18/19, D. Connell, ‘When should Trademark Owners Have The Right to Enforce Against Dilution of their Famous Mark Within Virtual Reality Metaversal Environments?’

Author: Danielle Connell

Introduction

Nwaneri states that: ‘there are several opportunities for goods and brands to be exploited through exposure in VR [virtual reality]’.[1] Virtual reality metaversal environments (VRMEs) present a worthy opportunity for a new form of advertising and marketing for trademark owners, especially those with famous trademarks. The use of this complex virtual reality technology will allow consumers within VRMEs to experience popular brands in a way that was not previously possible with traditional online shopping. It is also evident that, with the popularity of such VR environments, the sale of virtual products and services by famous brand owners will be an equally important market to that of their real-life equivalents.

Bagheri observes that: ‘with the growth of virtual reality “worlds” comes a number of legal questions about how different players will be able to enforce their intellectual property within virtual reality’.[2] Trademark owners’ famous marks are capable of dilution in VRMEs, and UK law can accommodate such claims where use in commerce is proven. Yet, it is evident that there are differences that could lead a potentially successful infringement claim in the real world to fail in one coming from a virtual environment. Therefore, cases remain where VRME dilution claims should not succeed. This paper will consider the circumstances in which trademark owners should have the ability to enforce against dilution claims within VRMEs.

Defining VRMEs

To determine whether dilution claims should be enforceable for VRMEs it is first necessary to present a definition. Due to VR’s swift technological progression[3], ‘developers have been trying to create what they are calling the Metaverse’.[4] This would encompass an ‘interconnected virtual world where users can travel from one immersive experience to the next, like walking through an infinite series of doors that take you through an endlessly growing virtual universe’.[5] This idea would closely mirror that of the world known as the OASIS created in Ernest Clines’ book Ready Player One, where avatars socialise, partake in experiences unachievable in the real world, play and work. An early version of such a VRME, Sansar, was launched in 2017 as the VR equivalent and successor to Second Life (SL), which provides ‘social virtual reality experiences’.[6] While this early VRME may not be as technologically advanced as the OASIS, it demonstrates the initial steps required to achieve this objective in the future. Therefore, life within the metaverse is made possible through the use of VR technology. VR encompasses:

‘an interactive computer-generated experience taking place within a simulated environment, that incorporates mainly auditory and visual, but also other types of sensory feedback like haptic. This immersive environment can be similar to the real world or it can be fantastical, creating an experience that is not possible in ordinary physical reality’.[7]

The importance of this continuously evolving technology is its effect on encouraging the expansion and introduction of increasingly realistic VRMEs. Frandsen argues that, ‘as virtual worlds continue to expand, control of virtual brands will become increasingly important’.[8] It is my view that, as technology progresses, dominant VRME such as the OASIS will exist and be used by the majority of the population. While this belief may appear fanciful to some, academics such as Nwaneri share a similar vision.[9] Individuals are likely to submerge themselves in this type of VRME, spending most of their time there for a variety of reasons, both work-related and social.[10]

Unconnected Worlds

Scholars hold diverging views on whether the law should govern the rules within VRMEs, or whether they should be considered a separate space immune from such responsibilities. In the past, it was recognised that there was a sphere of exclusion between private and public life in which individuals could be safe from intrusion;[11] ‘in contrast to the pervasive blandishments that surrounded the world of work, the home was seen as a refuge where commercialism could not enter’. [12] This is no longer the case with the growth of technology piercing the protected bubble that previously safeguarded the home. In the modern age, some individuals are turning to virtual environments as a safe haven and escape from the real world. Many scholars argue that virtual environments should ‘allow users to feel as though they are present in a space separate from the traditional world’.[13]

Blurring boundaries

There is a belief that virtual environments are only used by players, so they may engage in forms of fantasy play, with no interest in making real-life profits.[14] Many believe that individuals’ freedom to play should be respected and not be subject to real-world laws. [15] This encompasses ‘the freedom of the players to participate in the virtual world and interact with each other through their in-game representations, or avatars’.[16] Yet, as Dougherty and Lastowka observe:

‘if such players in virtual worlds are invoking trademarks during their performances, are there trademark law implications? Common sense might lead us to think we are simply returning to the realm of fantasy, which falls outside the reach of trademark law. But, common sense may lead us astray because, as many have observed in recent years, virtual economies can be quite real’.[17]

VRMEs as promotional tools and online markets

Research suggests there is a blurring of these two worlds currently happening due to individuals’ engagement in commerce in online markets created within these virtual environments.[18] Property plays a significant role within virtual environments in most cases, whether the aim is for ‘users to acquire personal assets in order to improve their avatar’s strength, abilities and powers’[19], or to ‘purchase items that fulfil purely decorative or social functions, such as designer clothing, furniture or pets’.[20] Therefore, it is recognised that ‘the economic boundaries between the real and the virtual world are not as distinct as they might appear’,[21] as dilution is occurring through the sale of virtual goods and services in in-world markets and online by unauthorised users, and trademark owners believe that they should possess the legal right to enforce against these actions.

Should users be subject to dilution laws?

Many hold the view that ‘virtual worlds are such distinct places that real-life law shouldn’t apply; what happens in virtual worlds doesn’t affect the real world in ways that justify legal intervention’.[22] This reinforces the belief that the rules of the game should be the extent of regulation to which virtual environments should be subject, and that they should be free from regulation by the law.[23] Some scholars also hold the belief that censoring the use of famous trademarks within virtual environments may devalue the enjoyment of the game.[24]

However, there is disagreement between virtualists and realists on this issue.[25] Realists argue that virtual worlds are not a separate space as, from the external viewpoint, they are still controlled by the individuals using the technology. The individual has not gone anywhere, and should still be subject to real laws within that world where they pass the boundaries of what is acceptable play.[26] Some argue that: ‘the purpose of these virtual environments is not just entertainment, but to integrate a self-sustaining economy, facilitating monetary transactions of substantial value with actual repercussions in the real world’.[27] Therefore, in some circumstances, virtual environments are crossing the boundaries from play to real commerce.

Thus, individuals should not be exempt from dilution claims when they engage in commerce, simply because they are within the VRME. This same rationale would be unlikely to be followed if users were breaching child pornography laws.[28] Therefore, whilst respecting play to an extent and freedom of expression within the realms of reason, it would be unacceptable to allow individuals to benefit from such infringement such as dilution of a mark without real-life legal repercussions.

When dilution claims should be enforceable

Nwaneri notes that: ‘the issue of what constitutes “use in commerce,” both on a platform providing an array of VR experiences and in the VR experiences themselves, will have to be litigated before the topic can come to any clear resolution’.[29] This paper will identify the types of commercial transactions which have occurred in the past in regard to famous marks for goods and services, in virtual worlds such as SL, and what the plausible verdicts may be in regard to VRMEs in the future.

Real-world financial benefit

Esparza argues that: ‘if there is a link between economic reward and the real world, then this weighs in favour of finding … use in commerce’.[30] This occurs when ‘real-money trading is involved’.[31] This arises when the virtual currency within the VRME can be converted into real world currency,[32] providing a real financial benefit to the individual in the real world. To orchestrate such a trade:

‘players must be able to link up both in the virtual world and in the real world. Inside the virtual world, the first player’s avatar hands the item being traded to the second player’s avatar. Back in the real world, the second player transfers real money to the first player’.[33]

Armitage opines that the UK courts would likely be willing to accept that the mark is being used in the course of trade where the virtual currency can be exchanged for real money in relation to in-world markets where users can buy goods and services directly from other players within the game.[34] Given that in predecessor worlds like SL, many users made extensive profits through the unfair or detrimental sale of famous virtual or real-life branded goods,[35] it is likely that successor VRMEs will encounter the same issues and thus, these distinctions are important.

Sales of virtual goods online

There are various ways that in-game goods can be sold for real currency. For instance, it is recognised that the sale of virtual goods of famous marks have taken place on different online platforms such as eBay.[36] This practice reveals the extent users will go to acquire branded virtual goods. However, exploiting marks in this way is more likely to be treated as commerce, as the goods are no longer being transferred in-world. Thus, even if the goods existed in a world where only virtual currency existed and thus would arguably not satisfy the commerce requirement, this would be overturned where the goods are placed for sale on a site such as eBay. When this occurs the use in the course of trade requirement is more than satisfied.  Kotelnikov takes the view that:

‘sales of in-game assets are likely to be treated as commerce regardless of whether the real money trade is permitted in the game, since even the tiniest doubt as to this possibility, or just one example of for-profit real money sale (including, for example, sale of the whole account), would likely be enough to satisfy the court’.[37]

It is possible that this practice will continue to be allowed in relation to future VRMEs, if it is not prohibited by dilution law at an early stage.

In-world sanctions

It has been recognised that in-world sanctions may be beneficial in dealing with the issue of dilution. However, these are only useful so long as they are implemented.[38] One method identified through the enforcement of computer code.[39] Unfortunately, these are able to be manipulated by users and may not be effective long term. Other approaches may be social exclusion from the community of players. Unfortunately, this is only applicable so long as the community within the game agree that the transfer of famous marked goods for money on online platforms is wrong.[40] However, as this practice has been deemed acceptable in predecessor worlds such as SL by users for a significant period, legal enforcement of dilution claims is likely to be the most effective and appropriate method.

When real-world laws should not apply to VRMEs

No real-world financial benefit

Nwaneri acknowledges that where goods or services are ‘only being exchanged for virtual currency’,[41] it would be ‘unclear whether this constitutes “use in commerce”’.[42]               Borowick and MacArthur conclude that:

‘even if the sale is conducted in virtual currency that can be used only in the User’s VR world with no equivalent value in the real world, it would be harder to argue that the User is not using the logo “in commerce”’.[43] Whether the profits accrued from infringing famous trademarks can be transferred into real money should not be a consideration. It is likely that there are in-world benefits attached to making this infringing content, even if only relating to in-world currency, or else players would not engage in it. This unauthorised use is an unfair use of the trademark and if used in a detrimental manner could affect the reputation of the mark in the real-world.

Yet, as Esparza argues, ‘if there is no link between economic reward and the real world, then there is no way an avatar may achieve the use in commerce requirement’.[44] Dougherty and Lastowka acknowledge, ‘it is not necessarily clear that the use of a brand in relation to a sale in Second Life, even where the alleged infringer is aware of the “real world” brand, is done with a bad faith intent to divert sales from the trademark holder’.[45] It may be used for ‘expressive purposes for the alleged infringer’.[46] Thus, it may be considered a step too far to begin enforcing dilution rights within virtual play where there is no real-world financial benefit, and thus no blurring of the two worlds. Kotelnikov agrees, arguing that:

‘the criterion of “commerce” should be less stringent for players occasionally engaging in exchange for the thrill of it and those who coherently pursue the aim of making profits inside the game’.[47]

However, it should be acknowledged that as users spend more time online, this in-world currency could be arguably just as valuable as real-world money. It may be important for individuals’ ability to partake in certain games, have the ability to be granted access into exclusive zones, or to entertain clients or friends in-world. Thus, users may be equally motivated to partake in unauthorised acts to increase their in-world bank balance, in order to exploit these benefits.

Imaginary exchanges in-world

Dilution claims should not apply where they unreasonably impede the right of freedom of expression among players.[48] For instance, where two avatars are making an imaginary exchange of famous brands with imaginary currency,[49] a dilution claim would not be applicable as no real exchange has taken place and this is nothing more than an act of the imagination.[50] To prevent such an exchange within a VRME would be an excessive restriction on this freedom. This situation would be consistent regarding goods being swapped as imaginary famous brands for in-world currency. This would occur when one avatar pretends to buy Ciroc Vodka from another, but instead purchases a standard untrademarked water bottle.[51] This would not be classed as use in the course of trade, as no virtual replica bearing the sign of the mark is being used. Neither does it include any real-world benefit, as only non-transferrable in-world currency was used to make the purchase.[52] Therefore, this would be classed as an act of play.

Non-commercial personal use

Finally, if an avatar uses a real-life famous mark on a good or service within the game for their own personal and non-commercial use, this will not amount to trademark dilution. Yi, Borowick and MacArthur support this view, stating:

‘if a User uses a real-world logo on a t-shirt that the User created in VR, although the trademark rights to that logo are owned by someone else, such use may not constitute a trademark infringement, because the User is not using the logo “in commerce”’.[53]

Conclusion

Consequently, it appears reasonable to accept that due to this overlap of virtual play and real-life commerce, some VRMEs who use this system in-world will be subject to legal rights and obligations under intellectual property law where virtual goods are sold in-world or online for real currency. Yet, this is unlikely to apply uniformly, as there remain cases where dilution claims should not succeed in virtual worlds and should be treated as play. This is demonstrated in cases of imaginary play, imaginary use and absence of real money trading. Regardless of the stance taken in this discussion, the approach that will be taken on virtual currency trade for famous marks and whether this may be classed as use in the course of trade in VRMEs remains ambiguous. For the law to be clarified in this area in the UK, litigation is required. Thus, famous UK mark owners who have the necessary resources should be encouraged to attempt to enforce their legal rights within UK courts when these issues within VRMEs arise, so that the law can be clarified.

[1] C. Nwaneri, ‘Ready Lawyer One: Legal issues in the innovation of virtual reality’ (2017) Harvard Journal of Law & Technology 30(2), 601.

[2] R. Bagheri, ‘Virtual reality: The real-life consequences’ (2017) U.C. Davis Business School 17, 112.

[3] J. R. III Boule, ‘Redefining Reality: Why Design Patent Protection Should Expand to the Virtual World’ (2017) American University Law Review 66, 1113.

[4] For an in-depth definition of the metaverse see https://xinreality.com/wiki/Metaverse.

[5] Wikipedia contributors, ‘Metaverse’ (Wikipedia, The Free Encyclopaedia, 27 January 2018) <https://xinreality.com/wiki/Metaverse.&gt; accessed 19 August 2018).

[6] Shenja van der Graaf, ComMODify: User Creativity at the Intersection of Commerce and Community (1st edn, Palgrave Macmillan, 2017), 87.

[7] Wikipedia contributors, ‘Virtual Reality’ (Wikipedia, The Free Encyclopaedia, 13 August 2018) <https://en.wikipedia.org/wiki/Virtual_reality.> accessed 19 August 2018).

[8] B. Frandsen, ‘Is Using Call of Duty in this Comment Infringement?’ (2016) BYU Law Review 10(1), 324.

[9] Nwaneri (n 1), 601.

[10] M. A. Lemley, E. Volokh, ‘Law, Virtual Reality, and Augmented Reality’ (2018) University of Pennsylvania Law Review 166, 1051.

[11] M. Bartholomew, ‘Advertising in the Garden of Eden’ (2007) Buffalo Law Review 55(3), 769.

[12] Ibid.

[13] E. C. Chaffee, ‘Securities Regulation in Virtual Space’ (2017) Washington and Lee Law Review 74(3), 1397.

[14] R. Bond, ‘Business trends in virtual worlds and social networks – an overview of the legal and regulatory issues relating to intellectual property and money transactions’ (2009) Entertainment Law Review 20(4), 3.

[15] J.M. Balkin, ‘Virtual liberty: freedom to design and freedom to play in virtual worlds’ (2004) Virginia Law Review 8, 64.

[16] Ibid.

[17] C. Dougherty, G. Lastowka, ‘Virtual Trademarks’ (2008) Santa Clara High Technology Law Journal 24(4), 756.

[18] Boule, (n 3), 1113.

[19] M. MacDonald, ‘The Case for Virtual Property’ (February 2016) (Unpublished Thesis for the Degree of Doctor of Philosophy, Queen Mary University of London), 77.

[20] Ibid. 77.

[21] Hunter (n 28), 10.

[22] J. Grimmelmann, ‘Virtual Borders: The Interdependence of Real and Virtual Worlds’ (2005) New York Law School 9, 6.

[23] Grimmelmann (22), 5.

[24] Dougherty (n 17), 828.

[25] Grimmelmann (22), 5.

[26] Ibid.

[27] MacDonald (n 31), 82.

[28] K. Weckstrom, ‘Trademarks in Virtual Worlds: Law, Outlaws or New in-Laws?’ Journal of International Commercial Law and Technology (2012) 7(2), 112.

[29] Nwaneri (n 1), 618.

[30]R. Esparza, ‘Weird Science! It’s My Creation . . . Is It Really? Or: Crafting a New Universal Trademark Standard for User-Created Avatars’ (2017) The Pace Intellectual Property, Sports & Entertainment Law Forum 8, 141.

[31] MacDonald (n 31), 87.

[32] Ibid.

[33] Grimmelmann (n 22), 7.

[34] MacDonald (n 31), 87.

[35] Ibid. 82.

[36] M. Ung, ‘Trademark law and the repercussions of virtual property (IRL)’ (2009) CommLaw Conspectus 17, 693.

[37] A. Kotelnikov, ‘Trademarks and visual replicas of branded merchandise in virtual worlds’ (2008) Intellectual Property Quarterly, 12, 9.

[38] Weckstrom, (n 28), 115.

[39] Ibid.

[40] Ibid.

[41] Nwaneri (n 1), 617.

[42] Ibid.

[43] P. Yi, J. Borowick, A. P. MacArthur, ‘Virtual Reality Creates Potentially Real Legal Issues’ (Venable LLP, 19 August 2018) <http://www.dewexpo.com/wp-content/uploads/2017/01/Venable-LLP-Virtual-Reality-Creates-Potentially-Real-Legal-Issues.pdf accessed 26/06/2018> accessed 19 August 2018.

[44] Esparza (n 30), 140.

[45] Dougherty (n 17), 789.

[46] Ibid.

[47] Kotelnikov (n 37), 9.

[48] The Charter of Fundamental Rights of the European Union 2000/EC 364/01, Art 11; Convention for the Protection of Human Rights and Fundamental Freedoms (European Convention on Human Rights, as amended) (ECHR) Art 10.

[49] Dougherty (n 17), 750.

[50] Ibid.

[51] Ibid.

[52] Ibid.

[53] P. Yi, J. Borowick, A. P. MacArthur, ‘Virtual Reality Creates Potentially Real Legal Issues’ (Venable LLP, 19 August 2018) <http://www.dewexpo.com/wp-content/uploads/2017/01/Venable-LLP-Virtual-Reality-Creates-Potentially-Real-Legal-Issues.pdf accessed 26/06/2018> accessed 19 August 2018.

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