The fashion industry enters the metaverse

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The faux pas of the 2022 fashion season is failure to understand the metaverse and its potential impact on the fashion industry and notable brands.

The metaverse is a concept popularized (not owned) by Facebook’s name change to Meta. The metaverse presents a wide variety of issues that touch on all aspects of fashion brands, most notably intellectual property concerns. The global pandemic has accelerated a societal shift and proven the need for an increased online presence, where avatars will be as fashionable as possible and wear high-end brands such as Gucci while walking down a virtual runway. See Metaverse Fashion Week in Decentraland. While creating great opportunities for brand owners, this new way of interaction with consumers also presents challenges that should be understood by the fashion industry at large, and particularly by the owners of the world’s most coveted brands.

Welcome to the metaverse

The metaverse is a new version of a virtual-reality space. In the metaverse, users, through their digital avatars, interact with a computer-generated environment and can meet, socialize, shop and play. The metaverse promises a virtual life unencumbered by the limits of reality. The metaverse is different from prior iterations of virtual reality; it has more advanced graphics, uses non-fungible tokens (NFTs) and incorporates decentralization.

Decentralization, in the context of the metaverse, means peer-to-peer user transactions that do not rely on an intermediary to conduct those transactions. The leading-edge technology at hand has resulted in more realistic avatars in the metaverse, which is creating the need for more fully outfitted avatars. The advent of NFTs has created the opportunity for your avatars to own unique items of clothing and accessories. No one will want to be underdressed or under-accessorized in the metaverse.

NFTs in the fashion industry

NFTs are one-of-a-kind digital tokens that exist on a blockchain and are linked to physical or digital assets. Essentially, ownership of an NFT is ownership of code stored on a verified ledger that stores prior ownership information. The verified ledger can be used to facilitate an easier process (via smart contracts) for providing royalty payments to original creators. Ownership of an NFT generally does not include ownership of any associated intellectual property. Instead, the intellectual property is used to identify the underlying code that is owned.

In the virtual fashion industry, NFTs are the haute couture of the metaverse. NFTs allow otherwise infinitely replicable digital goods to be purchased as if they were one of a kind. This sets the stage for a variety of issues associated with NFTs, including trademark and copyright concerns for brand owners and the licensing of those rights.

There’s already been a high-profile case lodged involving the famous Hermès Birkin bag. Enter the Metabirkin, an NFT version of the famous Hermès Birkin bag that is in no way associated with Hermès and for which sales as high as USD46,000 per Metabirkin have been claimed. The existence of Metabirkin bags and other virtual goods presents a host of intellectual property issues that will have to be addressed by courts.

Brand owners must prepare for the digital future

According to Forbes, assuming the metaverse is a future iteration of the Internet, the metaverse could be a trillion-dollar revenue opportunity. As such, brand owners in the fashion industry must consider if, how and when to become active in the metaverse. Before doing so, and particularly for entities that are considering NFT-based offerings or other commercial aspects of the metaverse, brand owners must take steps to ensure their intellectual property portfolio is in order. This includes reviewing existing trademark and copyright registrations to confirm there is robust brand protection, as well as considering additional trademark and copyright filings that specifically cover uses in the metaverse.

Additionally, brand owners must be prepared to consider how they may need to enforce their intellectual property rights in the metaverse in the near future. Such enforcement strategies should take into account how brand owners will interact with third parties making use of proprietary brands. The collaborative and decentralized nature of the metaverse creates unique problems from an enforcement perspective. For example, the typical online take-down request is not feasible on a decentralized platform with no controlling webhost.

There’s much uncertainty surrounding the metaverse. “How will it be used?” and “How will intellectual property law will apply?” are common questions. But it is clear that brand owners must immediately start thinking about these issues and develop strategies for moving forward in the metaverse. This is an opportunity to expand the reach of their brands in exciting new ways, and prudent brand owners will begin discussions with their IP attorneys to ensure each brand is prepared to enter the metaverse at the time of its choosing, instead of unfashionably late.