Virtual Goods and NFTs – Intellectual Property Protection for Digital Assets in Games, Social Media, and the Metaverse | Hogan Lovells

The leading role of the gaming industry

Virtual goods and digital assets are issued, bought, and traded digitally. They are often conceptualized as counterparts to real-world goods and services – almost (pun intended) any real-life product and services that can also be imagined in the virtual world. And unlike its real-world counterpart, the digital element can be improved, modified, and equipped with new features. In the gaming industry, virtual goods are traditionally used mainly as in-game items in the form of skins, clothing, accessories, equipment, and weapons for avatars. With the introduction of the blockchain, digital assets can be allocated, keeping a clear record of allocation or ownership and tracking – excluding the risks of double selling, opening in-game items to trade outside the single-game ecosystem, and facilitating monetization through easy tracking of royalties for secondary sales. Game developers are already making significant investments in tokenized digital assets. In emerging games such as “Decentraland” and “The Sandbox” digital lands can already be bought, sold and developed using virtual buildings. Game developer Ubisoft introduces NFTs in its games and opens up trade between players through “Ubisoft Quartz“The platform. Digital assets provide new opportunities for creative collaboration between non-endemic brands, game companies, social media operators, artists, and exchanges. The Metaverse is here to stay.”

EUIPO Reply to Metaverse

In response, the European Union Intellectual Property Office is treating the appropriate classification of these common topics of trademark protection in its new form 2023 Draft Guidelines. Stakeholders can still comment on the draft until October 3, 2022.

The commercial capitalization of digital assets is accompanied by efforts to protect core intellectual property rights – including a growing number of trademark applications covering terminology related to virtual goods and NFTs. The European Union for Intellectual Property defines virtual goods in its Guidelines as “intangible items purchased and used in online communities or online games” and assign them to Class 9 of the Nice Classification. They are treated as digital content or images. The term “virtual good” – such as “software” – of course lacks clarity and precision, and applicants are advised to specify in more detail the content to which virtual goods relate – such as “downloadable virtual goods, i.e. digital art”.

In the latest EUIPO Twelfth edition of the Nice ClassificationThe Bureau pays attention to the terms relating to NFTs. Class 9 includes downloadable digital files authenticated with non-replaceable tokens [NFTs]EUIPO refers to NFTs as “unique digital certificates, registered on the blockchain, that are used as a means of recording ownership of an item such as a digital artwork or collectible.” “Of course the NFT does not represent the digital number the object itself; it is merely a means of certification. As such, it can serve as an additional feature to define the scope of the protection of the trademark. Accordingly, the type of virtual good that is authenticated by the NFT must also be included in the trademark specification. As an example of the permitted application, EUIPO cites “downloadable digital art, validated by NFT.”

It is also important to note that Category 9 only covers downloadable virtual goods. Offers of non-downloadable virtual goods shall be classified as services corresponding to the specific offer in question, consistent with applicable classification principles for Categories 35-45. To give an example of a Class 35 service: “Provide an online marketplace for downloadable digital art images validated by non-fungible tokens. [NFT]. “

In the latest version of U.S. Patent and Trademark Office (USPTO) Identity Guidethe USPTO provides guidelines similar to those in the EUIPO Guidelines for Categories 9, 35 and 41.

Secure trademark protection for virtual assets

So far, we cannot seek guidance from a body of well-established case law on the scope of IP protection for virtual goods and their encoding through NFTs. For example: Is there a similarity in terms of trademark law between a physical good and its virtual counterpart? What is clear, however, is that current trademark protections for real goods do not extend to the digital world. Therefore, brand owners who are venturing into the field of digital assets are advised to audit their brand portfolios and supplement them with new deposits similar to the guidelines issued by EUIPO, USPTO and other brand offices.

Proper categorization of new trademark filings of virtual goods and their coding through NFTs is just a first step. The rapidly evolving virtual landscape, just like its real-world counterpart, will be a battleground for brand recognition and reputation, will invite imitators and libertarians, and will over time become the source of a dedicated body of regulation and case law. Our international team of experts in gaming, digital assets, and online regulation are here to help you navigate the metaverse – from NFT collaborations, branding, design and copyright protection strategies to online implementation and multi-jurisdictional regulatory advice on the metaverse ecosystems. You can contact us through our dedicated services Games and eSports page.

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