Intellectual property rights in the metaverse – NFT and fashion

New and unexplored intellectual property issues emerge from the exploitation of an NFT by fashion houses in the metaverse.

After several successful collaborations between fashion brands and gaming communities, NFTs represent the next step towards an increasingly digital fashion. The possibility for users not only to buy items to “wear” in the virtual world but also to have unique pieces adds a level of exclusivity that has always distinguished the fashion industry.

It is, therefore, no surprise that several fashion companies are entering the world of NFT, in some cases auctioning off an NFT along with some real couture garments at much higher prices than those usually paid for real creations. In this scenario, NFT and the new fashion metaverse could offer new opportunities and tools but also produce some risks for companies that until now have operated in the real world. 

On the one hand, NFT could be an essential tool in the fight against counterfeiters, helping IP rights holders in their anti-counterfeiting activities. In fact, in addition to the guaranteed traceability of the item during its lifecycle provided by blockchain technology in itself, an NFT takes the fight against counterfeiting to the next level by offering the possibility to embed an NFT in the physical product to be scanned to verify its authenticity. In this regard, some companies have already patented a system for minting, exchanging and mixing digital cryptographic assets in the form of digital objects, each of which can be linked to a physical product. For example, a buyer receives an NFT tied to a sneaker that they can transfer with the shoe, thus verifying the authenticity of the product.

When not created by the fashion brand itself or otherwise with its collaboration, however, NFTs cannot guarantee a product’s authenticity because, although they can authenticate the fashion item and its ownership, if the information initially entered is false or wrong from the start, the NFT will confirm and perpetuate that untrue information in all of its future sales. There is currently no system to verify that the person marketing an NFT has obtained all the necessary rights and, therefore, that the NFT being sold does not infringe on the intellectual property rights of any third party. As a possible solution to overcome this risk, platforms that sell NFTs should consider verifying sellers’ identities, just as major social media outlets do with their users. 

Another issue that fashion houses face in the case of an NFT sold by third parties that include their intellectual property rights is the effective scope of trademark rights. Both issues came to the forefront in the case of the “Baby Birkin” NFT, an animation of a baby growing inside the famous Birkin bag created by Los Angeles-based artists Mason Rothschild and Eric Ramirez, which was recently sold at auction for the equivalent of $23,500, but without the fashion house having any affiliation or receiving any royalties for the sale of that NFT. The famous French fashion house has registered the “Birkin” trademark for leather goods and handbags but not for digital artwork. Therefore, artists tried to argue that the trademark rights of the rightful owner do not extend to the NFT as well. 

Interestingly, in this case, the company decided not to take legal action, while more recently, a lawsuit was filed by the Maison in the US against the same artist for offering the collection of 100 NFT “MetaBirkins” depicting different versions of his iconic bag made of fur. This time the company claimed infringement of its trademark rights for using the famous wordmark “Birkin” and the related trade dress without its consent, simply adding the generic prefix ʻmeta’, referring to the virtual world in which digital goods such as NFTs are traded. The decision is probably also due to the fact that while the NFT “Baby Birkin” was a single work that included a certain degree of artistic reworking, in the case of the “MetaBirkins”, we are dealing with a real digital collection of 100 NFT, in which it is, therefore, easier to recognize the commercial purpose and exclude the defence of fair use related to the right of artistic expression raised by the author.

The case, one of the first NFT disputes in the fashion industry, raises important questions about the scope of intellectual property rights in the metaverse. In particular, to what extent do companies’ existing trademark rights extend to new technologies, especially if those companies are not yet operating in the metaverse?

In this scenario, celebrated brands such as the famous “Birkin” sign could likely benefit from the more significant (extra-commodity) protection afforded to trademarks that enjoy renown – which extends even to goods and services in classes other than those in which the sign was registered – while emerging designers and smaller companies could face severe difficulties in enforcing their rights if their trademarks were registered only for physical goods and not also for digital goods and services. 

However, given the popularity of NFTs among the Z and Alpha generations, some smaller brands may look at the phenomenon as an opportunity to create relevance and buzz among new potential customers and accept the unauthorized use of their trademarks in exchange for increasing notoriety in the marketplace. In this scenario, should fashion houses consider such NFTs as an underground marketing tool or as an infringement of their intellectual property rights? Only time will tell, but the decision in the MetaBirkin case will undoubtedly give us the first answer!

On a similar topic, you can find interesting the article “What is an NFT: speculative bubble or next digital revolution?

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Valentina Mazza

I am a lawyer in the Intellectual Property & Technology department of DLA Piper specializing in IP issues relating to the fashion and retail sector.

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