Fashion brands

The Metaverse and Implications for Fashion Brand Intellectual Property Rights

The metaverse seems to be everywhere right now – but what is it, and what should fashion brands be doing to ensure their intellectual property is protected in this emerging space?

The Metaverse is a virtual reality space, which allows users to interact with computer-generated environments and users and even allows them to purchase digital items in the form of NFTs. This virtual space has taken the world by storm and in doing so has created a number of questions in the fashion world regarding its impact on intellectual property rights.

To understand how the Metaverse affects the fashion world, it’s important to understand what NFTs are.

NFT stands for “non-fungible token” and is a unique, non-interchangeable unit of data stored on a digital ledger that uses blockchain technology to establish proof of ownership. This essentially means that NFTs hold information identifying the original copy of the “item” in question. This is why NFTs can have value like any other tangible fashion item like clothing or accessories and cannot simply be copied without being purchased.

When considering IP, it becomes evident that NFTs have great potential for revenue generation and IP is already highly valuable in the physical world, more and more fashion brands are also starting to consider the protection of their virtual assets.

Fashion already plays a big role in the Metaverse. Zepeto, Asia’s largest Metaverse platform, has acquired almost a quarter of a billion users in the 3 years since its launch. It has since created a number of so-called “virtual influencers”, who design and sell NFTs in the form of digital clothing and fashion accessories which are then purchased by users for their avatars online. Some of these influencers are already earning up to six figures with their virtual clothing, which demonstrates users’ interest in fashion in the virtual world.

Even luxury brands such as Ralph Lauren and Gucci are participating with their digital clothing already on sale and featured on avatars on Zepeto. In September, Luxury Marketplace UNXD collaborated with Dolce & Gabbana to launch its own NFT collection, Collezione Genesi, which has achieved sales of approximately $5.65 million to date.

The demand for virtual fashion seems to come from the “affordable” price. Designer item NFTs tend to be significantly cheaper than their real-world counterparts while still retaining their value. This makes them more accessible. In the Metaverse, you really can own that Gucci handbag that you always wanted but could never afford in real life.

It’s not just luxury brands that are getting into NFT. Over the past six weeks, we’ve seen major brands Gap, BoohooMan and H&M all announce their own NFT clothing collections. Despite the “affordable” price of luxury NFTs, not all users will be able or willing to afford these items. The big brands therefore open the market to users who still want to express their love for fashion but at a more reasonable price. This will likely encourage more users to engage with the metaverse and increase the number of virtual influencers creating new fashion-based NFTs.

One problem with the Metaverse and emerging NFTs is that virtually anyone can create NFTs from the comfort of their home. This gives room for the potential copying of well-known models in the fashion industry, which involves much less effort and funds than the production of actual counterfeit products.

While we might see brands arguing in trademark litigation that digital clothing is similar enough to physical clothing for trademark protection to extend to their digital counterparts, we are seeing more and more fashion brands choose to update their trademark protection now to specifically protect their virtual assets.

For example, in October 2021, Nike filed a number of new applications for its famous trademarks such as its slogan “Just Do It”, the swoosh logo, its “Jumpman” logo and “Air Jordan” among others for sneakers and virtual clothes. Ralph Lauren has also filed for trademark protection in the United States for items including store services offering virtual clothing and accessories, and online virtual clothing and accessories for use in virtual environments.

With the rapid expansion of the Metaverse, it will be interesting to see how the NFT clothing craze unfolds and what fashion brands choose to do to protect the trademarks of these digital assets. In our view, however, it is important that brands actively consider extending their brand protection to the virtual space now to avoid potential conflicts and “virtual infringement” later.