Intellectual Property

The concept of Metaverse is nothing new. This term was first introduced by Neal Stephenson, in his science-fiction novel  “Snow Crash” as a “form of human life and communication in a virtual three-dimensional space through a digital avatar”. As of today, this new world is no more science-fiction but part of our world.

Thus, this new virtual world raises some legal issues as to its use, especially when it comes to personal data, intellectual property and consumer law.

The metaverse is a 3D virtual world. Within this universe, users can live a complete immersive experience since they all can interact, buy, sell products, sell lands, etc.

The metaverse is a world full of opportunities as well as a world still in development. As a matter of facts, more and more individuals and companies have jumped into this new world where they both experience a unique experience. Because this is a virtual world, it is of legal interest and certain questions need to be raised.

What will be the applicable privacy laws in the metaverse?

When Facebook changed its name to Meta and introduced their vision of Metaverse, the trust people could have had toward the metaverse shifted. Thus, just as in the real world, the issue of personal data has an important place in the metaverse.

In a more general way, the virtual world is only a reflection of the real world. At the very least, it can be an improved version of reality.  As this world is virtual , the use of data becomes a major issue. As the data collected is different than in real world that involves numerous amount of information concerning the user, especially through their avatars as users are accurately represent by their avatars. Through their avatars, facial expressions, gestures or types of reactions that a person might have during their interactions in the metaverse can be collected.

 Because  facial expressions, gestures, or interactions can be collected, the traceability of users will be even more advanced than in the real world.

The European Union has the user’s data protected from being collected without their consent with the applicability of the General Data Protection Regulation (GDPR). Now the question is does the GDPR apply in the metaverse? Can the GDPR protect European nationals?

As per the Article 4 (1) of GDPR gives a broad definition of “personal data”. According to article 4(1), personal data is  any information which are related to an identified or identifiable natural person.

From this definition, the GDPR can indeed be applied in the metaverse. As the personal data is defined in a broad way, even indirect data can be considered as personal data. Therefore, as soon as a gesture or facial expression can be traced back to a person, it will be considered as personal data.

However, what about the territorial application of the GDPR? In fact, this Regulation only protects users when they are within the European Union.  Yet,  the metaverse, by definition, is a world without any borders.

Is Metaverse, facilitating counterfeiting?

The second issue raised by the metaverse is dealing with intellectual property law, and more specifically, about counterfeiting. There have been recent cases of counterfeiting in the metaverse, the most famous one being the MetaBirkin case.

On January 14, 2022, Hermès sued the artist Mason Rothschild for counterfeiting its Birkin bag. In fact, the latter had created a hundred or so NFTs in the shape of the Birkin bag, which he sold in the metaverse for cryptocurrency.

The French Intellectual Property Code defines counterfeiting as any violation of an intellectual property right, such as the reproduction, imitation, or total or partial use of a trademark, patent, model, copyright or software without the authorization of its owner (article L.335-2 French Intellectual Property Code). If a work or object belonging to a brand or artist is copied into the metaverse, there is a risk of infringement.

However, the question arises as to whether the products of small companies or the works of lesser known artists are counterfeit. While well-known brands or artists can effectively defend themselves against misuse of their brand or work in the metaverse, it is much more complicated for companies or artists who are unknown to the general public. Thus, there could be a disparity between the well-known people/companies and the “others”.

Hence, the best way to avoid such disparity but also to avoid any infringement, would be for companies or artists, whether they are known or not, to register trademarks covering virtual products or services. Similarly, one solution to avoid infringement of artists’ copyrights would be to use the blockchain. In fact, blockchain grants certificates ensuring a follow-up of the transactions and the originality of each world sold. As a result, a traceability of the work is in place, making it possible to avoid future counterfeiting.

Will consumer law apply to Metaverse?

As a mirror of the real world, users can buy and sell products. Because consumers find themselves buying products in this world, consumer law cannot be overlooked.

 Generally speaking, consumer law can be defined as all the legal and regulatory provisions designed to protect the consumer. Thus, as in the real world, the virtual world must be regulated and  governed by consumer law. The terms applicable in the real world will be applied in the virtual world and sanctioned in the same way.

The Commission National for Information Technology and Civil Liberties (CNIL) has looked into the issue of consumer law in the metaverse and has considered that consumers must receive enhanced information and be able to refuse without suffering the consequences. However, this seems complicated in the metaverse.

The metaverse offers infinite possibilities to its users, and to our society in general. However, the metaverse raises questions, particularly in terms of personal data protection and trademark law. Moreover, the metaverse, like the real world, offers its users the possibility of selling products. Consequently, consumer law must be applied there. In other words, the legal rules applicable in the real world must be respected in the virtual world, and some of them must be adapted to ensure the best protection of goods and users. As this technology is booming, it will be important to see how legislations adapt to this new world.

SEE ALSO…

♦ https://www.dreyfus.fr/en/2022/08/12/what-are-the-legal-issues-behind-the-registration-of-off-chain-nfts/

♦ https://www.dreyfus.fr/en/2022/03/11/metaverse-is-it-necessary-to-register-specific-trademarks-for-protection/

Don’t be fooled, although the argument of the family of trademarks can certainly be used to avoid the cancellation of a trademark for non-use, it can also work against you. This is partly the lesson taught by a decision rendered on December 17, 2021 by the Paris Court of Appeal (Paris Court of Appeal, Pôle 5, ch. 2, n° RG 20/17286), judging a summary judgment on appeal.

This decision also provided an opportunity to clarify a crucial and not uncommon point of law: the licensee’s standing to sue for infringement in the event of a referral to the interim relief judge.

Facts and procedure. – The first applicant, a natural person named Soraya, is the owner of the European Union word trademark SORAYA covering a swimwear and beachwear creation and distribution activity. She is also the owner of French and European Union semi-figurative trademarks composed of the name SORAYA.

These trademarks are exploited through a company, the second applicant, of which the owner of the trademarks is herself the manager and sole partner. The summary proceedings were brought on behalf of both the operating company and the trademark owner. A contract conferring an exclusive concession was previously concluded between the trademark owner and the company.

After becoming aware of the existence of a company called Soraya Beachwear Ltd. located in Switzerland, the licensee applied to the interim relief judge to obtain a temporary restraining order against it. The latter company operates a website selling swimwear and beachwear on line <sorayabeachwear.com>, as well as an Instagram account related to this site. Also named Soraya, the founder of the challenged company chose to use her first name to designate her collections.

Following the dismissal of their claims, the applicants appealed the summary judgment order.

Admissibility of the licensee to act in summary proceedings alongside the owner. – One of the contributions of this judgment is the interpretation made by the Paris Court of Appeal of Articles L. 716-4-2 of the Intellectual Property Code and 25 4° of the EU Regulation 2017/1001, relating to the standing of a licensee.

Under French law, there are cases in which a licensee may bring a “civil action for infringement”, notably with the consent of the owner or as a beneficiary of an exclusive right of use, provided the owner has not taken the initiative to act within a reasonable period of time after formal notice.

In any event, the Intellectual Property Code and the above-mentioned European regulation both provide that a licensee is entitled to intervene in the infringement proceedings brought by the holder of the IP rights.

There is no doubt in this case that the operating company must be considered as the beneficiary of an exclusive right of use on the invoked European Union word trademark since the exclusive trademark license, submitted to the debate, bestows on the company the status of licensee.

However, it was not a question relating to the intervention the company in the proceedings, but rather of an action being brought jointly by the company and the trademark owner. There seemed to be a confusion between the filing of a joint action, which requires the consent of the owner when the licensee initiates the action, on the one hand, and the intervention of a third party in proceedings initiated by another party, on the other hand. Indeed, it is expressly mentioned that the company “acted in summary proceedings jointly” with the trademark owner before the President of the judicial court. In bringing this action, the licensee seeks to obtain “compensation for the damage that it has suffered”, as provided for in the law rules relating to the intervention of the licensee.

One of the decision’s highlights is the fact that the license agreement was not registered, which is a condition for its enforceability against third parties. It was however ruled that the lack of publicity of the agreement did not hinder the licensee status acquired by virtue of a validly concluded agreement.

The appeal decision therefore deemed admissible the applicants’ action and reversed the interim order on this count.

It should be noted, however, that in the case of a ‘simple’ licensee (who enjoys a non-exclusive license), the solution held by judges not the same. Indeed, under the terms of a previous decision (TGI Paris, ord. ref, July 21, 2011, No. 11/55158, Sté Lyl c/ Michel Attali), the summary proceedings judge stated the inadmissibility to act of the simple licensee: “only a person with standing to bring an infringement action may refer the matter to the summary proceedings judge in accordance with the provisions of Article L. 716-6 (…), this is not the case of the non-exclusive licensee who is only admissible to intervene in an infringement proceeding initiated by another party in order to obtain compensation for the damage that is specific to him, by application of article L. 716-5 of the Intellectual Property Code”.

In addition to verifying standing, the summary judgment judge, when not confronted with a manifest nullity of the title invoked, limits itself to assessing the existence or imminence of an infringement of the petitioners’ rights.

Lack of use of the invoked trademark. – The procedure to be followed by the interim relief judge was specified in a decision of June 28, 2011 (TGI Paris, ord. ref, June 28, 2011): “The interim relief judge must therefore rule on the challenges raised before him to oppose the measures requested, and these challenges may concern the validity of the title itself ; It is then up to the judge to assess the seriousness or otherwise of the challenge and to evaluate the proportion that exists between the challenge made by the defendants and the imminent infringement alleged by the plaintiffs and to decide, in view of the risks incurred on both sides, whether or not to prohibit the marketing of the products, to order their withdrawal and to award an advance”.

In this case, the infringement of the applicants’ rights could seemingly be characterized by the use of the identical name SORAYA to cover strictly identical products and services, namely swimwear and beachwear, as well as the related commercial services.

The applicants, in order to claim infringement, relied solely on one of their trademarks: a European Union word trademark composed exclusively of the first name SORAYA. However, in order to be successful in the proceedings, the applicants had to be able to demonstrate genuine use of the trademark in question.

As a reminder, a trademark is subject to genuine use if, within a continuous period of 5 years, it is be used in accordance with its essential function, which is to guarantee the origin of the goods and services for which it is duly registered (Regulation (EU) 2017/1001 of 14-6-2017 art. 58, 1-a).

The applicants, in communicating the evidence intended to demonstrate the serious use of the trademark, seemed to rely on a certain reputation, which they did not explicitly argue. Instead, they testified to a simple “well-known use” of the trademark, induced in part by their long-standing partnership with the Miss France election. However, the argument that did not work in their favor was that “the exploitation of the derived trademarks that were the subject of subsequent registrations did not in any way diminish the use of the historical trademark SORAYA. In addition, in order to justify the serious use of the trademark, the applicants communicated documents with a certain date, but for the complex SORAYA signs and not for the SORAYA word trademark. Moreover, among the plethora of documents submitted in support of genuine use of the trademark, several of them did not have a definite date, which makes it impossible to determine whether the trademark was actually used during the five-year reference period for which genuine use must be proven. However, this period was not communicated by the opposing party’s appeal. Therefore, in this respect, the first instance court judges referred to the period specified in the last pleadings addressed to the summary proceedings judge.

With respect to the various trademarks derived from the trademark in question, which are mostly semi-figurative trademarks, the judges will consider them as a family of trademarks.

This qualification of family of trademarks must be retained, according to consistent caselaw, for trademarks commonly held by one and the same owner and including the same distinctive element. Although the contours of this concept are insufficiently understood, it should allow a trademark owner and operator to avoid the sanction of cancellation for failure to use a trademark, whether registered or not.

A recent decision rendered by the European Union Court of First Instance (EUTA) testified to the appropriateness of this concept in relation to several trademarks containing the element “Mc”/”Mac” and owned by the American company McDonald’s. In 2016, McDonald’s won the case by asserting the following 12 trademarks in the European Union: McDONALD’S, McFISH, McTOAST, McMUFFIN, McRIB, McFLURRY, McNUGGETS, McCHICKEN, EGG McMUFFIN, McFEAST, BIG MAC, PITAMAC. The qualification of “family of trademarks” was thus retained to cancel a “MacCoffe” trademark.

Nevertheless, what is worth remembering following the SORAYA decision is that the first instance court judges will consider that the use of a family of trademarks cannot be successfully invoked “when the aim is to establish the use of a sufficient number of trademarks of the same “family””.  In this sense, the use of one trademark cannot be invoked to justify the use of another trademark. In other words, the fact that the applicants used the semi-figurative trademarks independently, which are also different from the EU word trademark, does not allow them to rely on the concept of use of a family of trademarks.

Practical considerations from the decision:

– The exclusive licensee, together with the owner of the trademark, is entitled to bring an action in summary proceedings for the prosecution of alleged infringements;

– The licensee has standing to act even if the contract under which he derives his rights has not been subjected to publicity formalities;

– The assessment of the genuine use of a European Union trademark is carried out with regard to a reference period of 5 years, which is in principle specified by the party claiming the lack of such use, both in the writings addressed to the judge of the summary proceedings and to the Court of Appeal;

– The use of a substantial number of trademarks derived from the invoked trademark, and presumably constituting a series/family of trademarks, does not necessarily prove a substantial use that will defeat the legitimate use of similar trademarks.

SEE also…

♦The Specsavers vs Asda saga: Genuine use of trademarks

♦The masked licensee or the enforceability of the license of a non-enrolled European Union trademark