[Law Talk] Trademark issues in the world of the metaverse

The word “metaverse,” a portmanteau of the prefix “meta” (meaning beyond) and “universe,” is typically used to refer to a communal and interactive cyberspace where content, commerce and networking exist with increasing permeability with the real world. With new technical capability and accelerated cultural shift to online due to the COVID-19 crisis, the metaverse is creating innovation that transcends time and space in all areas of industry and society. In particular, gaming, fashion and luxury brand companies are partnering with metaverse platforms to expand their market bases to the virtual world.

In the world of the metaverse, you can easily create a virtual person and a virtual brand, but would it be okay to create anything you want in the world of the metaverse, even items which contain trademarks of others? Imagine that a company intends to create a virtual character to be active on metaverse platform and use items bearing another person’s trademarks for the virtual character. The company may face a range of legal issues.

First, there is a risk of trademark infringement. As a general rule, you may infringe another person’s trademark when you use a mark identical or similar to the trademark on goods identical or similar to the designated goods, and thereby causing consumer confusion. In the context of the metaverse, trademark infringement may occur if (i) items used in the metaverse are “goods” for purposes of the Trademark Act, and (ii) the act of using the trademark registered in the real world on similar or identical items in the metaverse can lead consumers to confusion.

The act of using another person’s trademark in the metaverse may meet those two prongs. For purposes of the Trademark Act, the term “goods” is interpreted to mean “articles which have exchange value” and traded in commerce (Supreme Court Decision 98Hu58). In light of such interpretation, items used in the metaverse may be construed as “goods” as long as they are traded with economic value. Given that various brands such as Gucci, Nike and Puma have recently launched their products in the metaverse by concluding contracts with metaverse platform providers, the act of using a trademark registered for the real world products in a corresponding product in the metaverse may lead consumers to confusion that the product is sold by the trademark owner itself.

If a trademark possesses creativity, it can be eligible for copyright protection in addition to protection as a trademark. The Supreme Court has hold that figures used as trademarks can be protected under the Copyright Act (Supreme Court Decision 2012Da76829). Accordingly, the use of a trademark protected as a copyrighted work on items used for a virtual character in the metaverse may also lead to the risk of copyright infringement.

In addition to the potential risk of trademark infringement and copyright infringement, the unauthorized use of another person’s brand in the metaverse may constitute an act of unfair competition under the Unfair Competition Prevention and Trade Secret Protection Act. If you sell items displaying another person’s brand in the metaverse, it may lead consumers to confusion that the items are licensed or sold by the brand owner itself. As such, it may be considered as “an act of causing confusion with another person’s goods” which is prohibited as an act of unfair competition under Article 2(1)(a) of the Act. It may also constitute an act of infringing on the economic interests of others by using outcomes achieved through substantial investment of efforts without permission in a manner contrary to fair commercial practices” as prohibited under Article 2(1)(k) of the Act, given that (a) a well-known brand generally falls within the scope of such achievement; (b) the use of the brand on items may directly or indirectly increase the awareness of the virtual character using such items; and (c) several brands have already entered into formal contracts to launch their products on metaverse platforms.

In sum, the reach of laws related to the use of trademarks in the real world can extend even to the world of the metaverse. In this context, the world of the metaverse is not completely cut off from the real world, but can be considered as an extension of it.

Lee Keun-woo and Helen H. Hwang

Lee Keun-woo is a partner at Korean law firm Yoon &Yang, with an expertise in intellectual property protection, privacy protection, trade secrets protection, including e-commerce and other technology, media and telecommunication laws. Helen H. Hwang is a US-qualified attorney at Yoon & Yang, with an expertise in the areas of intellectual property, technology, media and telecommunications and corporate laws. -- Ed.

By Korea Herald (khnews@heraldcorp.com)