By Maghan McDowell
As digital fashion increases in value and relevance, brands must consider how they show up in the metaverse, including how much control they want over user-generated content.
A “Baby Birkin” NFT, which was an animation of a baby growing in an Hermès Birkin bag, recently sold in a Basic.Space auction for the equivalent of $23,500. The artistic NFT, created by Los Angeles-based creatives Mason Rothschild and Eric Ramirez, was intended to be a play on the handbag’s sought-after standing in pop culture, and its sale price dwarfs 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 had no affiliation with — and saw no revenue from — the sale.
NFTs and digital fashion have become important ways for brands to create relevance and buzz, with numerous platforms letting creators make and sell digital fashion. While some brands, including Gucci, have partnered with platforms and creators to design digital clothing, people often make and sell items that appear to be created by luxury brands but without brand participation. This raises questions around ownership and legality: are sales of branded digital items legal if the brand had nothing to do with them?
Consider Roblox, the metaverse and gaming platform on which Gucci, Stella McCartney and Nike have sold digital items; users can also buy what appears to be Burberry, Chanel, Prada, Dior and Louis Vuitton, even though these brands have seemingly not participated in the creating or selling in most of these items. Tension is starting to rise over what’s used on the platform: last week, the National Music Publishers’ Association filed a lawsuit against Roblox, accusing it of using songs from artists like Ariana Grande and Ed Sheeran without compensating writers or copyright holders. In response, Roblox stated it was passionate about protecting intellectual property rights and does not tolerate copyright infringement. Other spaces in which users can buy and sell digital clothing include Animal Crossing, Open Sea, Zepeto and others, although not all items sold are branded. (Burberry, Dior, Prada, Chanel and Louis Vuitton declined to comment.)
Digital worlds are big business: this year, Roblox creators and developers alone are slated to earn $500 million, while Roblox’s revenue — it takes a percentage of sales — was $387 million in Q1 of this year. These platforms also cater to a lucrative audience: there are an estimated 3.4 billion gamers worldwide, many of whom are younger consumers. Brands including Louis Vuitton, Valentino, Gucci, Marc Jacobs, Burberry, Balenciaga and Hermès are getting in on the action and have partnered with games or created their own. But with some designs created by brands and others created by fans, this introduces potential confusion among consumers on whether they are buying items created by brands, says lawyer and fashion law expert Julie Zerbo, founder of The Fashion Law.
“The most important element when thinking about trademark use is if the average consumer would be confused. I would argue that [many of those in the metaverse] are less sophisticated consumers purely because of their age.” As of 2020, more than half of Roblox users were younger than 13. In addition to the lack of clarity on who created branded items, Zerbo says that brands could also make a trademark dilution argument as “many of the trademarks we are talking about are very famous”.
“It’s a minefield,” says Cathy Hackl, a metaverse expert who consults with brands. “Some of the creators are really young, so they might not understand that this is someone else’s IP, and I can’t take liberties with this. Brands will have to collaborate in spaces with UGC.” This doesn’t mean just marketing teams, she adds. “Legal and financial teams need to educate themselves about the metaverse and potential issues that might come with people trying to be creative. Maybe someone wants to use part of Gucci and merge it with another brand — and the brand has no say in the hybrid?”
This becomes especially relevant with augmented reality that enables people to, for example, wear digital clothing in Zoom calls and on social media, says Marc Beckman, CEO of advertising agency DMA United and co-founder of curated NFT marketplace Truesy. “We are barreling toward this idea of wearable digital technology, which should become a brand extension as natural as any other physical item. If you’re going to talk to the next generation consumer, you need to be there with them, and we are at a critical junction to develop strategies as it relates to wearable digital technology.”
Are copycats a problem?
While the rules around creating physical counterfeits are relatively clear, rules in the metaverse are still a bit murky. “Who owns the IP on a digitally created or mutated physical product?” posited New Balance’s Ian Fitzpatrick, who is global director of brand strategy and operations, during April’s GamesBeat Summit. “When we start a conversation like that with internal stakeholders who operate in a physical world, that takes on an entirely new form: who owns the IP for that, and how does that change over time? These are really scary ideas for established manufacturing companies.”
One fashion brand client of Hackl’s, whom she declined to name but has a “very iconic” logo, is starting its strategy by simply going through the games and NFT platforms to see what is out there, she says. Even though it identified a few items that would lead someone to believe it came from the brand directly, it decided not to “move on any of them”, Hackl says. “For them, it’s interesting. It’s a combination of, ‘Does this infringe on anything or is this affecting us?'”
“I refer to them as digital assets, which implies there is value,” Zerbo says, even if they aren’t what is traditionally considered to be “real” objects. “How we define authenticity is part of the question here, and the protections aren’t that different from what we see in real life. While it’s not uncommon for people to say, ‘How do we cope with this new reality?’, is it all that different from what we have been dealing with?”
Kering Americas general counsel Ewa Abrams acknowledged that the challenge of IP and counterfeiting is increasingly becoming a digital problem during last week’s Fashion Policy and Social Justice Summit. In some cases, designs are copied before they are released by the brand, putting more pressure on brands to respond to digital threats, she said.
As sales and usage of digital items increase, the Roblox lawsuit shows legal action is one route to tackle this. In its SEC filing, it stated that creators are responsible for clearing the rights to the content they upload and that it relies on legal protections, specifically the US’s Digital Millennium Copyright Act, which provides immunity to online service providers for infringing content, and Section 230 of the Communications Decency Act, which says that platforms are not responsible for screening what its users say.
In a statement to Vogue Business, a Roblox spokesperson said: “As a platform powered by a community of creators, we are committed to protecting intellectual property rights — from independent designers and creators to fashion and lifestyle brands. We do not tolerate copyright infringement and expeditiously respond to any valid Digital Millennium Copyright Act (DMCA) request by removing any infringing content.”
Platforms like Roblox aren’t required to police content, but it might be increasingly motivated if brands complain. Physical counterfeits are already a big problem for tech platforms trying to cultivate fashion relationships. Amazon has partnered with brandsincluding Salvatore Ferragamo and Valentino on lawsuits that go after counterfeiters, while Instagram partnered with Gucci on a similar lawsuit.
“It really is mirroring the real world,” Zerbo says. “If we think about Alibaba’s Tmall, [luxury] brands were not present for a very long time, then they started coming around as a result of Alibaba taking a lot of action to clean up its act. Part of this will be the platforms themselves having to take action if they want to entice brands to collaborate.”
Zerbo says that the impact on a brand when the item in question is a one-off NFT, like the “Baby Birkin”, might deter brands from taking action. “In principle, one could say that an unauthorised image and associated NFT are counterfeits,” says Jeff Trexler, associate director of Fordham University’s Fashion Law Institute. However, he adds, it’s not that simple because trademarks are registered by category. “Birkin” is registered under categories including leather goods and leather handbags, so the creator of the digital artwork could argue that Hermès hasn’t registered the pertinent marks for digital art and could also argue that this image is protected as fair use, commenting on the Birkin’s cultural significance.
“The NFT is not the image; it’s metadata pointing to the image,” he adds. “The use of the Hermès marks to sell an NFT would legally be considered infringing, but absent Hermès having a presence in the NFT market, it likely wouldn’t be seen as a counterfeit. Will [the artists] try to stake a claim to the Hermès mark for NFTs?” Conversely, Gucci has recently sold a fashion film NFT, Trexler says, “so it would not be surprising if Gucci were to protect its rights against infringing uses of its marks, as Gucci’s now a player in the graphics game”.
Currently, Trexler says, design patents refer to manufactured articles rather than digital ones, but that may change. Earlier this year, the US Patent and Trademark Office issued a request for comment on design patent protection for images that “do not require a physical display screen or other tangible article to be viewable”, such as images in virtual reality, augmented reality and holograms. “Depending on where the USPTO lands on virtual design patents, we could be looking at a whole new world of design protection,” Trexler says.
A brand might be motivated to want to participate in NFT sales because resales of NFTs would allow a brand to continue making money on secondary sales and all future sales. Beckman points to the popular marketplace Nookazon, which lets people buy and sell items for Animal Crossing: New Horizons. Any brand-created items sold there would ultimately not be paid to the brands. In Roblox, for example, a Gucci-branded item created by the brand was recently resold among peers for more than $4,000. While Gucci benefitted from the original sale, it did not capitalise on the resale.
“If considered as proof of concept, there is massive value, both commercially and from a marketing perspective. The problem is, these traditional houses are very focused on their core business — as they should be — but they don’t have teams that specialise in building these commercial strategies in-house. Gucci does, but I haven’t come across a company that has anything like what Gucci has,” Beckman says.
Bootlegging is cool
There is a trend among brands to embrace so-called bootleggers to build cultural capital. In the case of Gucci, it partnered with creator and game developer Rook Vanguard, who has gained a following creating one-of-a-kind original designs with colour-changing accessories. This mirrors Gucci’s partnership in the physical realm with Trevor Andrews, or GucciGhost, who got his start by ripping off the brand. Similarly, brands might have the perspective that user-generated content that builds desire and awareness is inherently beneficial.
Jesse Lee, founder of Basic.Space (which sold the Baby Birkin), says that creators Rothschild and Ramirez wanted to capture the cultural zeitgeist, including the popularity of the song by rapper Gunna entitled “Baby Birkin”. “We wanted to take the cultural moment and replicate it in a digital form. It was a cultural commentary.” He sees parallels in the music industry when streaming took over album sales. “Twenty years ago, labels were trying to sue everyone and look what happened since then; now publishers are thriving. They finally adapted to the culture,” he says.
He encourages luxury brands to embrace the opportunity of fashion in the metaverse, pitfalls and all. “Hopefully, Hermès thought it was an interesting interpretation, but not everyone will make it interesting and cool, but brands have to accept the bumps and bruises.” (Hermès declined to comment.)
One possible way to lubricate the transition is for platforms to verify creators, much in the same way that Twitter or Instagram verify users, Hackl says. These could signify that they are approved creators. Already, platforms like Roblox, Instagram and Snapchat, among others, are match-making between brands and creators. “Do you go after them or partner with them?” she asks. “The brands want to go where the eyeballs are, and generations Z and Alpha are in some of these places, so a brand that might not be relevant to them might become the next big thing to them.”
Whether a brand views it as underground marketing or counterfeits depends entirely on the brand. “This is still relatively novel if we think about how long it has taken us to get to where we are and how we value and protect trademarks on physical goods,” says Zerbo.