How to classify NFTs, virtual goods and metaverse services?

Introduction

Brand owners are already considering the use of their trade marks in the metaverse and Web3. Although some existing trade mark registrations may be used to prevent the unauthorised use of identical or similar marks in immersive and interactive online worlds, companies such as Heineken, L’Oréal and Nike are filing new trade mark applications for “downloadable virtual goods” and non-fungible tokens (NFT), to mitigate against any uncertainties.

In fact, the UK Intellectual Property Office (IPO) has noted that they are receiving an increasing number of trade mark applications relating to NFTs, virtual goods and metaverse services. In order to clarify how these new forms of goods and services should be framed and classified, on 03 April 2023, the IPO published “Practice Amendment-Notice 2/23: The classification of non-fungible tokens (NFTs), virtual goods, and services provided in the metaverse” (PAN2/23).

NFTs and Virtual Goods

What is a non-fungible token?

An NFT is a piece of data that is hosted on the blockchain. Its non-fungible nature means that each token is unique and cannot be replaced with another (unlike a banknote for example). NFTs are usually linked to a particular asset. Once linked, NFTs are used as a modern certificate of authenticity. They certify that a person “owns” the asset to which the NFT is attached. Anyone can look on the blockchain and verify who owns the asset. NFTs are tradable and the records of the transactions are recorded on the blockchain. These records cannot be altered. Assets can include digital assets such as digital art, photos, music, or property in virtual worlds. However, there is no reason why an NFT cannot also be used to certify the authenticity or ownership of physical assets. For example, Nike owns a patent for the use of NFTs to certify that a pair of its trainers are authentic. In the same way that purchasing an original painting does not mean that the buyer acquires the copyright in it, the owner of an NFT does not necessarily own any underlying intellectual property.

IPO Guidance

In PAN2/23, the IPO has confirmed that NFTs will not be accepted as a classification term alone without reference to the asset to which it relates. However, goods authenticated by NFTs could be accepted in multiple different classes depending on the relevant underlying assets.

A digital file (such as digital art, software, or other files), authenticated by an NFT could be accepted in class 9. This is currently the most common use of NFTs, but as described above their use is not restricted to digital goods only. As such, artwork (class 16), handbags (class 18), trainers (class 25) or all manner of other goods that have been authenticated by NFTs could be registered in their respective classes. The IPO also envisions the use of NFTs in the provision of services. For example, membership of a gym (class 41), or entry into an event like a cinema screening (class 41), could be linked to an NFT and registered as a trade mark.

While we are not yet seeing many brands using NFTs to authenticate physical goods or to provide services, it is helpful that the IPO is thinking about the future and trying to clarify potential issues before they effect brand owners.

In relation to digital goods (class 9), the IPO has confirmed that the same requirements for clarity and conciseness that apply to physical goods also apply to digital goods. Such goods will need to be clearly defined. The IPO gives the following examples of acceptable terms: “downloadable virtual clothing footwear, or headgear”, or “downloadable virtual handbags”.

Virtual Services

What is the Metaverse?

As we have written before, it is not easy to define the metaverse. However, in PAN2/23, the IPO uses a succinct definition: “a form of digital reality, where people can access virtual worlds and interact with others”. For more detail, we recommend reading our article where the Simmons & Simmons Gaming and Immersive Tech group, have set out what they think the metaverse is and what it is going to be.

IPO Guidance

As with NFTs, when classifying virtual services, the IPO guidance sets out that the relevant class is that of the underlying service. For example, when registering a mark for a service that conducts interactive virtual auctions, this would be registered in class 35. On its face, there is no reason why the provision of services through the metaverse would be any different to the provision of these services in the real world. A virtual auction in the metaverse is, in principle, no different to one conducted online through video conferencing software. However, for some services, the introduction of the metaverse can be more complicated. For example, a consumer may one day, be able to buy food in the metaverse. This could include buying both digital services (for their avatar) and/or physical services (food being sent to the consumer’s home). The IPO has clarified that when a mark is being registered for a service provided through the metaverse the examiner will seek clarification if the service is provided inside or outside the metaverse. The selling of virtual food or drinks within the metaverse is not considered a class 43 service. Therefore, brand owners who traditionally operated restaurants and are considering any expansion into the metaverse, will need to consider if their current registrations are sufficient. The IPO advises that a more general entertainment services registration (class 41) maybe the most appropriate registration.

Conclusion

The law of trade marks has always been linked to the development of technology. Many brands may not yet be thinking about the impact of NFTs, digital goods or metaverse services. However, if these technologies become more widespread, as many proponents of Web3 suggest they will, all brand owners will need to audit their brand portfolios to ensure their marks are protected against any potential negative impact of these technologies. The most innovative brand owners will be considering what new opportunities these technologies could hold. This new guidance from the IPO includes helpful clarifications that will assist brand owners as they consider the impact of these new technologies and how they should respond.