Branding in the Metaverse: The Rise in NFT Trademark Applications and Best Practices to Protect your Brand

The Anti-Counterfeiting Committee is excited to bring to IPIC's UnscrIPted Blog a series of articles related to the evolving digital landscape, highlighting non-fungible tokens (NFTs), new mobile and web-based applications, branding in the metaverse and artificial intelligence. To read our last article in the series, which provided an introduction to NFTs and the counterfeit implications of the Metaverse, click here.

The Rise in NFT Trademark Applications

Within the first quarter of 2022, over 1900 NFT-related trademark applications were filed in the United States alone, already exceeding the total number of NFT-related trademark applications filed in the US in 2021. In Canada, more than 250 trademark applications have been filed for the goods and/or services “digital collectibles”, and over 50 trademark applications are pending for goods and/or services relating directly to “nonfungible tokens”, approximately 500 trademarks have been filed relating for “digital virtual goods”, and more than 540 applications have been filed in association with “digital tokens”. With the NFT market quickly becoming a billion-dollar industry, many brands who have released or plan to release NFT-related products have found value in protecting their assets through trademark applications. Though the number of NFT-related trademark applications continues to rise, questions surrounding how to effectively prepare and file the applications in view of the existing trademark regime and potential examination objections remain.

Potential Issues with NFT Trademark Applications

NFT trademark applications, like all other applications submitted to the Canadian Intellectual Property Office, are examined and assessed for a variety of potential objections, including that the applicant’s description of goods and/or services are not in ordinary commercial terms or require further specificity. Some well-known non-fungible token collections with pending registrations in the US have begun to receive office actions.  In one particular instance, the USPTO objected to the specification of goods and services, particularly that the wording “digital collectibles”, “digital illustrations”, and “providing a website featuring an online marketplace for exchanging digital collectibles” is indefinite and must be clarified as it does not make clear what the nature of the goods and/or services. Suggestions on revisions provided by the Examiner include amending this wording to specify the common commercial or generic name of the good, or if the goods have no common commercial or generic name, describing the product, its main purpose, and its intended uses. For instance, “Digital collectibles in the nature of downloadable image files containing {indicate subject matter or field, e.g., trading cards, artwork, memes, sneakers, etc.} authenticated by non-fungible tokens (NFTs)”. 

Additionally, applicants may have issues regarding use, particularly if trademark applications were filed proactively and in anticipation of a future release of an NFT collection. Further to a review of office actions issued, Examiner’s have indicated issues with specimens submitted for the goods “digital collectibles” and “digital collectibles sold as non-fungible tokens”. By way of example, specimens provided have been deemed “merely informational matter”, and though specimens provided link to a page where one can purchase a piece of the applicant’s collection, the link redirected to an external third party and did not show the applied-for mark being used in connection of the goods. Similarly, for services, issues can arise regarding whether the applicant is providing the services for others. In Canada, though specimens of use are not required to register a trademark, the mark must be in use with the goods and/or services applied for, otherwise, the applicants run the risk of cancellation.

Courts in other jurisdictions have been working to address and establish precedent with respect to if and how NFTs can or should be protected, particularly when “real world” brands with famous marks have claimed infringement. As noted in our previous article, while these lawsuits provide some novel guidance on how these digital assets can be dealt with in relation to intellectual property infringement in the physical world, many of the same considerations of a traditional infringement claim are debated, particularly with respect to a likelihood of confusion analysis. Particularly, whether the NFT functions as an instrument to certify ownership of a real-world object, or actually represents or acts as a virtual asset itself, is to be considered in such an analysis. Many trademark applications are still awaiting examination by the Trademark Office in the US and registration and filing data continues to develop at an alarming pace. 

Protecting your Brand in the Metaverse

As previously noted, it will be more difficult to identify infringers in the metaverse than in the real world. Many brand owners will rely on the platforms used to identify and takedown infringers, which often require proof of a registered trademark to do so. Given this, filing an acceptable trademark application, considering the above-mentioned issues regarding examination, is a first step for protecting your brand in the metaverse.

There is not much legal precedent with respect to the Metaverse and the protection that is afforded to a brand who has an extensive trademark portfolio for their tangible assets. As to whether trademark registrations for a brand’s “real world” goods and/or related services extend to the metaverse remains to be seen and we will likely see this play out in the coming months. 

Brands must be strategic and consider the marks that they use or plan to use in the metaverse, on a related platform and/or on a digital marketplace. Infringing virtual content can damage a brand’s reputation and impact consumers beyond the digital world.  Despite some commentary that the Metaverse is fading away, and not nearly as lucrative as it once was, that should not deter rights holders who currently engage in or have a plan to engage in the Metaverse from taking the appropriate steps to protect themselves further in the virtual space. 

The third and final article in this series will continue to discuss potential infringements and copyright violations that accompany NFTs, the particular rights associated with their creation, transfer, license and sale as well as the implications and issues that stem from derivative works and related arenas.