Trademark Infringement in the Metaverse: Understanding Jurisdiction

Challenges of Enforcing Trademarks in the Metaverse

The term “metaverse” evokes images of a futuristic, interconnected virtual world, an extension of the internet where users, represented by avatars, interact with each other and digital environments. This digital universe, frequently accessed through virtual reality or augmented reality, blends elements of social media, online gaming, and digital economies, creating a rich tapestry for human interaction and commercial activity. The metaverse will not exist as a separate parallel universe; rather, it will have numerous connections linking it to the actual world.

Yet, similar to the internet before it, the metaverse’s virtual landscape is set to defy national borders as we know them from the physical world. Traditionally, physical localization and the principle of territoriality are key for a number of issues in both trademark and private international law, namely to determine:

• Whether and where the trademark right is protected and therefore enforceable,
• which law applies to the dispute (see our blog post “Trademark infringements in the metaverse – Applicable Law), and
• which courts have jurisdictional competence to adjudicate that dispute.

Turning to the question of jurisdiction, courts have long sought to apply traditional territoriality-based principles also to cross-border and often global commercial activities. In this regard, courts have for example looked at the location of the targeted audience or the effects of the infringement.

But unlike the physical world, the virtual nature of the metaverse blurs geographical boundaries; its non-physical, ubiquitous nature and lack of physical borders pose major challenges to the established principles of localisation. These difficulties are exacerbated by the fact that users are not bound by location and can operate from anywhere with an internet connection.

Consequently, enforcing trademark rights in the metaverse becomes quite challenging, as the determination of the competent court is at the beginning of any legal dispute. This raises the question: which court has jurisdiction to hear a trademark infringement case originating in the metaverse?

International Jurisdiction in Trademark Infringement Cases

Consider the following situation:

Austrian clothing company A, holding a German and an EU trademark, discovers that Italian-based B has made available on the metaverse virtual clothing items carrying a sign identical to A’s trademarks. This raises a critical legal question: where can A sue B for infringement?

In Germany and the European Union, the most relevant provisions relating to international jurisdiction can be found in the Brussels Ibis Regulation and the European Trademark Regulation (“EUTMR”). While the scope of the Brussels Ibis Regulation is limited to defendants domiciled in the EU (otherwise the lex fori of the court applies), the EUTMR applies regardless of the defendant’s domicile.

Art. 4(1) Brussels Ibis Regulation and, respectively, Art. 125(1) EUTMR contain the general rule that a person can (always) be sued at the place of their domicile or residence. In trademark infringement cases, there is one practically important exception to this rule in each of these regulations.

Art. 7(2) of the Brussels Ibis Regulation applies in the case of infringement of national trademarks. It provides that the defendant may be sued both in the place where the damage occurred (“Erfolgsort”) and the place of the event giving rise to it (“Handlungsort”). According to the CJEU, an alleged infringer may therefore be sued before the courts of the Member State in which the trademark is registered or the place where the infringer took decisions and actions to commit the infringement, which will regularly be their place of establishment (CJEU, case C-523/10, para. 39 – Wintersteiger). Of course, the latter offers no benefit to the claimant because it regularly coincides with the infringer’s domicile.

Apart from that, it is not necessary that the infringing act is particularly targeted at the state of protection, i.e. that it has a “commercial effect” there. This is solely a question of the merits of the claims (CJEU, case C-523/10, para. 26 – Wintersteiger; BGH GRUR 2020, 647, 650 paras. 37, 39 – Club Hotel Robinson). In the case scenario described above, this means that A could sue B in Germany for the alleged infringement of the German trademark. Whether there is any “commercial effect” in Germany would not be assessed in order to determine jurisdiction but is only relevant for the merits of the claim.

In the case that the (allegedly) infringed trademark is a European Union trademark, the situation is quite different. Here, Art. 125(5) EUTMR provides that the claimant may also bring their action in the courts of the Member State “in which the act of infringement has been committed or threatened”. According to the case law, the infringing act must also be held to have been “committed” in the territory where they can be classified as advertising or as offers for sale, namely where their commercial content has in fact been made accessible to the consumers and traders to whom it was directed (CJEU, case C-172/18, para. 54 – AMS Neve).

It is, therefore, necessary to find “a sufficient connecting factor” between the infringement and the Member State in which the court seised is situated” (CJEU, case C-104/22, para. 36 – Lännen MCE). In the case scenario described above, A would need to establish in which country consumers are targeted by B’s infringement.

Various criteria can be used to determine this “commercial effect”, including but not limited to the international nature of the activity, use of a language or a currency other than the language or currency generally used in the Member State in which the trader is established, mention of telephone numbers with an international code, outlay of expenditure on an internet referencing service in order to facilitate access to the trader’s site or that of its intermediary by consumers domiciled in other Member States, use of a top-level domain name other than that of the Member State in which the trader is established, and mention of an international clientele composed of customers domiciled in various Member States (CJEU, case C-104/22, para. 46 – Lännen MCE).

However, these criteria have been developed for web 2.0 environments. They will largely no longer apply in virtual spaces, e.g. due to the lack of top-level domains, classic payment currencies (such as EUR or USD) or traditional ordering functions (see also Uhlenhut/Bernhardt, WRP 2023, 139, 144). It therefore remains to be seen whether new and suitable connecting factors can be developed to ensure that Art. 7(2) Brussels Ibis Regulation and Art. 125(5) EUTMR continue to have an effective scope of application for infringements in the metaverse in the future.

Furthermore, due to the anonymity of the metaverse, it will often be difficult to identify infringers and thus their place of residence. As a result, platform liability is likely to become even more important. However, platform liability may face its constraints in the case of decentralised metaverses where no intermediary can be held responsible (see also Reinholz, GRUR-Prax 2023, 585, 588).

In summary, determining jurisdiction is a major challenge because the existing criteria cannot cover future cases. This also poses a practical enforcement deficit. It remains to be seen whether new reliable connecting factors can be developed, whether the problem will be shifted to the examination of the infringement, or whether legislative regulation will be required.

Conclusions for Your Business

The metaverse offers novel opportunities for brand engagement and expansion but also brings with it unique challenges for trademark protection and enforcement. Embracing its potential while diligently protecting intellectual property rights can yield significant competitive advantages. Vigilant and proactive trademark management in the metaverse is not just about legal compliance; it is about maintaining the integrity and value of your brand in a rapidly changing digital world.

Understanding the jurisdictional complexities of trademark infringement in the metaverse is crucial for businesses. As they venture into these virtual spaces, they must be prepared to enforce their rights across different legal systems. This involves not only registering trademarks in relevant jurisdictions but also developing strategies to monitor and address potential infringements effectively.

Businesses must also be aware of the evolving legal landscape. As the metaverse continues to grow, so too will the body of case law and regulation governing it. Staying informed and adapting to these changes will be key to successfully navigating trademark protection in this new frontier and to safeguarding the most valuable asset of any business: its brand identity.

External legal advice for both the protection and the successful enforcement of your trademark rights in the metaverse is therefore indispensable. We are happy to support you in the exciting venture of bringing your business into the metaverse and provide you with thorough legal advice based on our experience and expertise.