Virtual Fashion: Can Designer’s Lose their Intellectual Property Rights?

Virtual Fashion: Can Designer’s Lose their Intellectual Property Rights?

Virtual Fashion Overview

In recent years, there has been a move towards virtual fashion in the metaverse. The metaverse is a “virtual-reality space in which users can interact with a computer-generated environment and with other users.”^[1] Morgan Stanley predicts that digital demand is going to continue to grow from the current “low levels and result in extra sales for the industry that could reach $50 billion by 2030.”^[2] Brands have been looking for ways to participate in the metaverse because of the benefits it provides. For example, during the COVID-19 pandemic, the metaverse has allowed brands to stay connected to consumers.^[3] Reed Smith LLP’s Stacy Marcus and Deborah Bessner argue that the appeal of the metaverse is that virtual stores “are easily changeable and can adapt more quickly to consumer preferences and trends than a brick-and-mortar store can” and “the reach of a virtual world and experience goes beyond that of a physical one.”^[4]

Virtual fashion has been taking form in a variety of ways. Brands have begun implementing virtual fitting rooms where individuals can try on clothes in virtual reality.^[5] The brand debuted four fit outfits and various other accessories to be worn by a player’s avatar and they created a Balenciaga store within the game.^[6] They also placed billboards throughout the game, where avatars wearing Balenciaga’s fits could be featured.^[7] Additionally, Gucci recently released a digital sneaker available for under $12.^[8] Consumers will benefit from more luxury brands moving into the digital space because they may not be able to afford any of their physical products, which can sell for hundreds or thousands of dollars.^[9]

Individuals have also been creating specifically focused on virtual fashion, such as Dress X. Dress X provides a platform where consumers can upload pictures of themselves, purchase 3D clothing and place the clothing item on themselves in the picture.^[10] Users can then post that photo on social media and it will be as if they were actually wearing the 3D garment.^[11]

Intellectual Property Ownership Rights

With the rise of virtual fashion, questions have been forming around the intellectual property rights of virtual design. Recently brands have made a move toward gaining protection for the virtual products they intend to create. For example, in October 2021, Nike filed seven intent-to-use applications for some of its most famous trademarks including “Nike,” “Just Do It,” “Jordan,” and “Air Jordan,” the iconic swoosh logo, the Jordan silhouette logo, and a combination of its name and the swoosh logo.^[12] The application specifies Nike’s intends to use these marks for virtual goods and services such as “downloadable virtual goods,” “retail store services featuring virtual goods,” and “entertainment services, namely, providing on-line, non-downloadable virtual footwear, clothing, headwear, eyewear, bags, sports bags, backpacks, sports equipment, art, toys and accessories for use in virtual environments.”^[13] By filing this application, Nike will be able to its protect trademarks on virtual products.

Even where brands have intellectual property rights in their logos on virtual goods, there can be ownership issues when they employ a software company to create virtual garments. Absent an agreement, the software license holder who creates the virtual design will be the intellectual property owner of the 3D garment.^[14] The original designer will still be the owner of the intellectual property rights attached to a physical twin design.^[15] In order for a designer to retain rights in 3D garments they can contractually agree with the software company to transfer the ownership back to them.^[16] Alternatively, a license agreement could allow the original designer to use the virtual garment for a period of time and in specified ways.^[17] The more people involved in the design of a virtual garment, the more a designer could be at risk of losing their ownership rights.^[18] Where one agency handles the design, another handles the animation, and a third combines those into a 3D environment for fashion presentation, the more essential license agreements are between all parties to agree to ownership rights and rights to edit/use/repurpose any of the content.^[19]

Designers, new designers in particular, must be aware of the intellectual property issues that correspond to virtual fashion designs. Since more brands are looking to build a presence in the metaverse, they need to educate themselves on the issues that may arise with intellectual property rights, especially since this is a new world that is rapidly evolving. Otherwise, they could lose the right to use their own design.