WHAT IS THE METAVERSE?
The metaverse is a virtual world where users can interact with others, play, and purchase products through their avatars. Some of the more popular metaverse platforms available to the public include Meta, Fortnite, and Roblox, among many others. As the metaverse continues to develop, brands have an opportunity to reach customers in a new and exciting way. Through the metaverse, brand owners are able to reach an international audience for their products at a lower cost than traditional advertising methods. The metaverse also enables brand owners to interact with consumers in new ways, such as by hosting events and allowing consumers to purchase digital products in the form of non-fungible tokens ("NFTs"). Entering the metaverse can help brand owners develop interest and excitement in their brands. With all of these new opportunities the metaverse presents, brand owners need to carefully consider how to best protect and enforce their brands in the metaverse, and comply with applicable advertising laws.
TRADEMARKS
The metaverse has been referred to as the "wild west" for brand owners. Given the ease and low cost at which NFTs and other digital products can be produced, it is easier than ever for third parties to infringe on brand owners' rights in the metaverse, including by producing virtual counterfeit goods. In addition, much like infringement over the internet, the anonymity of users makes it even more difficult to identify infringers and take legal action against them. In the metaverse, brand owners risk others making unlawful use of their trademarks and confusing consumers as to the true source of the brand owners' goods or services. It is important that brand owners take steps to protect their brands from bad faith actors in the metaverse, including by implementing robust brand monitoring practices in the metaverse, registering key trademarks in connection with virtual goods and services in key jurisdictions, and enforcing trademark rights against infringing parties in the metaverse, including via direct engagement with metaverse platform operators.
ADVERTISING & MARKETING
Another consideration for brand owners in the metaverse is the rules they must follow when advertising their brands on metaverse platforms. If Canadian consumers are able to access a company's advertisements, it is likely that Canadian advertising laws will apply. While Canada does not have advertising rules specific to the metaverse, many of the rules that are applicable to traditional advertisements will also apply in the metaverse.
MARKETING CONTESTS
A popular trend within the metaverse involves creating contests or giveaways sponsored or run by the brand owner. Any contest, giveaway, or sweepstake open to Canadian residents will need to follow the contest rules found in the Competition Act and Criminal Code. For instance, under the Competition Act, all contest advertisements must clearly disclose key information to entrants about the contest such as the number and approximate value of available prizes, any regional allocation of the prizes, and any other fact that materially affects the chances of winning. The Criminal Code requires that prizes not be awarded solely based on chance and prohibits requiring participants to pay consideration, including in-game currencies, in order to participate.
DECEPTIVE MARKETING PRACTICES
The metaverse provides ample opportunities for companies to organically feature their brands within a virtual world. The Competition Act prohibits companies from presenting advertising materials that are false or misleading. Similar to the use of influencers on traditional social media platforms, it is important for metaverse influencers to disclose when they are being compensated or rewarded for using a brand within the metaverse, as well as any material connections they may have with a company. As avatars are often used within the metaverse, it is also important to distinguish when a real person is behind the avatar versus an artificial intelligence ("AI") machine. AI avatars are unable to provide testimonials or reviews based on products they are "using" as they cannot experience the product. It is important for brands to disclose the use of AI in the promotion of a product within the metaverse.
ADVERTISING TO CHILDREN
Children make up a significant portion of metaverse users. For instance, in 2022, 75% of children aged 9-12 in the United States regularly played Roblox.1 Given these demographics, it is important for advertisers to follow the myriad of rules related to advertising to children. Some metaverse platforms have built in protections for children; for instance, Roblox does not advertise to children under the age of 13. Canada's self-regulating body for the advertisement industry, Ad Standards, has released rules related to children's advertising, including the Broadcast Code for Advertising to Children and the Code for the Responsible Advertising of Food and Beverage Products to Children. Some brands have also avoided advertising to children by creating events only accessible to users over a certain age.
CONCLUDING REMARKS
As brand owners begin to use the metaverse as a new way to promote their brands and engage with consumers, it is important for brand owners to ensure that their activities within the metaverse comply with appropriate rules and regulations. In addition, as the metaverse continues to expand, it is important for brand owners to consider how to best protect and enforce their trademark rights in this new internet frontier.
Footnote
1 Bennett Institute for Public Policy, "Children, competition and the metaverse" (21 August 2022), online (blog): https://www.bennettinstitute.cam.ac.uk/blog/children-competition-and-the-metaverse/>.
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