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ISSUE 19.19.F • 2022-05-09

In this issue

LEGAL BRIEF: The one thing you need to know about the metaverse

Additional articles in the PLUS issue • Get Plus!

PUBLIC DEFENDER: Are Google’s Accelerated Mobile Pages (AMP) good or evil?

SECURITY: How to use two-factor authentication the right way

ON SECURITY: Is firmware patching important?

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The one thing you need to know about the metaverse

Max Oppenheimer

By Max Stul Oppenheimer, Esq.

Nike is trying to convince a court that the metaverse is a real place, where the rules of the real world (as I think of it) do not apply.

If it succeeds, it will be a revolution in thinking on a par with the introduction of the theory of relativity. Because the one thing you need to know about the metaverse is this — it is not real. The tools that create the metaverse create projections into the real world, but the metaverse itself is no more real than Pandora.

Nike is upset with Stockx, a company that brokers resale of Nike shoes, and has sued Stockx in federal court in New York. The interesting part of Nike’s complaint is the claim that Stockx is violating Nike’s trademarks.

A quick tour of real-world trademark law

Trademarks are symbols that identify the source of goods. They are meant to assure purchasers that the goods they are buying have been produced by a specific company, presumably because that lets consumers buy products of known quality. The fundamental rule of trademark law is that the only party allowed to use the trademark is the trademark owner. If another party produces similar goods and markets them under a trademark that is confusingly similar to that of the trademark owner, it is an infringement, and the trademark owner can get an injunction and damages.

How then, you might wonder, can eBay exist? Isn’t its marketplace made up largely of third parties selling goods made by (and bearing the trademark of) others? The answer lies in two fundamental exceptions to the main rule of trademark law.

The first exception is called the first sale rule, whereby the right of a trademark owner to prevent infringing usage terminates, as to any specific item, upon the first sale of that item. So, if you lawfully acquire a pair of Nike sneakers, you can resell that specific pair — including, of course, the Nike logo that’s on the shoes — without infringing on Nike’s trademark.

That solves part of the problem, but part of it remains. The first sale rule permits the sale of the shoes but technically it does not permit advertising them by using the Nike trademark. The right to use the Nike trademark to advertise a subsequent sale of legitimate Nike products arises under a principle called nominative fair use, which is the right to use a trademark to identify the products being sold. That should make perfect sense. If you are selling a lawfully acquired pair of Nike shoes, you should be able to call them Nike shoes, not “shoes that are made by a company that I’m not allowed to name but which rhymes with bikey.”

If I believe that, then why can’t Nike and Stockx get along?

Stockx has done more than facilitate resale of Nike shoes. It maintains a stock of Nike shoes and has attached a nonfungible token (NFT) to each. According to Stockx’s answer to Nike’s complaint, customers can buy and sell the NFTs while the physical shoes remain in a Stockx warehouse. Stockx certifies the authenticity and condition of each pair of shoes. If someone wants actual possession of the shoes, they can pay a delivery fee, and Stockx will send the shoes and destroy the associated NFT.

Note: In fairness to Nike, its complaint alleges that Stockx is selling NFTs without actually having the shoes. That would dramatically change the analysis, but Stockx’s answer denies the allegation.

Nike owns trademarks on, for example, the word “Nike” for athletic shoes (Registration No. 0978952) and has applied for trademarks on the same mark for NFTs. It claims that when Stockx attaches an NFT to the shoes, that is an infringement of its trademarks. Moreover, in December 2021 Nike acquired RKFKT, a company that produces “digital art and collectibles.” In Nike’s view, Stockx has created a new product — the Nike shoe plus an NFT — that somehow has greater value than the shoe itself, infringing Nike’s trademark in the process.

As evidence, Nike offers the example of a pair of shoes (specifically, Nike Dunk Low – Retro White Black) originally available from Nike for $100 and then in the secondary market at an average price of $282. However, the pair is listed by Stockx as an NFT evidencing ownership of similar shoes for $809.

Part of that disparity can be explained in economic terms: if one were buying the shoes as an investment for resale, buying the NFT would avoid shipping costs, storage costs, and a second set of shipping costs to a future purchaser. There might also be value in the certification that Stockx provides as to authenticity and condition.

Whether that justifies the entire disparity in price is an open question. Nike’s view is that the difference represents value associated with the Nike trademark — value that belongs to Nike, not Stockx.

Nike’s view translates into an NFT being somehow different from a “real world” document of title. Under that view, the title to your car would have value unrelated to the existence of your car, except that the title would at least be worth the paper it’s printed on, while an NFT can’t be used to cover the lens on your smartphone during awkward moments on zoom calls.

So how does this work in the metaverse?

That question makes sense only if you believe that the metaverse is real. It isn’t real any more (or less) than the world created in a Disney cartoon. Both have real-world embodiments, and those embodiments — but only those embodiments — can be protected by trademark law. Intellectual property protection is limited to things that have real-world consequences. Creation of a physical cartoon using Mickey Mouse would violate the Disney trademark (Registration No. 0247156 dating to 1928), as would broadcasting it on TV, because either action would be perceptible in the real world.

On the other hand, thinking about the Mickey Mouse character is not a trademark infringement. No less a figure than Thomas Jefferson (viewed by some as the father of U.S. intellectual property law) opined that ideas in the abstract were not protectable.

If you find that odd, try this simple thought experiment. Imagine the last time you watched a TV show. Now focus on the commercials. You saw advertisements for products that included trademarks, yet you did not need to sign any sort of licensing agreement to do so — things that go on in your mind cannot violate intellectual property rights.

Ultimately, a federal court in New York will be called on to decide whether Stockx is using Nike’s trademark to advertise Nike shoes — in which case, we can expect a boring result — or whether Stockx has somehow violated rights in a metaverse — in which case there is an exciting new world (and maybe multiple new worlds) to exploit, and prospectors should start lining up to buy metapicks and metashovels.

Feel free to apply for those metatrademarks.

How to search for federal trademark information

The United States Patent and Trademark Office (USPTO) is a bureau of the US Department of Commerce. USPTO operates several websites that provide information about patents and marks. These tools are sorely in need of updating and can be confusing to navigate, which is just what you’d expect from the agency in charge of the nation’s cutting-edge technology.

Starting at the USPTO home page swamps you with information and links. The quickest path to detailed trademark information is the Trademark Electronic Search System (TESS). On the first page of the site is the link Basic Word Mark Search (New User). Ignore the “New User” part — there is no login, and a user account is not required. Just click through. You’ll then be at the search page, the relevant portion of which looks like this:

Source: USPTO TESS website

To search for either of the registrations mentioned above, enter the registration number in the Search Term field, select Serial or Registration Number from the Field dropdown, and click the Submit Query button. The presentation of the search results is not particularly clean, but you should have no problem from this point on.

You can also choose the clearly named Combined Word Mark (BI,TI,MP,TL) from the Field dropdown to search for marks by name. You’ll get over 350 results if you search for “Nike.”

Talk Bubbles Join the conversation! Your questions, comments, and feedback
about this topic are always welcome in our forums!

Max Stul Oppenheimer is a tenured full professor at the University of Baltimore School of Law, where he teaches business and intellectual property law. He is a registered patent attorney licensed to practice law in Maryland and D.C. Any opinions expressed in this article are his and are not intended as legal advice.

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Here are the other stories in this week’s Plus Newsletter


Brian Livingston

Are Google’s Accelerated Mobile Pages (AMP) good or evil?

By Brian Livingston

A programming technique that Google says will speed up websites is actually slowing them down, according to major Web publishers and browser makers who are actively blocking it or working around it.

The technology is called Accelerated Mobile Pages or AMP. The search giant has been working on the technique since at least 2015. But AMP has become a hot potato only recently.

Last year, publishers and Web developers began realizing that Google was favoring its own AMP systems and silently diverting to itself a large cut of websites’ advertising revenue, according to a lawsuit filed by the attorneys general of 16 US states.


Lance Whitney

How to use two-factor authentication the right way

By Lance Whitney

Two-factor authentication is still one of the best ways to protect your accounts. But there are right and wrong ways to use it.

More websites and companies now offer two-factor authentication (2FA) to better protect your logins and accounts. The idea is to use a second form of authentication so that you’re not solely dependent on your password. The goal is to prevent your account from being accessed and compromised in case your password is ever leaked or stolen. And here’s how that can happen.


Susan Bradley

Is firmware patching important?

By Susan Bradley

Firmware patching has always been fraught with concern.

Until very recently, applying firmware updates often meant launching the update process from a DOS prompt. You often received warnings that if your computer lost power during the process, your machine might be bricked. This is such a daunting thought that, for servers, I would often update the firmware when I initially installed the server and never touch it again.

But firmware is nothing more than software, and — like every other kind of software these days — attackers find vulnerabilities in firmware. Recently, researchers found security issues in Lenovo consumer notebook firmware.

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