Bridging The Real And The Virtual: Trade Mark Protection In Metaverse In China

A Landmark Ruling from Hangzhou Intermediate People's Court

The Hangzhou Intermediate People's Court recently issued a final judgment in Case (2024) Zhe 01 Min Zhong 10520. The ruling is being hailed as China's first judgment finding trademark infringement where mark use on virtual goods in an online game was identical with a registered mark designating the physical goods, where the goods are in a different Nice Classification class (Class 9 vs Class 12). The groundbreaking case broke the boundary of rigid class-based virtual and real goods and signals a more consumer-centric approach when considering the practical likelihood of consumer confusion in commerce.

Background of the Case

The dispute centered around the use of the 'G.PATTON' mark, registered by the plaintiff for vehicles in Class 12. The defendants were involved in the authorization and co-branding activities for a popular mobile game. Within the game, a virtual vehicle skin was made available to players, prominently branded with the 'G.PATTON' name. This virtual vehicle was offered alongside other officially licensed virtual models including several renowned luxury car brands, creating an in-game garage of aspirational vehicles.

The plaintiff, holder of the Class 12 registrations for 'G.PATTON,' sued for trademark infringement and unfair competition. The core legal question was straightforward yet novel: could a virtual vehicle in a game (generally classified in Class 9 as 'downloadable virtual goods' or 'computer game software') be considered 'similar goods' to a real-world automobile (Class 12)?

The Court's Groundbreaking Reasoning

The first-instance court adhered to a more traditional view, finding the goods dissimilar based on their differing physical nature and purposes under the Nice Classification framework. However, the Hangzhou Intermediate People's Court overturned this finding on appeal, delivering a sophisticated verdict that acknowledges the convergence of physical and digital brand experiences.

The collegial panel reasoned that while the core functions of a digital asset and a physical vehicle differ, the critical factors for determining similarity of goods—particularly the relevance of the goods and the likelihood of consumer confusion were present. The court highlighted three (3) pivotal elements:

1. Functional Analogy and Marketing Context: The in-game vehicle was not a mere decorative pixel pattern; it provided a transport utility within the game's world, mirroring the fundamental function of its physical counterpart. More importantly, the game integrated the vehicle as a key part of its gameplay and marketing, presenting it in a context that directly evoked real-world automotive desire and branding.
2. Consumer Perception and Association: The court placed significant weight on the fact that the 'G.PATTON'-branded virtual vehicle was featured alongside genuine, licensed luxury car brands. This contextual placement would inevitably lead players to perceive 'G.PATTON' as another genuine vehicle brand that had authorized its presence in the game. The inclusion created a direct mental association in the consumer's mind between the virtual mark and real-world vehicles.
3. Authorization and Connection: The use of the mark was not to identify the source of the game software itself but to express a specific connection, cooperation, or authorization between a vehicle brand and the game operator. The defendants' activities in authorizing this co-branded content severed the link between the 'G.PATTON' trademark and its rightful owner, misleading consumers into believing an official affiliation existed, where it did not.

This reasoning represents a departure from a strict, class-based goods analysis towards a holistic assessment of how trademarks are actually perceived and used in contemporary commerce, where virtual experiences are powerful marketing tools that directly impact real-world brand value.

Implications for Trademark Protection Strategies

Though not being a case law jurisdiction, the G.PATTON judgment may still serve as a wake-up call for brand owners to reassess their intellectual property strategies for the digital frontier.

1. Strategic Portfolio Expansion: Brand owners shall proactively consider filing for registrations covering virtual goods and digital services on top of their core physical goods or services. Critical classes worth planning include:
   • Class 9: For 'downloadable virtual goods,' 'digital assets,' and 'virtual reality software.'
   • Class 41: For 'online entertainment services,' 'providing online video games,' and 'virtual reality game services.'
   • Class 42: For 'design and development of virtual goods,' 'software as a service (SaaS)' featuring virtual environments.
   • Class 35: For 'online retail store services featuring virtual goods,' and 'virtual marketplace services.'

Securing these registrations provides a stronger, pre-emptive legal footing.

1. Enhanced and Expanded Monitoring: Enforcement monitoring can no longer be confined to traditional e-commerce and physical markets. Vigilance must extend into virtual worlds, video games, NFT marketplaces, social media platforms featuring augmented reality (AR) filters, and any emerging metaverse platforms. Brand owners need to invest in or partner with services that specialize in digital surveillance.
2. Courage for Cross-Class Enforcement: The judgment encourages rights holders to pursue enforcement actions even when an infringing use is in a technically different Nice Class. The key is to leverage the factors of consumer confusion, brand association, and the modern marketing context, just as the Hangzhou Intermediate Court did.

Proactive Steps for Licensing and Risk Mitigation

For brand owners looking to license their IP for use in virtual platforms, and for licensees seeking to secure such rights, the ruling imposes a higher standard of care.

• For Licensors (Brand Owners): It is imperative to develop specialized digital licensing agreements that go beyond generic IP licenses. These arrangements must include meticulously defined scopes of use, stringent quality control and approval rights over the digital representation of the brand, robust audit and monitoring clauses, and clear termination triggers for breach. The license must explicitly state whether it grants rights for virtual-use only or also implies an association with physical goods.
• For Licensees (Game Studios/Virtual Platforms): Comprehensive due diligence is non-negotiable. A clearance search must not be restricted to the virtual goods classes (e.g., Class 9) but must expansively cover the classes for pertinent physical goods (e.g., Class 12 for vehicles, Class 25 for clothing, Class 14 for jewellery). Relying solely on a registration in Class 9 is now a risky strategy if a similar mark exists in the physical goods class, given the potential for a G.PATTON-style confusion analysis.

Conclusion

The (2024) Zhe 01 Min Zhong 10520 judgment is a seminal moment for IP law in China and a strong indicator of global trends. The decision bridges the gap between physical trademark protection and the digital realm, demonstrating a judicial awareness that the value of a brand is now across the real and virtual world. For brand owners, the judgement is an empowering tool to protect their hard-earned goodwill wherever it appears. For operators in the digital economy, it is a reminder that the virtual world is not a lawless frontier but an extension of the marketplace, requiring careful navigation of intellectual property rights. Proactive registration, vigilant monitoring, and precise licensing are no longer optional — each is essential to competing and thriving in the new digital reality.