Digital Transformation » Metaverse: risk understanding is vital to protect intangible assets

Metaverse: risk understanding is vital to protect intangible assets

As CFOs navigate the promising yet perilous terrain of the metaverse, understanding its potential for brand growth alongside the critical need to safeguard intellectual property becomes paramount.

Metaverse: risk understanding is vital to protect intangible assets

The metaverse could be seen as a double-edged sword for consumer-facing businesses. On the one hand, it unlocks opportunities to strengthen brand loyalty and reach new customers, but on the other, it brings an increased risk of intellectual property (IP) infringement. With a delicate balance of risk and reward to navigate, what do CFOs need to know and what steps should they take to protect intangible assets in the metaverse?

Although interest in the metaverse has softened slightly of late due to the boom in GenAI, it is still big business. In 2024, the metaverse is projected to reach a value of $74.4 billion and more companies are continuously choosing to enter virtual worlds and develop their brand presence there. Businesses in consumer-facing sectors are among those leading the charge in the metaverse – from fashion houses and retailers to car makers and luxury goods manufacturers.

To date, many brands have been using the metaverse experimentally, creating and selling digital goods or hosting new immersive experiences for customers to enjoy. The buying and selling of NFTs and digital goods, including artworks and designer fashion accessories, has become an established market. New virtual platforms and retail destinations are opening where brands can create and sell digital goods and reach new audiences.

Mark Caddle

For example, luxury German fashion brand, MCM, has launched a virtual store in partnership with Caliverse; a next generation metaverse platform, to ‘break down barriers’ and allow customers to experience their latest collection in new and exciting ways.

Other brands are looking to create a distinct, personalised experience for the customer. Nike has created a bespoke community platform called Swoosh, where customers can design their own trainers and purchase them as NFTs. Many luxury fashion brands, including Gucci and Prada, are offering new digital wearables or branded garments and accessories that avatars can try on, buy, and wear in the metaverse as a fashion statement.

For the brand owner, there is much to be gained by entering the metaverse. It’s a great way to reach out to new customers, especially Generation Z and Generation Alpha, who are used to pursuing life in virtual and real worlds simultaneously. The growing use of AR/VR technologies to support product visualisation is driving the popularity of virtual marketplaces and helping brands to strengthen customer relationships. With so much untapped commercial potential linked to virtual marketplaces, brand owners can’t afford to ignore them.

Where there are opportunities, there are also risks of course. For brand owners, the main risk linked to the metaverse is IP rights infringement. For example, businesses could find that their brand logo or registered designs are being copied by an opportunistic creator, who is profiting from the sale of copycat goods. If left unchallenged, this could damage the brand’s reputation in both the physical and virtual worlds, so the affected business should consider enforcing its IP rights and make a ‘take down’ request to the relevant platform as soon as possible.

Crucially for the CFO, who is often regarded as a value protector, case law related to IP infringement in the metaverse is still evolving. The principal question is whether a company’s existing IP rights are sufficient to protect its brand identity and designs in a virtual world too.

Mariana Köpf

Rather than wait for case law to catch up in this area, businesses should follow current UKIPO and EUIPO guidance and consider reviewing and updating their IP portfolio to ensure appropriate protection. Looking for risk areas where IP infringement has occurred in the past, and identifying virtual marketplaces where branded products are most likely to be sold, could help to narrow the field when employing watching services too.

The court’s decision in Hermes International v Mason Rothschild in 2023 was positive for the brand owner. In this case, Mason Rothschild’s decision to create and sell NFT lookalikes of the French fashion house’s well-known Birkin handbag – known as ‘MetaBirkins’ – was found to be an infringement of Hermes’ IP rights. However, other legal disputes have not yet been resolved, including Nike v StockX: a case that hinges on whether the online reseller has infringed Nike’s IP rights by authenticating and selling Nike-branded ‘Vault’ NFTs.

Overall, CFOs should see the metaverse for what it is: an opportunity to transform customer relationships and generate value. However, understanding the potential risks and keeping track of emerging case law is essential to protect the brand as it enters the next phase in the internet’s evolution.

Mark Caddle is a partner at Withers & Rogers. Mariana Köpf is an attorney at law Withers & Rogers; both specialise in UK and European trade mark prosecutions. 

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