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

Underlying the performance of athletes, soccer clubs are engaged in a big race to develop their respective trademarks. FC Barcelona, until now the second biggest soccer club trademark, now risks losing its place to the club Paris Saint-Germain (PSG) as a result of Lionel Messi’s departure.

Lionel Messi has recently made the news by announcing his departure from FC Barcelona after more than two decades with the club.

This unexpected announcement is mainly due to the financial difficulties faced by FC Barcelona who are unable to take on the costs of the new contract agreed with the footballer two weeks ago..

This departure may not only impact the club’s quality of play but also its finances and especially its Intellectual Property rights.

A probable significant decrease in the value of the FC Barcelona brand

Brand Finance, in an article of 6 August 2021, estimated that the departure of Lionel Messi could cause an 11% decrease in the value of the club. This departure would cause a loss of €137 million. According to Brand Finance estimates. FC Barcelona has been, until now, one of the three most valued brands among soccer clubs (behind Real Madrid and in front of Manchester United). This news may well change the ranking.

Lionel Messi’s departure is even more impactful as he is considered one of the greatest players in the history of soccer. FC Barcelona’s image is therefore strongly impacted.

An opportunity for Lionel Messi’s new club.

On the other hand, the recruitment of the footballer by PSG is a real boon for the club which could see the value of its brand increase considerably. According to Brand Directory, the PSG brand is currently worth €887 million and ranks 7th among the most important soccer club brands.

The influence of players on intellectual property rights is such that some player brands even rival the value of some clubs’ rights. Messi has the most registered trademarks of all footballers. He has 115 trademarks, compared to 60 for Neymar, 53 for Cristiano Ronaldo and 46 for Paul Pogba. His trademarks are registered in various countries around the world, but mainly in Argentina, his country of origin. They are mainly registered in class 25 (Clothing), 28 (Games, sporting goods, toys) and 9 (Computer programs).

This trademark portfolio, owned by the footballer, is also an asset for the club that recruits him, as it increases its importance and influence.

So, PSG now holds two of the biggest players in terms of brand portfolio, Neymar and Lionel Messi, and could also be inclined to recruit Paul Pogba.

An impact on the new cryptocurrencies

As a result of PSG’s brand value, its cryptocurrency, “PSG Fan Tokens”, has grown considerably. The club made its mark by concluding the first player signing that included fan tokens. This news caused the cryptocurrency to rise by +100% in just three days.

As a result, the simple signing of Messi boosted the club’s PSG token capitalization to almost €144 million.

The PSG trademark is on track for considerable expansion, which can only reinforce the strength and interest of Intellectual Property rights in the world of soccer. Whether it’s the value of a club brand, the derivative products derived from it, or its cryptocurrencies, the composition of soccer teams considerably influences the pecuniary value of clubs.

We are a law firm with a unique expertise in the exploitation of intangible assets. We keep you updated on issues related to intellectual property and the digital economy through articles written by the Dreyfus legal team.

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♦  Webinar : clubs sportifs

♦ Protecting trademarks during the Olympic Games : the major issues and challenges

To protect a trademark and minimize the risk of potential legal action, restaurateurs should employ an ongoing research strategy, registration and monitoring.

What impact could the pandemic have on restaurant brand portfolios?

The pandemic has pushed restaurants to innovate. Delivery services, technological services, and even innovative uses of restaurant real estate are leading to an increase in trademark demands beyond traditional restaurant services.

Foodservice companies have expanded the use of “ghost kitchens” (also known as “dark kitchens” or “virtual kitchens”).

In ghost kitchens, chefs prepare food only for delivery or pickup without a seat for customers. A ghost kitchen can serve as a cooking space for multiple brands, allowing operators to expand their customer base without investing in a separate area for each brand.

The ghost kitchen concept also encourages experimentation because a brand can get started quickly with little additional cost.

The legal consequences arising from the different classes and descriptions of services requested by kitchens and brands continue to evolve. Regardless of what lies ahead, restaurants and related entities need to extensively think when filing for trademark protection and enforcing their rights.

The Covid-19 pandemic has put innovative pressure on the restaurant industry. As restaurants have changed or expanded their products and services since the start of 2020, their trademark portfolios have also expanded to include new classes of trademark registration.

How to effectively manage restaurants trademark portfolios?

In this context and after having created the name, the question of the company’s trademarks protection and international extension quickly arises, even for restaurants.

Today, there is a craze for trademark registration, which has a considerable impact on the strategy of their management by companies. It is increasingly complex to create a distinctive and solid brand or to maintain a monopoly on a word coveted by many.

In addition, legal risks have accelerated with e-commerce, market globalization and the company’s international exposure to the Internet.

As the demand for contactless food delivery grows, restaurants and related brands have adopted broad strategies, including partnering with ghost kitchens or selling food through temperature-controlled lockers.

At the same time, these new business areas have created an increased need to examine restaurant trademark portfolios and identify areas for which brands should be protected.

What precautions should you take to protect your IP rights?

It is of great importance to protecting your IP rights to take several precautions:

• Ensure that you included confidentiality clauses in your contracts;
• Provide for non-disclosure agreements;
• Be vigilant on the terms of transfer of rights between the creator and the company.

It is necessary to establish a protection strategy in the real world and in the digital world to protect your trademark portfolio.

Why bet on the brand?

It is about obtaining an operating monopoly, which can be renewable indefinitely and will constitute the pillar in your marketing and commercial strategy.

It is necessary to register the trademark from the genesis of the project. Determine a limited but suitable territory is also of great necessity. Likewise, it is about thinking globally and digitally by protecting domain names when registering the trademark.

The domain name is an important asset!

Today, insurers identify the intellectual property of which domain names are a part as one of the top three risks facing businesses.

The domain name occupies a special place in that it serves as a vector for ever more sophisticated and varied frauds. Managing your trademark on the Internet is not just about filing and renewing but also building a strategy.

It is crucial to invest in protection and preventive defense strategy and also set up surveillance on your brand.

Finally, you must be particularly vigilant about the use that is made of your brand on the Internet to avoid any “bad buzz”, which would be particularly harmful to your reputation.

A restaurant’s brand portfolio is a true intellectual and economic investment that must be protected.

In order to offer our clients a unique expertise, necessary for the exploitation of intangible assets, we keep you informed of the current issues of intellectual property and digital economy through articles written by the legal team of Dreyfus & associés.

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♦ Why is the well-knownness of an earlier trademark not enough to qualify bad faith?

♦ Why is claiming unregistered trademark rights over a geographical name a difficult challenge in UDRP proceedings?

One of the key elements of the franchise is the authorisation given by the franchisor to the franchise to exploit its trademark. In such contracts, it is key to define precisely the terms of use.

Century 21 Real Estate LLC (“Century 21”) is a renowned real estate company, founded in 1971 and managing 8000 franchised agencies in 80 countries. In particular, it owns the trademark C21, protected in Montenegro.

Century 21 filed a complaint before the WIPO Arbitration and Mediation Center to obtain the transfer of the domain name <c21fresh.me> registered on November 14, 2012 by Lika Ivanoc, which belongs to the Fresh d.o.o. company in Montenegro, also specialized in real estate.

Century 21 asserts that in the past the Respondent has been a member of its network of franchisees but that this is no longer the case. Realogy Group LLC, another parent company of Century 21, was reported to have entered into an agreement with a Serbian company, Real Estate d.o.o.

According to this agreement, which the Complainant does not provide, Real Estate d.o.o was authorized to use the trademarks of Century 21 and to enter into sub-franchises.

This agreement would have expired in 2014.

The Complainant explains that in 2015, the parent company of the Respondent, Century 21 Fresh Real Estate, was notified of the end of the contract of franchise. The letter stated that Century 21 did not know if Century 21 Fresh Real Estate was commercially connected to Real Estate d.o.o.

In the absence of any response, Century 21 filed a complaint to the Montenegrin Trade Inspection, and after that, Century 21 Fresh Real Estate has been ordered to withdraw the trademark from the photographs published on the web site www.realitica.com.

The above situation is quite complex.

 To begin with, the Respondent did not reply to the complaint, which would have eventually clarified the situation and the possible links, even the indirect ones, between the Complainant and the Respondent.

The expert acknowledges the similarity between the domain name <c21fresh.me> and the C21 trademark. However, he does not issue commentaries on the legitimate interest of the registrant and directly moves on to rule on the question of registration in bad faith.

He notes that if the Complainant clearly indicates that the Respondent was part of its franchisees network, it also had a letter sent to the Respondent’s parent company, suggesting that it was not sure that the Respondent was actually part of this network.

It might be surprising how little control Century 21 has over its network of franchisees and sub-franchisees. However, the name of the Respondent’s parent company appeared on the site of one of the franchises of the Complainant, which suggests that the Respondent was indeed a member of the franchise network.

The expert notices that during the course of this agreement Real Estate d.o.o. and the sub-franchisees had the authorization to use the trademarks of Century 21. Thus, the domain name has certainly been registered within this framework. Unless a clear clause in the contract prohibits to register domain names, it is difficult to consider that the domain name has been registered in bad faith in 2012.

The experts relies on a previous case, Elders Limited v. Private Company, No. D2007-1099, in which the expert concluded that the name registered by the franchisee was part of its activity even without the franchisor’s express authorisation. In the absence of evidence of other motivations that might have pushed the Respondent to register the domain name, the registration was considered to be in good faith.

The question then arises as to whether the renewal of the domain name <c21fresh.me> after the end of the contract of franchise can define a new starting point for the criterion of registration in bad faith. Referring to the WIPO Overview 3.0, the expert indicates that the simple renewal of the domain name cannot qualify a bad faith registration. Consequently, the complaint is rejected.

This decision shows that it is always preferable, for a company, to be the owner of the domain names used by its partners, such as franchisees, even if the latter are the ones exploiting them. At the very least, drafting a contractual provision is essential, specifying the way in which the trademarks of the franchise can be operated and if such use includes the registration of domain names, under which conditions, which charter to respect and when these names must be returned. The same problem can arise for social media accounts.

Dreyfus can assist you in the management of your trademarks portfolios in all countries of the world. Please feel free to contact us.

Source: WIPO, Arbitration and Mediation Center, Nov. 9, 2020, Case D2020-0008, Century 21 Real Estate LLC v. Luka Ivanoc, Fresh Realestate