How would you like to drive a Ferrari, wear the latest Gucci shoes, or perhaps own an expensive Rolex watch?  Conversely, how would you like to see copies of your own products being sold online by someone else, for a profit?  It’s all happening, in a virtual world of course, and for a lot less than you would expect.  A virtual world is an online environment in which users are free to interact with other users around the world through “avatars,” or digital personas which they create.  Not only do users converse with one another as they move about in these virtual worlds, they may also own land, purchase and exchange goods and services, and run a business.

As the numbers of users operating businesses within virtual worlds for real world profit increases, so do the concerns about the protection of intellectual property rights within them.  Second Life (SL), the most popular virtual world, currently has over 4.5 million users and is attracting a bustling commercial economy.  SL distinguishes itself from other virtual-world games by giving its members intellectual property rights to the content that they create in SL.  However, the most interesting feature of SL is that its virtual currency is freely exchangeable for real world currency.  This effectively ties the economic activities that occur within SL to the real world.  In fact, within the past year, the Federal Bureau of Investigation entered SL to conduct an investigation into illegal gambling operations on SL.  It is currently estimate that roughly 3-5% of all transactions in Second Life involve goods which make an unauthorized use of the trademark of another.  While this number might seem insignificant, it amounts to millions of transactions annually and at least $2 million in total value.

Given this rampant sale of counterfeit virtual goods, how long can a trademark holder stand idly by?  Trademark owners are obligated to defend their marks or risk losing them.  As a result, it stands to reason that they should be actively policing their marks within these virtual worlds. Unfortunately, that is much easier said than done, as a new storefront can be easily set up overnight.  While Linden Labs will accept complaints of copyright infringement and will “take-down” content deemed to be in violation, this does not put a stop to trademark infringement.  Additionally, other legal questions, such as whether or not the “virtual goods” composed of electrons sold within these virtual worlds are “counterfeit” real world goods remain unclear.

While many believe that the SL user base is too small to warrant attention, others view this as an opportunity for trademark holders to get in on the ground floor and protect their core mark(s) within a growing part of the Internet, similar to the domain name rush of the mid 1990s.  In a recent effort to combat counterfeiting, several trademark holders, such as the Coca-Cola Co., Toyota Motor Co., Herman Miller, Inc., and others have established a presence within SL to promote their real world products by providing authorized virtual goods.  From another perspective, users who began their business and have built their brands wholly within these virtual worlds are now turning to trademark law to protect their rights.  Recently, a designer of content for Second Life won a federal trademark registration for her avatar and brand “Aimee Weber.”

Companies interested in protecting their core mark(s) should consider filing a trademark application pertaining to “virtual” goods and/or services.  Currently, the law in this area is developing and the Trademark Office isn’t sure how to deal with such applications where no “real” goods exist.  As a result, a successful application requires careful drafting.  Obtaining a registration may also require that you are involved in a virtual world using the mark.  Such a use could include establishing and maintaining at least a minimal virtual presence within a virtual world in order to properly claim use of the mark in commerce with respect to “virtual” services.

It has yet to be seen how quickly IP protection and enforcement will adapt to virtual worlds.  However, if the commercial impact of these virtual worlds continued to grow, then high profile trademark holders would be well served to invest in promoting their products and securing their rights within these virtual worlds as early as possible to discourage unauthorized and improper use and ward off a potentially larger problem in the future.