Trademarking the Digital Frontier

The Importance of Trademark Classification for NFTS and Virtual Goods and Services

Dr. Susanna Grech Deguara co-authored with Martina Cassar | 21 Mar 2024

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Trademark Classification in a Nutshell 

Essentially, a trademark cannot be registered in respect of any good or service as this would easily create monopolies. Therefore, the Nice Classification (NCL) was established in 1957. The Nice Agreement established this international classification of goods and services which is applied for the registration of a trademark. It contains 45 classes of which 34 are goods and 11 are services. The list is updated every 5 years. The Nice Agreement is open to states who are parties to the "Paris Convention for the Protection of Industrial Property", given that the system is recognized in numerous countries, it makes it more efficient for trademark registration internationally.

Key Legal Issues:

  • Protection of NFTs
  • Nature of Virtual Assets
  • Classification of Virtual Elements 

Classification of NFTs

In recent years, we have witnessed a digital phenomenon which has transformed the art world, and the internet landscape at large. Non-Fungible Tokens (NFTs) have sparked widespread curiosity, and undoubtedly have also challenged legal frameworks. 

Unlike cryptocurrencies, NFTs are distinct digital assets that cannot be exchanged at an equivalent value for another token. Therefore, whilst cryptocurrencies are considered fungible as they allow for a one-to-one exchange, NFTs are considered as a one-of-a-kind digital item. In fact, the term ‘non-fungible’ means that an item is unique and cannot be replaced with anything else. This intrinsic uniqueness sets NFTs apart, rendering them particularly well-suited for representing and owning digital art, music, videos, virtual real estate, and even virtual pets.

Like any other work of art, it is often the case that creators of such NFTs would want to protect their assets by means of intellectual property rights, generally through the registration of trademarks. This protection grants a right over the creative elements consisting of words, phrases, symbols or designs that identify goods and services. However, technological advancements in the digital space continuously challenge the legal framework regulating trademarks. This article shall be delving into the guidelines issued by the European Union Intellectual Property Office (the ‘EUIPO’) on the classification of NFTs, virtual goods and services.

The question arose on how such tokens should be classified in terms of the NCL. Presently ‘virtual goods’ fall under Class 9 as they are considered as ‘digital content or images’. This notwithstanding, the term ‘virtual goods’ on its own lacks clarity. Therefore, it is ripe time to include more specific sub-classes related to virtual goods, such as downloadable virtual goods, including virtual clothing. 

This lacuna will lead to advancements in the next edition of the classification. The 12th Edition will incorporate the term ‘downloadable digital files authenticated by non-fungible tokens’. The reason for this inclusion is that essentially NFTs are considered as unique digital certificates held in a blockchain, which authenticate digital items but is intrinsically distinct from such items. Some scholars have suggested that the term ‘NFTs’ should be included in the new version. However, the EUIPO emphasized that the term NFTs on its own is not acceptable. Similarly to the notion that clothes and shoes should be two separate entries, even though essentially they can fall under the umbrella term of ‘apparel’, the type of the digital item which is authenticated must be taken into account. In basic terms, similar to traditional certificates, NFTs pertain to something beyond their own existence. Therefore, it is essential to include the specific regard of such certification. 

Whilst the item itself would fall under Class 9, the service of creation or minting of NFTs is to be considered as a service. In light of this, Class 42 shall include the minting of NFTs. 

Classification of Virtual Goods

The EUIPO defines Virtual Goods to be “non-physical items that are intended to be used in the course of trade in online and/or virtual environments”. Thus, their function and purpose is to serve as digital content. As indicated in the most recently published guidelines by the EUIPO, such goods would be classified under Class 9 in a trademark registration application. Similar to an application concerning NFTs, the term ‘virtual good’ in isolation is unacceptable for the EUIPO, rending the application null. ‘Virtual goods’ must be further defined for the sake of clarity and precision which the EUIPO values.

Classification of Virtual Services

The classification of ‘Virtual Services’ tends to be slightly more challenging. As a baseline principle, it is important to keep in mind that the classification of virtual services is influenced by the nature or intended purpose of the service in question. The way a service is supplied may alter its objective or outcome, such as how it is seen in the physical world. The purpose and function of virtual services may be three-fold.

1.         Real-world service provided online - In this case there is no impact in the real-word, thus the applicable and suitable class would be its natural class. Offering a service of financial consultancy in a virtual environment for example, would not differ from offering such service in person. 

2.         Emulate a real-world service in a virtual environment – This includes the mimicking of services which can be provided in person in virtual environments. Providing the service of transportation from one place to the other would naturally fall under transport services in Class 39. However transporting an avatar in a virtual reality (VR) platform, does not have the same effect and function. It does not have any real world effects or implications and therefore can be rendered as entertainment. Consequently, virtual transportation services for gaming purposes would fall under Class 41. 

3.         Specifically developed services with no equivalent in the real world – In this situation, the classification is more obscure and thus it would be up to the EUIPO to determine its applicability or otherwise. 

What does this mean for you

Filing a trademark in the wrong class will lead to delays in protecting your invention, and might also trigger additional costs. Therefore, it is beneficial to consult an IP professional prior to filing. The choice of classes and sub-classes is very important. Once registered, the owner has 5 years to put the mark into use. Should the owner fail to prove genuine use, the mark can be revoked. 

How we can help

At Chetcuti Cauchi, we seek to apply a pragmatic business approach to each client’s intellectual property matters and obtain results consistent with the client’s business needs. As a Malta IP Law Firm Chetcuti Cauchi offers a wide-ranging variety of services for individuals and entities seeking to protect their ideas, marks, inventions, works and designs from potential threats. 

 

[1]Scientific and technological services and research and design relating thereto; industrial analysis, industrial research and industrial design services; quality control and authentication services; design and development of computer hardware and software.


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