With the expansion in metaverse, NFTs and digital fashion have become significant for brands to generate pertinence and buzz, with numerous platforms letting creators make and sell digital fashion. Many fashion companies are auctioning their NFTs- whether they are for the skin of the avatar in virtual games or linked with some actual couture pieces and are often sold for prices higher than the creations in real life.

As digital fashion is expressed in a fixed tangible medium like avatar skins, they are eligible for copyright protection. This brings in multiple ownership issues in the realm of Copyright Law. Either a fashion brand can create an item exclusively in digital format or it can design the physical item first and then use it to create the digital artwork. Further, several agencies may be working in creating that particular digital piece – say, one can be working in designing the garment, the other in digitally emulating that design and so on. In this model, the original designer might lose out on exercising their right to reproduction of their own design because of the multiple agencies involved in digitalizing it. Thus, there is a need to structure licensing agreements with each party that is involved in the reproduction of the design and ensure that the right of each party is adequately categorized to avoid conflicts.

There is a misconception that Non-Fungible Tokens or NFTs can replace copyrights for digital pieces. The NFT space is as such unregulated by law. Digital signatures can be minted without the permission of the designer. Apart from NFTs, the application of copyright law becomes essential to prevent counterfeiting. NFTs, in the arena of digital fashion, are mainly used to generate digital copies of physical pieces. They also enable brands to fight piracy by offering them the possibility to embed an NFT in physical products that has be scanned to determine their originality.

The buyer receives an NFT tied to a purse that they can transfer with the shoe, thereby verifying the authenticity of the product. The traceability of the digital fashion item over its life-cycle facilitated by blockchain technology adds to fighting counterfeits. However, they fail to ensure the authenticity of the fashion item in case the information entered is false from the very beginning. In that case, the NFTs will end up sustaining that falsehood in their future sales. The issuer should be cautious regarding licensing through the sale and subsequent transfer of the NFT and buyers should carefully go through the “smart contract” that stipulates the required terms of the NFT.

Roblox is a metaverse and gaming platform on which users can trade in digital fashion. Other spaces for the same include Animal Crossing, Open Sea and Zepeto. On 17th May 2021, inside Roblox’s virtual world, a digital-only Gucci bag was sold for more money than the bag’s value in the real world. Stella McCartney and Nike have also sold digital items on this platform; however, users can also buy items that seem to be created by other luxury brands, without those brands’ participation in creating or selling most of these items. A need to verify creators like Twitter, Instagram and other social media platforms.

Another problem that is faced by fashion brands when it comes to third-party created NFTs and displaying their trademark is the defined scope of their trademark. Companies register their brand’s trademark for physical goods and services but not generally for digital artworks.

For example, A “Baby Birkin” NFT, which was an animation of a baby growing in an Hermès Birkin bag was sold on the e-commerce platform Basic.Space for $23,500, much higher than the estimated $9,500 price of the 25-centimetre “baby” Birkins sold by Hermès. Despite the NFT borrowing the iconic Birkin name and style, Hermès did not have any affiliation with it, nor did they receive any revenue from it.

Fashion houses that have or seek a presence in the Metaverse should register their trademarks and service marks at the USPTO and at foreign offices. A physical, as well as a metaverse strategy, is important to protect brands from issues like the dilution of trademarks.

Thus, the question that arises is related to the extension of existing trademark rights to new technologies. With the growing popularity of NFTs among Gen-Z, small brands may consider this an opportunity to target a different consumer base. Whether this is viewed as underground marketing or as counterfeit depends entirely on the brand’s outlook.

By Ananya Taneja