Canada: Brand Owners' Top Five Questions About The Metaverse, Answered

Some of the excitement has subsided in the last year, but the metaverse is not going away any time soon.

As its evolution continues, brand owners need to stay on top of developments, whether they class themselves as metaverse cynics, evangelists or somewhere in between.

Wherever they fall on that spectrum, this guide will help trademark advisers and their clients get on the same page, and stay ahead of the competition in this constantly changing field.

1. Hasn't the metaverse bubble already burst?

The hype may have died down, but reports of the metaverse's demise are greatly exaggerated.

A year ago, it was impossible to go anywhere online without running into a metaverse think piece (or hit piece) - hailing (or mourning) it as the future of internet communication.

The deafening metaverse buzz has dulled somewhat in the last 12 months, levelling out at more of a distant hum. For those who want to put a figure on it, Google Trends suggests global interest in the search term "metaverse" has fallen by close to 90 per cent compared with its peak in early 2022.

"Progress has been slower than expected, given the financial strength and investment of the big corporations looking to exploit the metaverse," acknowledges Charlie Bond, an intellectual property lawyer based in Gowling WLG's U.K. offices.

But how you feel about the overall health of the metaverse depends largely on where you live.

The crypto crisis, sparked by the collapse of the notorious FTX exchange, also inflicted some collateral damage on the metaverse, thanks to its close association in the minds of consumers with Bitcoin and other blockchain-backed digital assets, such as NFTs.

However, enthusiasm seems to be running higher in Asia, buoyed by steady user growth of metaverse platforms and the young tech-savvy populations of places like Singapore, Shanghai and Hanoi.

In South Korea, the national government has leaned into the country's reputation as a cultural and gaming pioneer, making a $200-million investment in metaverse technology the centrepiece of its "Digital New Deal." Meanwhile, at the municipal level, the Seoul Metropolitan Government has begun offering public services in the metaverse via its virtual City Hall.

The spotty nature of the metaverse's development comes as no surprise. Unresolved core issues, such as the high price and variable quality of its required technology, as well as the siloed nature of metaverse platforms, have all served as barriers to more explosive growth.

The metaverse in its truest form is a seamless single platform where you can explore anything from games, to shopping to any number of other pastimes and experiences. Some companies have teamed together to make their "mini" metaverses work in harmony, but it will be a long time before all the interested parties reach an agreement on how every "mini" metaverse can be combined into this envisioned single platform.

2. Hold on, how many metaverses are there?

Opinion is divided on the exact number, but there is no single metaverse - at least not yet.

In the meantime, 3D virtual worlds Decentraland and The Sandbox remain the standard bearers for the metaversal experience, as places where hundreds of thousands of monthly users can buy land, develop property and interact with friends virtually.

Gaming platforms such as Roblox and Fortnite or social media apps like Zepeto also stake a claim as major hubs. However, their metaversal qualities are more tangential to their core offerings, even if their user bases are of another order of magnitude altogether - counted in the millions.

More broadly, industry observers are increasingly coalescing around three distinct groups for the categorization of metaverse activities:

• The Consumer Metaverse encompasses what you might call the "classic" view of the metaverse, with avatars of real people shopping, socializing and playing games together.
• The focus of the Enterprise Metaverse is on companies' use of virtual and augmented reality tools as part of their business, including virtual meetings and simulations of real-world interactions for training purposes.
• A key feature of the Industrial Metaverse is the Digital Twin, a virtual copy of a physical space that serves as a testing ground for new technology, designs and processes. For example, a company may use a Digital Twin to envision how a new factory might function in reality, while a city could use one to trial changes to traffic flow or anticipate maintenance needs.

"While much attention to date has been focused on consumers, the metaverse promises to be a game-changer for businesses across all sectors," says Monique Couture, a lawyer in Gowling WLG's Ottawa office. "From cost-effective approaches to research and development to bold new opportunities for cross-border collaboration, brand building and product testing - the possibilities are endless."

3. Are brands still coming to the metaverse?

An ever-growing collection of businesses are leaping into the metaverse in search of fresh connections with new customers and deeper bonds with existing ones.

"More and more, companies are exploring consumer engagement strategies that shed the physical constraints of the real world and harness the tremendous brand-building potential of virtual environments," say Harleen Khanijoun, a lawyer, patent and trademark agent based in Gowling WLG's Hamilton office.

Fashion and gaming brands continue to position themselves as metaverse leaders. Early movers included Nike, which teamed up with Roblox to create Nikeland, a mini-metaverse within the game for fans of the brand's products.

Higher-end designers like Louis Vuitton have produced their own NFT wearables, typically available at more realistic prices than their aspirational online followers could afford to pay for the equivalent real-world outfits. Meanwhile, Hugo Boss and Gucci have each experimented in the emerging "phygital" space, blending physical and digital experiences via tagged real-life products that can be reproduced and worn by owners' avatars in the metaverse.

In the last six months, Nike has supplemented its metaverse presence with the launch of .SWOOSH, an NFT marketplace and digital community designed as a home for virtual creations based on Nike's physical shoes and jerseys.

The company will also be cheering the increased metaverse activity of some of its bigger commercial partners: sports leagues. For example, the NBA has signed a deal to make certain games available in Meta's Horizon Worlds platform, promising immersive shared watching experiences for users with virtual reality headsets. The NFL also got in on the act during its February showpiece, hosting its own celebratory Super Bowl concert in Roblox, featuring hip-hop artist Saweetie.

Other more recent high-profile metaverse arrivals include Oreo, who generated significant marketing buzz for its Oreoverse experience, which offers a place for fans to play games and design their own takes on the classic cookie.

4. What are the risks to my brand?

In case anyone had any doubts, the early metaverse experience has proven that nowhere is off limits to infringers and bad faith actors - not even virtual worlds.

Gucci and Prada were both targets of trademark applications filed by unaffiliated parties for "downloadable virtual goods," including clothing, eyewear, headwear and other items - although these were swiftly rejected by U.S. authorities.

But IP worries are not the only dangers lurking in the metaverse that brand owners should be alive to. Concerns surrounding privacy and cyber security, identity theft and child protection have attracted the attention of regulatory organizations around the world - notably Interpol, which established its own closed virtual reality space as part of its move to explore policing and crime investigation in the metaverse.

The European Commission is also in the midst of a public consultation in its quest to develop a vision for the metaverse "based on respect for digital rights" and European Union laws and values. In the short term, Charlie Bond says the onus will be on brand owners to look out for themselves.

Gowling WLG lawyers agree: legislative change is necessary but will no doubt be very slow, lagging behind the development of the metaverse itself - just as it did when the internet was invented. But that makes it all the more important that brand owners take steps now to ensure they are protecting their rights within existing legislative frameworks applicable to the metaverse.

Plenty of businesses are subscribing to the "you-snooze-you-lose" school of metaverse trademarking, with brands as diverse as Playboy and Yves Saint Laurent all taking advantage of updates in the most recent edition of the Nice Classification, which added an explicit reference in Class 9 to "downloadable digital files authenticated" by NFTs.

Recent developments in U.S. courts also delivered some good news to brand owners, suggesting that old-school enforcement methods will still have some teeth in the new-fangled world of the metaverse.

In early 2023, a New York jury ordered an American artist to pay $130,000 in damages after finding his range of unauthorized "MetaBirkin" NFTs infringed on trademarks held by Hermès, the maker of the real-world Birkin bags. In the process, the jury dismissed the artist's claim for First Amendment protection, while the damages included a $23,000 award for cybersquatting related to his registration of the MetaBrikins.com web domain.

5. What will happen next?

In its young life, the metaverse has already made fools of the numerous self-appointed oracles heralding either its impending domination of the online world - or its imminent doom.

So far, the most consistent quality of the metaverse has been its ability to develop in unexpected and unpredictable ways. Some of the uncertainty that this creates for brand owners will subside naturally over time, as trademark applications continue to work their way through the system in various jurisdictions and courts build a more solid foundation of metaverse-related jurisprudence.

Overall, metaverse development may remain slow and steady in the near future, but all could change very quickly if major players are able to make progress on the big issues of technological affordability and interoperability across platforms.

Imagine, if a company can create a platform that is taken up by consumers as being "the" platform for the metaverse. This could very likely speed up development as it will force other organisations to work together and incorporate themselves into that platform.

You may even test the water and get started, with a guest account. But before you dive in, get expert commentary or advice.

"Whatever the future of the metaverse holds, the one thing you can be sure of it will be overarching across industries and legal areas," comments Vincent Tan, a corporate lawyer working in the offices of JurisAsia LLC, with whom Gowling WLG has an exclusive association.

Explore our thought leadership designed to help you stay up to date, like the cross-practice view on the developments in the last 12 months.

Read the original article on GowlingWLG.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.