Insights

Various fashion luxury labels and brands have now started expanding their marketing strategies to cover digital collectibles and non-fungible tokens (“NFTs”). However, digital goods, like physical goods, are not exempt from the conditions for obtaining trademark protection. On 8 February 2023, the European Union Intellectual Property Office (the “EUIPO”) issued a partial refusal to Burberry Limited’s (“Burberry”) application for the registration of its iconic check pattern for a European Union Trade Mark (“EUTM”) for virtual clothing, accessories and several other services on the basis of lack of distinctiveness.

Facts

Burberry’s application was based on three (3) main classes under the Nice Classification[1], namely being, (i) Class 9, covering NFTs, digital tokens, and other downloadable and virtual goods and/or material; (ii) Class 35, including retail and wholesale services of goods and other virtual material; and (iii) Class 41, providing for online non-downloadable digital collectibles and online entertainment. The EUIPO raised an objection pursuant to Article 7(1)(b) of the European Union Trade Mark Regulation on the basis that Burberry’s maroon and beige check pattern did not serve to identify as originating from a particular undertaking, and thus distinguished it from those of other undertakings.

In deciding whether to accept or reject the application, the EUIPO noted that, in the context of the goods in question, a mark consisting of a decorative check pattern would be seen as simple and common. The EUIPO thus considered it to be devoid of any element that could attract the consumers’ attention, and thus is insufficient to indicate the source or origin of goods or services. The combination of elements forming a check pattern was deemed to be typical for the goods which Burberry intended on using this pattern for (which the EUIPO characterised as being “downloadable and virtual versions of real-life clothing, footwear and decoration related goods”), and as concluded in this decision, the mark applied for was found to be “not essentially different from other check patterns commonly found in trade”. In making such an assessment, the EUIPO referred to various shops and brands offering real-world clothing pieces and accessories with a similar pattern to Burberry’s, such as, Mango, Boohoo and even website such as Etsy and Amazon.

Recently, the EUIPO has also rejected similar applications by other brands in relation to their signature designs, such as Louis Vuitton’s application in relation to its famous ‘Damier Azur’ pattern. From these decisions, the EUIPO has demonstrated that it is applying very high standards in relation to designs – this is especially given the fact that Burberry’s design is already registered as a figurative mark.

However, it must be noted that the EUIPO’s refusal was partial, and it did allow the application to proceed for specific elements in Class 9 and Class 41, namely, downloadable interactive characters, avatars and skins, video games and downloadable video game software; and also that of providing online information about digital games, and entertainment services such as providing online electronic games, providing a website with non-downloadable computer games and video games. Burberry had the opportunity to file an appeal for this decision until the beginning of April.

A Legal Analysis: The INTA White Paper

According to the EUIPO’s Guidelines on the Classification of Virtual Goods and NFTs, any goods and services pertaining to such shall be classified in Class 9 of the Nice Classification, as they are to be treated as digital content or images. However, since the standalone terms “virtual goods and/or NFTs” lack clarity and precision, the content to which the virtual goods relate must be indicated. Whilst there is no particular guidance as to the level of detail one needs to indicate, in April 2023, the International Trademark Association (“INTA”) released a White Paper on Trademark in the Metaverse (the “White Paper”) whereby it hinted at the fact that the application should include a description of the virtual goods them­selves, to such an extent that it does not limit the authentication method in order to avoid having a specification become unintentionally narrowed or rendered obsolete over time, if the preferred authentication method changes.

This White Paper has also delved into an important factor in EUTM applications for NFTs and digital goods, namely, the fact that “an influx of thousands of new applications in Class 9 for metaverse goods will add to this ongoing backup of unreviewed applications at many trademark offices and will continue complicating trademark owners’ and practitioners’ clearance efforts.” It continued by saying that “some stakeholders appear to be in favour of establishing a new Nice Class 46 for digital goods and services, while even others have argued for virtual goods to be registered under the same classes as their non-virtual or physical good counterpart.” Registering virtual products in the same class as their physical equivalents might be a solution to the congestion of trademark registers with excessively broad registrations for “virtual goods”. Regardless of what approach ultimately becomes the dominant one, the need for international uniformity is paramount.

Conclusion

The way the three-dimensional internet experience is evolving into a different digital reality has – despite paving the way for positive changes – also brought about challenges on the legal landscape. Consumer recognition, and the relation of the goods and services emulated in the metaverse to those manifested in the physical world, will ultimately have to form a material element of the legal concept of virtual “use” and assessment of distinctiveness.

This EUIPO decision demonstrates once again that, in theory, the rules and concepts relevant to trademarks in the virtual domain – whether consumer perception or distinctiveness criteria – do not need to be re-invented; rather, they may be transferred from the real world to the virtual world. However, in this specific case, even though Burberry has a registered EUTM covering the same pattern in relation to physical clothing goods (and therefore distinctiveness was found to exist), the EUIPO has now found that the same pattern is devoid of a distinctive character in relation to virtual clothing goods.

By way of analysis, it can be said that the EUIPO seems to apply stricter requirements for the existence of distinctiveness when it comes to the protection of virtual goods than for real-words goods despite its statement to the contrary. This rejection ruling calls into doubt trademark-owners’ ability to extend the scope of their trademark protection to digital goods and collectibles, even where they already have the same trademark registered for identical goods and products offered in the physical world.

[1] The Nice Classification, as established by the Nice Agreement (1957), is an international classification of goods and services applied for the registration of marks.

Ganado Advocates is responsible for contributing this law report but was not in any way involved as legal advisor for the parties in the judgement being covered in this law report.

This article was first published in the Malta Independent on 03/05/2023.