On 3 April 2023, the UK Intellectual Property Office (UKIPO) issued updated guidance on how best to classify non-fungible tokens (NFTs), virtual goods and services offered in the metaverse. The clarifications aim to help those who wish to register a trademark for goods or services found within the metaverse. Many rights owners and trademark applicants have recently faced the challenge of identifying the appropriate classes of goods and services, and drafting the appropriate specification, for the trademarks they intend to exploit in the metaverse.
As a result, the UKIPO, like other registration authorities around the world, has encountered an increase in trade mark applications incorporating these terms and corresponding requests for their appropriate classification. The guidance seeks to provide clarity on these matters and follows similar, albeit more concise, guidance issued by the EU Intellectual Property Office (EUIPO) in June 2022. Below we describe what the UKIPO has to say about these virtual products, and how it aligns with its EU counterpart.
The Nice classification system
The Nice Classification system is an international system used for the classification of goods and services in trademark registration. It divides goods and services into 45 classes, with classes 1-34 for goods and classes 35-45 for services.
The system helps to simplify the process of trademark registration by providing a harmonized way of categorizing goods and services across different countries and languages. The classification system used for trademark registration provides broad categories for goods and services. However, these categories may not be comprehensive enough, especially in a rapidly changing digital industry, where there may be uncertainty as to which category a particular good or service should be classified under, or how to formulate a trademark specification within a given class of goods or services. As a result, trademark applicants may lack clarity, and guidance from intellectual property offices may be helpful in providing guidance.
NFTs
The UKIPO defines an NFT as “a unique unit of data (the only existing one of its kind) that links to a specific piece of digital art, music, video, etc. and that can be bought and sold”.
It is important to remember that an NFT is a computer token that is closely tied to the asset it represents, usually a digital asset. The main purpose is to denote own of the asset, rather than the asset itself. As such, UKIPO and EUIPO agree that simply referring to a “non-fungible token” in a specification is insufficient as a classification term – the type of digital asset it is associated with must also be specified.
The Nice Classification system already assigns “Downloadable digital files authenticated by NFTs” to Class 9. As such, assets such as digital art, downloadable graphics or software, and digital audio files authenticated by an NFT would fall into Class 9.
The EUIPO guidance does not say more on the subject. However, the UKIPO rightly considers the possibility that NFTs will be used not only in relation to digital assets, but also to authenticate real goods. In light of this, physical goods defined as authenticated by NFTs will simply be accepted in the relevant commodity class. For example, a painting, whether authenticated by an NFT or not, would fall into Class 16. Similarly, handbags would be categorized under Class 18, regardless of NFT authentication.
A similar approach is taken with regard to services. Retail services relating to the sale of, for example, virtual clothing or digital art authenticated by NFTs fall into the same class as retail services provided in respect of real products (Class 35). The same applies to the provision of online marketplaces for buyers and sellers of goods and services authenticated by NFTs.
NFTs have also been used to demonstrate membership in a club or access to an event. Members of the (in)famous NFT brand “Bored Ape Yacht Club” often hold exclusive events for holders of their NFTs. Again, despite the digital aspect, membership of a club or entry to an event associated with an NFT would fall within Class 41 as an entertainment service.
Virtual goods
A challenge for potential registrants is to identify the appropriate class of goods for virtual goods. Should applicants designate the class for the corresponding physical product, or use class 9, which covers software and digital assets?
Interestingly, both offices appear to be of the opinion that the correct classification for all virtual goods, regardless of what they relate to, is Class 9. This is because the goods they relate to are essentially data, such as digital pictures. . The UKIPO provides examples of virtual handbags, clothing, accessories and footwear which all fall within Class 9. These types of products are quite similar in nature (ie they are all related to fashion) and provide further guidance on whether it is possible to use a virtual goods may fall outside Class 9 would be helpful, but for now both EUIPO’s and UKIPO’s position appears to be straightforward.
In terms of drafting the specification, both the UK and the EU agree that describing “virtual goods” as such lacks the necessary clarity and conciseness, in the same way that “goods” would not be an acceptable description of physical goods. To be accepted, these virtual goods must be clearly defined, such as “downloadable virtual clothing”.
Virtual services
The UKIPO also provides its position on virtual services, including those offered in the metaverse. The UKIPO has stated that video auctions and training or education services would be classified in classes 35 and 41 respectively, regardless of whether they were provided in the metaverse or otherwise. This is on the basis that, regardless of where the services are delivered, the function they fulfill remains the same.
But according to the UKIPO, not all services can be treated in the same way both inside and outside the metaverse. Take the example of Irish whiskey distiller Jameson, which recently sought to trademark virtual bars and restaurants that would offer virtual food and drink. UKIPO treats these activities differently, as it may be possible to order food and drink within the metaverse for delivery or consumption in the physical world, a metaverse avatar who ‘consumes’ food and drink does not fulfill the same function and should therefore not be classified on the same manner.
As a result, these types of non-equivalent services can most appropriately be categorized into “entertainment services”, i.e. providing a virtual reality or metaverse-based simulation game service.
In relation to virtual services, the EUIPO has rather ambiguously stated that these will be classified in line with “established principles of classification for services”. In the absence of further clarification in the future, a cautious and pragmatic approach – namely, enrolling all potentially relevant classes and being prepared to discuss with the examiner any objections or comments they may have – may be the best course of action.
Conclusion
Intellectual property protection in the virtual world continues to be a difficult landscape to navigate, from the initial step of getting your IP protected, to defending or bringing legal challenges against those with whom there may be infringement issues (for example on the latter , see our recent update on the US Hermes v. Rothschild NFT trademark dispute).
The guidance highlights the fact that regardless of whether a brand is considering selling digital goods in the metaverse, it is important for trademark owners to consider expanding their trademark portfolio to include virtual equivalents of their goods in Class 9. Sole Reliance. on existing trademark registrations for physical goods is insufficient, for obvious reasons for brands who plan to sell products in the metaverse, but also for those who want to be able to enforce their rights against unscrupulous infringers who plan to sell digital versions of brands’ goods.
When it comes to registering IP, the UKIPO guidance provides some useful examples and pragmatic advice on how to describe the goods or services to which a potential trade mark application relates. That said, there will undoubtedly be ambiguity in some areas, especially in an industry that constantly sees itself in development and innovation. As such, a number of goods and services will still be assessed on a case-by-case basis. With that in mind, trademark applicants should strive to be as clear and concise as possible in the terminology used to describe virtual goods and services in the trademark application.
UKIPO makes clear that it recognizes that these terms represent new types of goods and services in a rapidly evolving technological landscape and will likely aim to update the guidance periodically as new advances continue to emerge.
It will also be interesting to see whether UKIPO’s and EUIPO’s practice will spread in this matter, as the UK is no longer bound by the EU office’s guidance and rules. It may be necessary in the future for licensees to adjust their approach to class selection, specification design and enforcement actions for different territories. Consequently, it is crucial to stay abreast of these developments to ensure that IP portfolios remain adequately protected.
