Trademarks in Virtual Worlds

Part 3 in a series: Part 1 | Part 2

An avatar walks into a bar in Second Life, and another avatar looks at his shoes and says, “Hey! Nice Air Jordans!” Although it sounds like a classic joke set-up, it’s really a case of trademark infringement.

Sorry if you’re disappointed there’s no punchline, but imagine how Nike feels. Or Gucci, Louis Vuitton, or a host of other companies who defend intellectual property rights in the real world. They’re not laughing either–assuming they are even aware of the issue.

As an experiment, I built a new head for my avatar to mimic the Jack character from the popular Jack-in-the-Box restaurant commercials. I reinforced the allusion by constructing a large 7-foot-diameter hamburger that would follow me around wherever I went. Predictably, I had people come up to me and ask if I was really Jack, which I denied. The point here is that people assumed I was legit and officially sanctioned by the Jack-in-the-Box restaurant chain. In a virtual world, the expression of a brand conveys the appearance of some legitimacy.
Scope of the ‘Problem’

According to a May 2007 article by Benjamin Duranske, an intellectual property attorney and editor of the law blog

This past March, about 11,500,000 transactions took place within Second Life. There’s no way to know exactly how many involved knock-off goods, but a quick overview of in-world shopping areas reveals that well over 1% (probably closer to 3-5%) of the goods for sale in-world carry unlicensed trademarks.

For the sake of argument, let’s be conservative and say that about 1% of the transactions in-world involve unlicensed trademarks. That’s about 115,000 instances of profitable, in-world trademark infringement in March 2007, alone. Projected out, around 1.4 million transactions a year. Using an average transaction value of $1.50 (less than the current, saturated-market price of a knock-off Rolex) we’re in the range of US $2m in transactions involving counterfeit goods in Second Life every year.

The article goes on to detail infringements on Gucci, Ferrari, Chanel, Rolex, Prada, Rayban, and the ubiquitous Apple iPod.

Responsibility and Risk

The ultimate responsibility of a trademark enforcement is the trademark holder. It is they, or some service they hire, who must police it. Besides saying, “Hey, we didn’t authorize that,” what are the actual risks of not policing your trademark in virtual worlds? Come on, it’s only a game, right? But these worlds are a form of social network, and as such, information spreads like wildfire. Even some video games now explicitly feature product placement. The exposure is very real.

Unless your company is actually extending your brand into virtual worlds by creating representations of your existing products, or creating entirely new products specific to that world, I would tend to ignore the idea of “lost income.” After all, how do you sell virtual perfume or cologne?

However, the big risk is the control of your brand and its associated marketing messages. If a brand is shown in a negative or unfair light, the owner has the right to challenge such treatment. Remedies may involve the owners of the virtual world, by seeking their cooperation in enforcing the Terms of Service, which probably forbids trademark infringement (if the owner of the virtual world is doing business in a country that recognizes such). In addition, and perhaps more effective, determining the real identity of the virtual transgressors will afford a real set of lapels to legally grab for cease-and-desist letters or stronger measures.

But there’s a hidden aspect to this. In the future, product tie-ins will evolve in virtual worlds to an extent that make them desirable as marketing efforts. Currently, Colgate toothpaste has a presence in Second Life that gives away a little script (a program that can control your avatar or other objects) that allows you to make your avatar smile. It’s fun, it’s germane to a virtual world, and it associates Colgate with bright white smiles. Kudos.

Let’s go deeper: beyond marketing and into actual products. What if Apple did have a version of the iPod that was usable in some virtual form? I can’t be the only one to have thought about that one. An avatar could take music they upload from their PCs to the virtual world, and play them as they go hither and yon. Possible copyright issues aside, this is a natural extension of the iPod brand, and if the field is flooded by nonworking knock-offs, it would greatly diminish such efforts. Prevention of brand confusion can keep future marketing options open.

Stemming the Tide

In an effort to stem the tide, the Second Life Trademark and Patent Office (SLPTO) has opened up in-world to address these issues. The idea is to provide some set of intellectual protection tools that creators can use.

The third-party effort lacks actual legal standing, as it has no authority over virtual-world residents or, in this case, Linden Lab (owners of Second Life). However, the SLPTO serves to help document the ownership and associated rights of virtual creations, while educating the in-world public about legal issues such as trademark and copyright infringement. I like to think of it as a “Friend of the Court of Public Opinion.”

The Upside

Finally, I would suggest that not all infringement is necessarily something to eradicate. Having several million people see your brand every week at least gives you brownie points in the institutional advertising category. I stopped counting how many FedEx delivery trucks I’ve seen in the last year in Second Life.

Beyond passive advertising, why not turn this into an opportunity? Develop a marketing strategy that involves extending your brand into virtual worlds, and engage those who infringe by signing them up to act as promoters of your brand with all the appropriate controls in place. Turn a potential mess into a positive by managing surreptitious third-party branding efforts. I say build your virtual branding army!

Further Reading

As I am not a lawyer, this article only scratches the surface. If you are interested in the evolving nature of virtual law by experts, I’d like to recommend these blogs:

Terra Nova

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