Classification of virtual goods and NFTs
When applying for a trademark, the applicant must indicate the goods and services for which protection is sought. Moreover, they need to be classified according to a system known as the “Nice Classification”, containing 34 classes for goods and 11 classes for services. If the goods and/or services are not placed in the correct class, the mark will not be registered. The EUIPO has recently adopted guidelines on the correct classification of virtual goods and NFTs.
The EUIPO guidelines
Given the surge of applications for virtual goods and NFTs the EUIPO has issued guidelines specifying the following:
- Virtual goods belong to class 9 since they are considered equivalent to digital content or images;
- NFTs also belong to class 9 in accordance to the 12th edition of the Nice Classification that contains the item downloadable digital files authenticated by non-fungible tokens.
Neither the term “virtual goods” or “non fungible token” will be accepted as such, so that is it required to specify the kind of goods or the type of item that is authenticated by the NFT.
Services that are related to virtual goods or NFTs are to be classified in line with the current practice on the classification of services.
At first glance, the new guidelines seem to suggest that brand owners should refile their existing trademarks in class 9 as well and to also include this class in filings for future brands in order to be sure their trademarks will also be protected in relation to virtual goods and NFTs. This is further incentivized given the value and thus importance of the market for these goods and the prospect that this market will grow fast in the coming years.
This may however not necessarily be true. Even though this has not yet been confirmed in case-law, it seems likely that virtual goods will be considered to be similar to their physical counterparts by the courts, in which case an additional registration in class 9 has very little added value.
However, if brand owners take no risk and start to additionally register their trademark(s) in class 9 as well, just to be sure, it is likely this will cause a rapid overcrowding of class 9. Indeed, all virtual goods and NFTs are to be classified in this class regardless of the kind of good or type of item they relate to, meaning they will no longer be spread out over 34 product classes, but rather be concentrated in a single class.
This in turn would defeat the main purposes of the Nice Classification, namely the incorporation of the principle of specialty and the facilitation of availability searches. From now on availability searches will always have to include class 9 in order to not get caught out by a similar trademark that is registered in relation to the virtual equivalent. The same is true for a watch service, which will now also have to be set up for class 9.
Until this issue has been addressed by the courts these new guidelines also raise some questions in relation to the use obligation. In particular it is unclear to what extent the use of a trademark for a physical good also constitutes use in relation to the same kind of virtual good and vice versa.
The new guidelines don’t appear to provide a good solution, but on the contrary seem to create a load of new problems.
Brand owners are pushed into a position where they will have to spend time and effort expanding the protection of their marks to class 9 if they want to be sure to have full protection for virtual equivalents of their goods. However, should the courts decide that physical goods are similar to their virtual counterparts, all of this will have been for nothing. Availability searches and watches will also take more time and effort since they now must include class 9 regardless of the nature of the goods.
It is likely that as class 9 gets more and more clogged up by registrations for virtual goods and NFTs – which is a certainty if the metaverse will be the success some predict – the Nice Classification will have to be revised so that virtual goods and NFTs are to be classified in the same class as the physical counterpart. It’s hard to understand why this decision hasn’t been taken straight away, especially since there is no obvious advantage to the concentration of these goods in class 9.
Every brand owner will therefore need to consider whether they want to be investing in a practice that may become obsolete very fast.
For the assessment of the legal implications welcome to contact us.