Specialist Chapter: NFTs, the Metaverse and Blockchain Technology Create New Risks to Brand Protection in Singapore

In summary

This article discusses how trademark owners can better protect their trademarks, unique issues that have arisen in non-fungible token (NFT) and metaverse-related trademark disputes, and the challenges that claimants face due to the unique features of blockchain technology that do not exist in traditional trademark disputes.

Discussion points

• Business owners should consider expanding their trademark registrations to include goods andservices relating to NFTs and the metaverse
• Legal proceedings can be commenced against defendants who are unknown
• Given that NFTs are permanent in nature (as blockchain technology does not allow the blockchain ledger to be deleted or altered), traditional remedies may not be as effective

Referenced in this article

• Trade Marks Act 1998
• Circular No. 2/2023
• CLM v CLN & Ors
• Janesh s/o Rajkumar v Unknown Person (CHEFPIERRE)
• Juventus Football Club SpA v Blockeras Srl
• Hermès International v Mason Rothschild

Introduction

Since the start of the 2020s, the term ‘metaverse’ has been a buzzword. From a non-technical perspective, the metaverse may be broadly described as a network of immersive 3D virtual worlds that, among other objectives, seek to replicate the real physical world.

With the trading of cryptoassets growing in popularity at around the same time, non-fungible tokens (NFTs) have started emerging as useful tools in the metaverse. They allow for the trade of assets^[1] in the metaverse by representing digital assets on a blockchain. This aids the public tracking of ownership on blockchain ledgers (acting as verification of ownership and authenticity) and has opened a new world of possibilities in terms of monetising digital assets and content.

With these developments, the protection of trademarks, trade names and trade dress, whether in the physical or the virtual world, is of enduring relevance. New methods of trading in the metaverse using NFTs mean that traditional methods of trademark protection and trademark dispute resolution, while remaining relevant, may need to be employed in new and creative ways, and possibly extended in a principled fashion to afford adequate protection to trademark owners.

Expansion of traditional trademark protection

The Intellectual Property Office of Singapore (IPOS) issued its Circular No. 2/2023 titled ‘Classification practices on Non-fungible tokens (NFTs) and Metaverse-related goods/services’ on 10 February 2023,^[2] clarifying the Registry of Trade Marks’s practices on the classification of goods and services for NFTs and metaverse-related applications of trademarks.

This is not unique to Singapore; new classifications have also been added to the 12th edition of the Nice Classification^[3] to cater for NFT and crypto-related goods and services. Similarly, the UK Intellectual Property Office issued Statutory Guidance PAN 2/23 on the classification of NFTs and virtual goods and services provided in the metaverse on 3 April 2023.^[4] In particular, this guidance highlights that NFTs will not be accepted as a classification term alone and that the description would need to pertain to the asset to which the NFT relates.

A common issue in traditional trademark protection that is exacerbated by the metaverse is the need to seek protection in multiple jurisdictions. In principle, trademark protection is jurisdictional in nature and a trademark registration grants the owner a statutory monopoly of the trademark only in the jurisdiction of registration. In traditional trademark protection, businesses are often advised to think ahead and seek early protection of their trademarks in jurisdictions of their business operations and jurisdictions of likely future business operations.

The metaverse, however, aims to be a seamless connected 3D virtual world accessible from anywhere in the physical world. Therefore, applying for trademarks for NFTs and metaverse-related goods and services in a single jurisdiction may not be adequate in affording satisfactory protection. Businesses may need to constantly consider and monitor whether they need to extend their trademark protection in other jurisdictions where their business may be gaining traction in the virtual world (compared to the physical world), and work out multi-jurisdictional protection and enforcement strategies. This includes seeking protection of their trademarks in locations where the businesses’ servers are located and the target markets where consumers are familiar with the businesses’ brands and products.

NFT and metaverse trademark disputes

Having the ability to conduct business operations in the virtual world through technology may seem like an exciting prospect for many businesses. It could mean increased access to a much wider customer base while being able to avoid incurring potentially significant costs associated with setting up a presence in the physical world. However, the increase in accessibility is not without its problems – just as it is easier to conduct business operations in the metaverse through technology, it is likewise easier for infringers to violate trademarks in the virtual world through technology.

The first added complication of this is that, in the virtual world, anonymity is rife. Infringers are able to make use of technology to mask their true identities and would, more often than not, use false information to prevent themselves from being tracked.

The Singaporean courts have found that legal proceedings can be commenced against persons whose identities are unknown at the time of commencement and orders can be granted against them.^[5] Claimants, however, would need to describe the unknown defendants with sufficient certainty to identify those who are included and those who are not. In the case of NFTs, such defendants can be described by referring to the wallets that had received the cryptoassets, to pseudonyms used by defendants^[6] or to the NFT itself (given that each NFT is unique).

Claimants can also consider the use of Norwich Pharmacal orders, which are court orders made against third parties requesting documents or information to assist in identifying the wrongdoer in question. Such information can be sought against providers of the accounts providing access to the metaverse service in question, the issuer of the NFT in question or the NFT marketplace displaying the NFT in question. In Singapore, such an order can be sought before claimants commence legal proceedings in court.^[7]

Unlike the English courts,^[8] the Singapore courts have not yet ruled on whether a Norwich Pharmacal order can be obtained against a third party located outside Singapore. It is however noteworthy that the grounds upon which the Singapore courts can permit service of court documents outside of Singapore are fairly broad.^[9]

In addition, time is required for business owners to seek expanded protection through registrations of trademarks. Given the speed at which NFT and metaverse technology is developing, business owners would most likely have to rely on existing trademark registrations in pursuing after trademark infringers. The question then is whether the scope of existing trademark registration would be adequate for claimants to do so. Although there have not been any relevant decisions in Singapore to date, claimants have succeeded in doing so in other jurisdictions.

The Court of Rome recently ruled that an existing registration for ‘downloadable electronic publications’ covered the sale of NFTs. Juventus Football Club SpA v Blockeras Srl^[10] concerned the use of the words ‘JUVE’ and ‘JUVENTUS’ as well as a figurative mark (a black and white striped shirt with two stars on the chest) by Blockeras in the production, marketing and online promotion of NFTs. In addition to relying on existing trademark registrations, Juventus managed to show that it had been active in blockchain-related games that had used cryptocurrencieso or NFTs through agreements with other parties. In the circumstances, the Court of Rome found that Blockeras had infringed the trademarks.

In the recent US decision of Hermès International v Mason Rothschild (Hermès v Rothschild)^[11] the defendant, Mason Rothschild, created 100 MetaBirkin NFTs. The virtual bags, unlike the original Hermès bags that are typically made of leather, were depicted with fur covers.^[12]

Hermès is famous for its Birkin bags. It claimed that it owned the ‘BIRKIN’ trademark,^[13] the trade dress rights in the BIRKIN handbag design^[14] and numerous trademark registrations ‘not limited to the three-dimensional design mark’.^[15]

At the time the claim was commenced by Hermès against Rothschild, Hermès’ trademarks were limited to its physical goods; its ‘BIRKIN’ word mark was registered for leather or imitation leather goods, namely, bags; handbags; travel bags; rucksacks; wallets; card holders in the nature of wallets; leather purses; leather cases of keys; briefcase; trunks and suitcases and the trade dress was registered for handbags. A question therefore arose as to whether the previous protection for physical goods extended to virtual goods. The jury in this case did not expressly address this issue, but found Rothschild liable.

Although trademarks for goods and services specifically relating to NFTs and the metaverse ought to be registered as far as possible, if necessary, existing trademark registrations may perhaps be relied on in Singaporean trademark disputes if the factual matrix allows for it. They can be considered if existing trademark registrations are robust in terms of goods specifying downloadable files or online trading and marketplaces. For example, a business running a physical café that has registered its trademarks under Class 35 (covering marketing and advertising online) may be able to contend that its trademark protection extends to a virtual café in the metaverse (which arguably would amount to a certain degree to online marketing and advertising).

There is a question in each factual scenario as to whether an NFT depicting a trademark has been used by defendants in the course of trade. In Singapore, claimants seeking to commence action against a trademark infringer must show that the infringer had used the mark in question in the course of trade (ie, as a means of distinguishing the goods or services in question as to their origin). The use must not have been for purely decorative purposes or purely to describe the product or service in question or some element thereof.^[16] In light of this, the statutory definition of use in the course of trade is broad,^[17] covering advertising and other use where the trademark is not directly applied to the goods.

Further, in Singapore, claimants in trademark infringement proceedings would have to show that the infringing use of an identical mark in relation to similar goods or services, or both, or that a similar trademark in relation to identical goods or services, or both, gives rise to a likelihood of confusion on the part of the public.^[18]

In Hermès v Rothschild, Hermès submitted evidence showing that several fashion magazines (eg, Elle and L’Officel) mistook the MetaBirkins NFTs as ‘Hermès’ foray into the NFT market’,^[19] and confusion was also expressed by social media users.^[20] Hermès also submitted evidence in the form of a study conducted by its expert to show actual confusion.^[21]

Survey evidence can be a useful and important tool that claimants can utilise to prove likelihood of confusion. However, it is equally important to note that such surveys must be designed properly and conducted carefully. The Singapore High Court has, in this connection, provided some guidelines that claimants should take note of:

1. the interviewees in the survey must be selected so as to represent the relevant cross-section of the public;
2. the size of the survey must be statistically significant;
3. the survey must be conducted fairly;
4. all the surveys carried out must be disclosed, including the number of surveys carried out, how they were conducted and the totality of the persons involved;
5. the totality of the answers given must be disclosed and made available to the defendant;
6. the questions must neither be leading, nor should they lead the person answering into a field of speculation he would never have embarked upon had the question not been put;
7. the exact answers and not some abbreviated form should be recorded;
8. the instructions to the interviewers as to how to carry out the survey must be disclosed; and
9. where the answers are coded for computer input, the coding instructions must be disclosed.^[22]

It should also be borne in mind that claimants can, in appropriate cases, also avail themselves of the well-known trademark protection afforded under section 55 of the Singapore Trade Marks Act 1998, which states that:

A well known trade mark is entitled to protection under this section —

1. whether or not the trade mark has been registered in Singapore, or an application for the registration of the trade mark has been made to the Registrar; and
2. whether or not the proprietor of the trade mark carries on business, or has any goodwill, in Singapore.

. . .

3. Subject to subsections (6) and (7), the proprietor of a well known trade mark is entitled to restrain by injunction the use in Singapore, in the course of trade and without the proprietor’s consent, of any trade mark which, or an essential part of which, is identical with or similar to the proprietor’s trade mark, in relation to any goods or services, where the use of the trade mark —
   1. would indicate a connection between those goods or services and the proprietor, and is likely to damage the interests of the proprietor; or
   2. if the proprietor’s trade mark is well known to the public at large in Singapore —
      1. would cause dilution in an unfair manner of the distinctive character of the proprietor’s trade mark; or
      2. would take unfair advantage of the distinctive character of the proprietor’s trade mark.

Claimants can rely on this provision even if they have not registered a trademark in Singapore (much less for NFTs or-metaverse related goods or services).^[23] The test that the Singapore Court of Appeal has adopted in determining whether a trademark would indicate a connection between the claimants and defendants incorporates an element of likelihood of confusion and would yield the same result as the test applied to a claim for passing off (ie, whether the defendant in question had made a misrepresentation to the relevant sector of the public that causes that sector to be mistaken of the source, and whether that misrepresentation resulted or is likely to result in damage to the goodwill belonging to the claimant in question).^[24]

Enforcement issues in NFT-related trademark disputes

One significant difference between traditional trademark disputes and blockchain-related disputes is that cryptoassets created using blockchain technology are etched in the ledger in perpetuity. Deleting a cryptoasset is impossible, unlike the traditional remedy of destroying infringing goods.

Claimants can obtain an order for injunction (to stop the infringement) or for delivery up (ie, that the infringing goods be delivered to claimants), or both. However, in NFT-related trademark disputes, the NFT in question may no longer reside with the issuer. Defendants may therefore face practical challenges complying with a traditional injunctions or orders for delivery up obtained by claimants.

In Hermès v Rothschild, it was reported that the MetaBirkin NFTs sold for record prices.^[25] Requiring that the NFT be delivered up to put the NFT out of circulation would require that the identity of the holder be known. There may also be technical difficulties in unilaterally mandating a transfer, as the NFT holder would need to provide their private key to effect any transfer.

Claimants can therefore consider alternative remedies to ensure that the defendants do not seek to hide behind such practical concerns. One option may be to seek an injunction against marketplaces to prevent them from permitting the further sale of the NFT in question. The Singaporean courts had previously granted a proprietary injunction against a defendant, preventing that defendant from ‘in any way dealing with the Bored Ape NFT, until after the trial of’ the legal proceedings. OpenSea, the platform that had been offering the trading of the Bored Ape NFT, subsequently froze its sale.^[26]

Another possibility may be to require the issuer to delete the underlying asset to the NFT. As NFTs would typically link to underlying digital assets (which are, more often than not, images) and it may be that injunctions have to be sought against the host of the digital asset. This may be contrasted with a situation where tools used to manufacture infringing physical goods are delivered up or destroyed, making it much costlier for defendants to restart or continue the infringing act.

Footnotes