Brave new (Meta) world—Nike files virtual trademarks: implications for Canadian trademark law

On the heels of Mark Zuckerberg announcing the rebranding of Facebook to “Meta”, along with his plans for creating a virtual reality metaverse, Nike garnered significant media attention when it was reported that it filed seven trademark applications for use on “virtual goods”¹. These filings include the notable Nike “swoosh” logo and the words “Nike”, “Just Do It”, “Jordan”, and “Air Jordan”².

In the trademark application details, Nike described the trademark registrations as intending to cover the categories of “downloadable virtual goods, namely, computer programs featuring footwear, clothing, headwear, eyewear, bags, sports bags, backpacks, sports equipment, art, toys and accessories for use online and in online virtual worlds”³. This has led to speculation that these applications are Nike’s latest efforts in exploring the metaverse, cryptocurrencies, and non-fungible token (NFT) worlds⁴.

As Canadian companies bring more and more of their business online, the management and protection of their intellectual property, including trademarks, will meet the complex and global dynamics of a rapidly changing virtual marketplace. In this article, we explore the evolving brave new (meta)world of virtual trademarks and their potential impact on trademark law in Canada.

Virtual trademarks

The notion of “virtual trademarks” is nascent in Canadian law. The idea of protecting the use of a trademark that exists in a virtual world, supported by a virtual economy and its virtual currency, raises a host of complex issues regarding the scope of trademark protection. For example, consider online games where there may be active in-game markets for various forms of virtual property (e.g., tokens, prizes, and awards), and where the exchange of virtual currency creates a marketplace of virtual goods. There, the association of goods and services with a particular symbol or trademark may be likened to the real world. If commerce, in the real world, can generate brand association and goodwill, then why not in the virtual world? This raises many questions revolving around a central theme: to what extent can, and should, trademark law function to permit virtual indicators of source and the policing of virtual (non-national) borders? Which jurisdiction’s trademark law applies?

In the world of video gaming, trademark law has traditionally been applied when marks are used in the promotion and sale of video games. Brand recognition and quality assurance are the hallmarks of this protection. However, in recent years, trademark owners in the gaming space have started paying closer attention to the symbols presented within the games. They have even started to bring lawsuits, for example, when marks were being expressively misappropriated⁵. Nike’s recent trademark filings indicate that more traditional brands are changing their strategy as well, with a new focus on the virtual worlds. Fashion brands like Louis Vuitton have partnered with League of Legends on a capsule collection and in-game skins; Gucci and The North Face have collaborated with Pokemon Go!; and Gucci and Vans have entered (boldly, where no brand has gone before) the Roblox world⁶.

This is potentially going to get complicated, especially as the dollar values double. Consider, for example, a situation where a player in the metaverse sells a virtual pair of branded sneakers to another player. What constitutes quality with regard to virtual sneakers? Can a pair of virtual sneakers have material qualities that are only revealed after purchase? If not, do we really need to provide incentives for the brand to protect the quality of its virtual footwear⁷? Does the brand serve as an indicator of source, allowing the consuming gamer to make purchase choices among options? Nike’s recent filings suggest that there are implications to selling virtual branded products by virtual players and risk of damage if its brand is not protected in the virtual world.

Virtual player infringement and the limits of protection

Virtual trademark lawsuits, based on trademarks allegedly used in commerce within virtual economies, could conceivably occur in three distinct situations⁸:

• Scenario 1: A player sells their own virtual sneakers, in the virtual world, and brands them with the registered (real world) trademark of a brand owner.
• Scenario 2: A player sells virtual sneakers using their own original mark. Then, after the player builds substantial goodwill in the virtual brand, a real world branded sneaker retailer starts using the virtual mark on real sneakers.
• Scenario 3: A player sells virtual sneakers using their own original mark. Then, after the player builds substantial goodwill in the virtual brand, another virtual player uses the mark on their own virtual sneakers.

One issue to consider is what will constitute “use” of a trademark in the virtual world, because “use” is a central component of trademark laws when it comes to whether the registration is valid and in the context of trademark litigation. Assuming Canada’s laws apply, a trademark owner would need to demonstrate use of the mark “in the normal course of trade”, pursuant to section 4(1) of the Trademarks Act⁹. Activities can be considered “in the normal course of trade” where there are commercial dimensions to the activities¹⁰. Whether “use” of a mark in a given virtual world environment would constitute use “in the normal course of trade” will likely depend on the exact wording used in the trademark application itself (since there is a different standard for “use” for a “product” than a “service”) and the virtual world model. In a metaversal world, where the activities of users participating in the user-generated world typically involve the exchange of virtual assets, it is very conceivable that a court could find “use” of a mark to be “in the normal course of trade”.

However, even if the trademark owner is able to establish ownership rights over a mark in a video game, a question would still remain as to the limits of the trademark protection. Are the virtual trademark rights enforceable only against users within the game? Trademark rights have always been territorially defined based on use of the mark and the statutory regime where the use occurs. Under the Trademarks Act, the rights to a registered mark may be enforced across Canada, even if the actual use of the mark is confined to a limited geographical area¹¹. Under Scenario 2, above, the situation considers whether a player would be able to enforce their unregistered trademark rights against a real world retailer in any location in the country. This raises the question as to the “geography” covered by the Internet and whether trademark law should recognize “virtual” geographical limitations.

Infringing use of a virtual trademark

Even if any given “use” of a mark is used “in the normal course of trade”, a registered trademark owner would still need to demonstrate that the infringing trademark causes a likelihood of “confusion” with the registered mark. The test in Canada is “a matter of first impression in the mind of a casual consumer somewhat in a hurry who sees the name…at a time when he or she has no more than an imperfect recollection of the [trademark], and does not pause to give the matter any detailed consideration or scrutiny, nor to examine closely the similarities and differences between the marks”¹².

Section 6(5) of the Trademarks Act sets out the following non-exhaustive factors for courts to consider in determining whether trademarks are confusing: (a) the inherent distinctiveness of the trademarks or trade names and the extent to which they have become known; (b) the length of time the trademarks or trade names have been in use; (c) the nature of the goods, services, or business; (d) the nature of the trade; and (e) the degree of resemblance between the trademarks or trade names, including in appearance or sound or in the ideas suggested by them¹³.

Whether or not infringement would be found in each of the three scenarios discussed above would depend largely upon the circumstances of the allegedly infringing use, with due consideration being given to the unique game environment. Courts will typically first look at the marks themselves before considering whether any of the above factors reduce the likelihood of confusion and will also consider all of the surrounding circumstances. As such, it is conceivable that a court could and would find a likelihood of confusion in the right circumstances under all three scenarios.

Conclusion

As Nike blazes into Mark Zuckerberg’s new era of the metaverse, we must ask whether trademark law—and the law generally—is prepared to face this brave new metaworld. If we accept that trademark laws were developed to protect fair competition, and if we accept that in the metaverse, there is competition for the consumer’s dollar, then we must expect that trademark laws—to use a card-gaming analogy—will follow suit.