Race to the Metaverse: opportunities and risks for brands and IP rights

Until the company formerly known as Facebook announced a change of name in mid-October, public awareness of the Metaverse concept was relatively low. The new moniker led to many questioning the rationale behind the name, while some businesses sat up and took notice as one of the world’s most influential companies appeared to be trespassing on their registered intellectual property rights.

Facebook’s brand transition to Meta isn’t the only example of recent metaverse-related activity. In early November news broke that Nike has applied to register its word mark, logo and “Just Do It®” slogan as trade marks in Classes 9, 35 and 41, specifically for downloadable virtual goods “for use online and in online virtual worlds”. At the same time, the company began recruiting for virtual material designers who will be tasked with creating products solely for virtual consumption and, as the company puts it: “redefining our digital world, ushering us into the metaverse”.

Unsurprisingly, others are following Meta and Nike’s lead, and attempting to get ahead with applications for metaverse-related IP rights. A quick look at trade mark journals in the UK, US, Germany and France sees a marked uptick in applications featuring the word “meta” and “metaverse” across a range of classes.

So, what is the metaverse and why are brands and entrepreneurs getting excited about becoming part of it?

What is the metaverse?

The term metaverse was coined by science fiction novelist Neal Stephenson in his 1992 novel “Snow Crash”. In it, he describes how “humans, as avatars, interact with each other and software agents, in a three-dimensional virtual space that uses the metaphor of the real world”.

However, as the technology to make this vision reality has emerged, the scale and scope of metaverse potential has exploded. In his excellent metaverse primer, which we recommend to anyone who wants to get under the hood of what could be in store, essayist and venture capital investor Matthew Ball gives his best-attempt definition as:

“The Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an effectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments.”

Ball also describes the metaverse as a “quasi-successor state to the mobile internet”, building upon and iteratively advancing what currently exists. It incorporates Virtual Reality (VR), Augmented Reality (AR), Internet of Things (IoT) and digital twins (digital replications of real-world constructs) and integrates the digital and physical worlds, with continuity between them.

A basic example of this continuity and blurring of digital and physical worlds might be someone walking down the street wearing virtual clothes that are visible to others who are wearing AR glasses (or even smart contact lenses). Or, more basic still, think of Pokemon Go where players can view characters set in the real-world landscape when looking through their smart phone camera.

Much of the technology needed to realise the full vision of the metaverse does not yet exist – such as the ability to sustain millions of user realities synchronously in real-time – but some of the tools that will be part of it, such as AR and VR, are beginning to become mainstream.

Blockchain, non-fungible tokens and cryptocurrency also play key roles, as the metaverse will be a functioning economy. The facility for work, payment, ownership, and creativity are intrinsic to the metaverse. It will be possible to generate value that is recognised by and transferable to others. And this is where brands get interested.

That’s because in the metaverse, it will be possible to buy digital assets and transfer them between all of its experience components. Matthew Ball explains: “your Counter-Strike gun skin, for example, could also be used to decorate a gun in Fortnite, or be gifted to a friend on/through Facebook”.

Brands in the metaverse: my metaverse wardrobe is Balenciaga

Brands have already undertaken significant experiments in virtual worlds. Marvel has integrated its characters and IP into Fortnite and O2 worked with EPIC Games to recreate the O2 arena in Fortnite Creative as a venue for virtual concerts.

High fashion brand Balenciaga has aimed to bridge digital/physical spaces with a Fortnite collaboration that sees Balenciaga designs available for virtual purchase and incentives for players to share images of their avatars in Balenciaga. The real-world Balenciaga x Fortnite collection is available in the brand’s stores.

Partnerships are a common feature in Roblox, too. This phenomenally successful gaming platform has more than 150 million monthly users and in the first nine months of 2020 users spent $1.2billion on in-game currency.

While the examples above centre on gaming platforms, it is important to remember that individual virtual worlds do not constitute the metaverse, rather it is the interoperability and continuity between multiple digital experiences, some of which are entertainment-based but could just as easily be educational, retail, medical – or any number of other applications.

Challenges for brands in the metaverse

Clearly, brands are seeing the opportunities inherent in the metaverse. But there are some interesting questions to be considered around how brands protect themselves in the metaverse and offer their genuine products and services to consumers within it. It would be too much to hope that the metaverse will be free from counterfeiting, passing off and copycats, and this will require subtle handling, especially because user-generated content is currently a big feature of many virtual worlds.

Monitoring for IP infringement across the multiple components of the metaverse will be a considerable challenge. Some commentators have suggested that operators of different metaverse components should establish strategies for protecting users’ IP, in a similar way to how YouTube, Amazon and eBay work to protect rights holders from illicit activity on their platforms.

Certainly, users are likely to have to agree terms and conditions of use for each metaverse entity they engage with. This will go some way to transferring legal jurisdictions across the boundary from physical to digital worlds and allow for the functioning of IP laws.

As a first step, IP commentators are advising that brand owners register their key assets as downloadable virtual goods for use in virtual environments, as Nike has done. Over the longer term, the question may arise whether new virtual product classifications are needed, and indeed, the wider issue of regulation and legal jurisdiction in the metaverse will need to be explored.

It is likely that new brands will emerge entirely within the metaverse, taking advantage of low set-up costs and potentially unlimited global reach. The question of which jurisdictions should be prioritised for rights applications for such brands could become an issue, as the metaverse is not necessarily geographically relevant.

For now, it is a case of watching and waiting as this fascinating new environment emerges. For those who want to get more hands-on, Drew Benvie, founder of leading social media communications agency Battenhall shared five tips for brands to start exploring it:

Discover: where are you being discussed
Dabble: buy a headset, specs or Stories
Dive in: try out Decentraland the virtual world
Deal: buy, mint & sell some NFTs on Opensea
Defend: research, register & protect the brand

Certainly, everyone in the IP industry can get behind the last tip!