At the time of publication of Holzer’s article in 2009, Hublot was the only watch company to have established an official presence in Second Life.
(Much like how brands are currently flocking to platforms like Roblox, Decentraland, Sandbox, etc. to connect with consumers and engage in a (rather) new revenue stream, Hublot has been joined in the Second Life universe by IBM and Nissan, which acquired land Meanwhile, adidas and Reebok sold sneakers there, Toyota offered virtual cars there, Coke ran a marketing campaign there, 1-800-Flowers operated a flower pavilion and a greenhouse, Toyota sold virtual cars there, and Giorgio Armani and American Apparel offered virtual clothing.)
The frequency with which brands’ trademarks were used on virtual goods in the Second Life ecosystem without their permission without surprise leads to Metaverse-related lawsuits. Taser International, for example, filed a quickly settled trademark infringement lawsuit against San Francisco-based Linden Lab in 2009. Around the same time, virtual sex toy company Eros LLC filed a lawsuit (since settled ) for trademark and copyright against a Second Life user. which reproduced her marks, and one against Linden, herself. Yet Cartier owner Richemont filed a lawsuit against an individual who operated a store on the Second Life platform in which he offered unauthorized Cartier-branded products; this case ended after the defendant defaulted – again, leaving the merits of the case untouched by the court.
Commercial use?
Due to quick settlements or defendants’ inability to participate in cases, these Second Life-centric lawsuits provided little insight into how courts would handle trademarks – and trademark infringement claims – around the world. virtual. However, another case Bragg v Linden Research, Inc., has shed some light (at least tangentially) on one of the — and still largely untested — threshold issues with regards to brands in the metaverse: whether the “use” of a brand in the Second Life sphere (or its more modern counterparts like Roblox) actually constitutes “use in commerce”. This is a fundamental issue, whether dealing with Second Life or newer virtual worlds, because use in commerce is both a prerequisite for an entity to accrue trademark rights and to make viable claims for trademark infringement.
In the Bragg case, a contract case in which the plaintiff accused Linden of illegally confiscating the virtual property he had acquired on the platform (using “real world” dollars), Judge Eduardo Robreno of the United States District Court of Eastern District of Pennsylvania gave some examples of what “use in commerce” might look like in the virtual world.
As Sally Abel of Fenwick & West LLP stated at the time, in a May 2007 memorandum, the court described various ways in which commerce exists in Second Life, stating that users can “buy, own and sell virtual goods” on the Second Life platform, “creating virtual goods and selling them for a profit”, “buying virtual land, making improvements to that land, preventing other avatars from entering the land, renting the land and sell the land for a profit” (and pay “real property taxes to Linden in the process), and enter into “contracts and business relationships in the virtual world”.
Also suggesting that commercial use may occur in the realm of Second Life (and other virtual worlds) which appears to straddle the line between pure play/expressive use and commercial use, the court acknowledged that Linden had marketed the platform as a commercial space. It should also be noted, as the court did, that Second Life’s virtual currency – Linden Dollars – can be purchased with and could be sold for US dollars, and that there was (and still may be ) a secondary market for L$ virtual currency on marketplace sites like eBay.
The general language of the Lanham Act – which defines “use in commerce” as the bona fide use of a mark in the ordinary course of business – may also suggest that the offer and sale of goods virtual worlds constitute “Use in Commerce.” Moreover, if you think of Second Life as Reed Smith’s lawyers did in a recent guide – as “a great multiplayer role-playing game that also functions as an economy online, allows users to create their own virtual worlds, develop and promote intellectual property, and even sell their own branded creations (or those of others) for a profit” – it seems clear that some uses of platform and the like could be construed as commercial.
The same goes for the language used by The Wall Street Journal to describe the platform in 2006. Writing for the WSJ, Andrew LaVallee said Linden Lab “has provided a platform for gamers to do what they want — whether it’s starting a business, running a bar, or launching a space shuttle. Beyond that, he said Second Life “residents [can] chat, shop, build houses, travel, and hold jobs” in the virtual world, and “are encouraged to create items in Second Life that they can sell to others or use themselves.” He noted that “Linden takes a cut of many transactions around the world (such as uploading a design to the game) and charges players for ‘premium’ accounts, which provide more flexibility in owning land and the display of goods.”
An avalanche of uncontrolled uses
In the same way that the rise of Second Life, which still exists and was actually the location of an event coinciding with New York Fashion Week for designer Jonathan Simkhai, has not been without problems of brand and trademarks, virtual platforms that have arisen since are facing many of these issues, especially when considered with the influx of allegedly counterfeit assets tied to non-fungible tokens (“NFTs”) . But then again, the fight against unauthorized goods in the virtual world may not be entirely uncharted territory.
As Amster Rothstein & Ebenstein, LLP Partner Max Vern has previously said, “the unauthorized use of trademarks in the Second Life universe” – and others – “can be compared to the avalanche of unchecked infringements brands in [real] global jurisdictions suffering from weak and ineffective trademark protection mechanisms”. In this context, he says that brand owners should not view Second Life (or its newer versions) as “an insignificant or transient nuisance, but rather take a proactive stance to enforce their legitimate rights and limit encroachment, by combining consumer education efforts with ongoing efforts to enforce trademark rights.
While new Metaverse-centric lawsuits, such as Hermes c. mason rothschild, are beginning to make their way to trademark filings and applications for virtual goods and NFTs continue to flood national trademark offices, which should ideally shed light on how courts and lawyers examiners consider virtual brands (including the critical element of use in commerce) businesses are generally encouraged to establish a presence in the metaverse. Reed Smith attorneys encourage brand owners to consider “establishing their own presence in the metaverse” because in addition to the benefits that come from leveraging the metaverse as a way to reach consumers and build brand awareness brand via a thriving and growing market, “it also provides an opportunity to monitor activity, and it can even help thwart trademark infringement by bad faith actors.