Trademark Protection for Fashion Brands in Metaverse: Legal Challenges of NFTs and Virtual Goods

Introduction

Fashion is no longer limited to the clothes and assets we touch, wear and buy from physical stores. Today, fashion brands, and even small businesses, have entered the digital market boosting the online shopping forum to an all time high. Moreover, brands have now entered the spaces such as gaming platforms, avatar words, social media and NFT marketplaces. A person may now purchase a virtual handbag for an online avatar, collect branded digital sneaker or wear designer clothing in a game without ever owing the physical item itself. For brands and designers, this opens exciting commercial possibilities however, for the law, it certainly creates predicament.

The central problem is simple to state yet difficult to solve: what happens when someone uses a famous fashion trademark in the digital world without authorization? For instance, if a person creates a virtual Chanel dress, a Nike sneaker NFT or a digital Birkin-style handbag and sells it online to a gaming platform such as Fortnite or Roblox, they are not just copying the design but also using the goodwill, reputation and recognizable identity of the brand to make a profit. It is the value of the brand itself. In order words, what is being copied is often the trademark value.  

The problem is that the preset framework of trademark law serves and protects the physical market, territorial boundaries and ordinary goods and services. The metaverse and NFT economy, however, operates rather differently. Digital items move across borders instantly, platforms host user-created content and NFTs can function as artwork, certificates, receipts or products all at once. That makes enforcement of IPR restrictions and even the contract law, which already suffers from the new intricates of e-commerce, harder than in the offline world.

Therefore, this article shall ask: ‘to what extent can existing trademark law adequately protect fashion brands in the metaverse, especially where virtual goods and NFTs blur the line between artistic expression, authentication and commercial exploitation?’ The article argues that trademark law does apply to digital fashion but not smoothly, and the metaverse exposes three weaknesses in traditional trademark doctrine: territorial enforcement, classification of digital goods and difficulty of separating art from commerce.

Background: Understanding the Basics

To understand the legal issue, it is first necessary to understand the technology and the market. The Metaverse is best understood as a network of digital environments in which people interact through avatars and take part in entertainment, social life and commerce.[1] And in these spaces, users may buy and use virtual goods, meaning non-physical items such as digital clothing, shoes, handbags, accessories and skins for their digital avatar. Interestingly, a Balenciaga jacket or a Gucci bag may still perform the same status-signaling function online that they also bestow offline.

NFTs, or non-fungible tokens, are often part of this digital economy. An NFT is a blockchain-based token that can authenticate, link to or record dealings in relation to a digital or physical asset.[2] NFT may or may not be digital object itself rather, most often, it acts as a receipt and proof of ownership of your purchased digital item.[3] This distinction matters because one of the biggest legal questions in this area is whether an NFT is being sold as a product, used as a proof of ownership or functioning as a claim-check for something else. Both the EUIPO and the UKIPO clarifies: “NFTs alone are too vague for trademark classification and applicants must specify the actual asset authenticated by that token.”[4]

Trademark law protects signs used in commerce to indicate origin, sponsorship, association and most important for fashion brands, goodwill. The logic is simple: if a sign implies that the product might be connected to a particular brand, that brand should be able to control and monopolize on it. In the UK, Section 10 of the Trademarks Act, 1994 protects against identical and similar uses of registered mark in the course of trade, including uses that create confusion or take unfair advantage of a mark’s reputation.[5] Similarly, in the EU, article 9 of the EU Trade Mark Regulation gives the proprietor of an EU mark the right to prevent unauthorized uses that create confusion or exploit reputation.[6] The Indian law carries broad infringement rules of trademark however, not much metaverse-specific administrative guidance.[7] On the other hand, the UK and Eu have progressed in practical terms because both UKIPO and EUIPO have already issued guidance declaring that virtual goods generally fall in Class 9 and that “NFTs” must be describes precisely by reference to an underlying asset.[8] Indian law has not yet developed that same level of explicit classification guidance for virtual goods and NFTs. So the doctrinal tools exist in India, but the regulatory and filing framework is less developed.

The problem is that digital fashion places pressure on two assumptions built into this system. First is ‘territoriality’; trademark remains a territorial right however, metaverse use is globally accessible and digital. Second is ‘classification’; trademark registrations were historically structured and introduced for physical goods, whereas digital markets now encapsulate downloadable virtual assets, digital files authenticated by NFTs and online retail or entertainment services. The classification method suggested by the UKIPO and EUIPO helps but does not solve the problem. The deeper issue is that digital fashion collapses old distinctions between product and image, collectable and commodity, authentication and exploitation and art and advertisement.

Legal Analysis

The first question is whether the trademark law should extend to virtual fashion goods at all? In principle, it should. A trademark protects the communicative and commercial function of a mark/sign. That function does not disappear or weaken simply because the product is rendered digitally rather than physically. If a consumer sees a virtual product modeling a famous logo, they may still assume that the product was licensed or approved by the relevant brand. Indeed, the assumption may become stronger as more brands officially enter digital spaces and sell avatar clothing or launch branded virtual experiences.[9] Its simple, the stronger the presence of fashion brands is in the metaverse for real commercial purposes, the stronger the case for trademark protection against unauthorized third- party use gets.

The second issue is classification and commercial use. This is where the law and judges start to struggle. Not every NFT does the same job and it is important to classify them because the legal analysis changes depending on what the item is for.[10] Classification matters to court because the court does not cases by trendy words like “metaverse” or “trademark”. Courts decide by asking: what is this thing actually doing in the market, and what legal consequences follow from that function? One NFT may be a virtual fashion product being sold like a digital handbag or shoe, another may only be a blockchain certificate linked to a physical item and acting as a receipt whereas another may be a part of an artwork or creative project. This classification is important because the effect of trademark law changes completely depending on the function of the item. If it is acting like a product in the market, the court is more likely to treat it as a commercial use of a trademark and ask whether consumers may be confused or whether the brand’s reputation is in jeopardy. If it is acting more like an expression of art, commentary or proof of ownership, the court may diverge and balance trademark protection with freedom of artistic expression.[11]

The third issue if territoriality and jurisdiction and this is where the WIPO’s study becomes useful. WIPO’s work on localization of online infringement makes it clear that mere accessibility is not enough to establish infringement in every jurisdiction.[12] If that were the rule, digital activity anywhere could be treated as unlawful everywhere at once. Instead, courts increasingly look for targeting or commercial effect in the relevant territory. In practical terms, the question is whether the digital activity is aimed at consumers in that jurisdiction or has market impact there. This approach does not abolish territoriality, but it helps adapt to online trade, e-commerce and now metaverse.[13]

This approach can be explained by the case of L’Oreal v eBay, wherein the Court of Justice of European Union recognized that online marketplaces may be required to take effective steps against infringement where they play an active role.[14] Similarly, in the case of AMS Neve v. Heritage Audio, the Court of Justice accepted that online targeting could ground jurisdiction in a trademark dispute.[15] In the UK, the House of Lords, in the case of Lifestyle Equities v. Amazon, confirms that online offers and marketing can infringe UK rights where they seem to target UK consumers, even if goods are stored and produced abroad.[16] Although these cases are not “NFT” related yet they establish enforcement architecture of digital brands disputes and the e-commerce. Thus, the metaverse foes not make the trademark law irrelevant in toto rather, it makes the localization of infringement more fact-sensitive prompting conflict of laws.

The fourth and most intricate issue is the fine line between artistic expression and commercial exploitation. It is important to note that not every use of fashion marks in the digital environment constitutes IPR infringement. If it were so, all chaos would break in lieu of social media. Some creators claim that make art, parody and even social commentary by using the brands’ logos and marks. Trademark law therefore must give room for artistic expression. At the same time, “art” cannot become a complete defence for exploitation. Where the brand name or logo is being used a selling point or where the project is structured like a product launch rather than mere commentary, the case of infringement becomes stronger. Is the item an artwork, an NFT, a virtual product or a hybrid object? Is it for commercial use, personal use or for non-profitable distribution? The answer affects how much weight should be given to its trademark protection.[17]

The Indian Trade Marks Act 1999 is broad enough to catch unauthorized digital brands usage through ordinary infringement and passing off principles. But India still lacks the detailed administrative classification mechanism, as seen under UKIPO and EUIPO, hence, the present debate becomes more alarming as Indian consumers, creators and platforms enter virtual fashion markets increasingly.[18]

How have the courts been handling it until now?

Interestingly, there have not been a lot of cases dealing with this issue in particular. Hermes International v. Rothschild, better known as the MetaBirkins dispute, remains the most significant in this area. Mason Rothschild created and sold NFTs showing colorful, fur-covered handbags inspired by Hermes famous Birkin bag under the name ‘MetaBirkins’. Hermes sued for trademark infringement, dilution and cybersquatting. Rothschild argued that the works were artistic expression of his own and should be entitled to protection accordingly.[19] The court was forced to consider a cutting-edge question: can a digital luxury item sold as an NFT still infringe a traditional trademark? The jury, in 2023, found for Hermes and awarded damages of about $133,000. Hermes was successful in establishing that Rothschild sold the NFTs for profit, used the name “MetaBirkins”, promoted them online like a branded collection and created a real possibility for brands misrepresentation and consumer conundrum. A permanent injunction followed later in 2023.[20] Yet, an appeal on the broader tension between trademark protection and artistic freedom is still being contemplated at the appellate level.[21]

The second major dispute is Nike v. StockX. StockX launched “vault NFTs” connected to physical Nike shoes kept in storage and argued that the NFTs were merely digital claim-tickets or receipts for the underlying goods. Nike argued that the NFTs were independent digital products using Nike’s marks without permission and creating consumer confusion. This case did not yield a clean merits judgment as it was settled between the parties in August 2025 however, its real value lies in the doctrinal question it exposed: when does an NFT merely verify ownership of a lawful physical item and when does it become an unauthorized digital product in its own right?[22]

The case mentioned before, Lifestyle Equities v. Amazon although is not strictly metaverse related nonetheless, it provides a strong model for understanding territoriality in digital commerce. The UK Supreme Court in 2014 held that Amazon’s sales and online marketing could infringe UK’s Trademarks rights when the activity of the e-commerce website targeted UK consumers regardless of where the physical products were actually stores (the US).[23] For metaverse fashion disputes, this matters because it supports a practical enforcement principle: digital accessibility alone is not enough, but targeted commercial activity can localize infringement with a territory. Thus, the existing trademark law already has tools for dealing with online marketplace and intermediaries, it’s just that they need a little fashioning to deal with the avant-garde technology.

Critical Analysis and Findings

Several trends emerge from this discussion.

First, the Trademark law, worldwide but in varying capacities, is adaptable but inadequate. Courts may extend confusion, dilution, commerciality, and unfair advantage principles to virtual goods but they ate doing so through analogy only. The present law was not written or foresighted for digital fashion, which makes outcomes less predictable than they should be. They carry the potential to collapse the judicial pronouncement and precedents on IPR law.

Second, the deeper instability and worldwide heterogeneity lie in classification. Courts, lawmakers, offices and platforms are still deciding whether NFTs are products, proofs, receipts or hybrid objects. Until that segregation settles, infringement analysis will continue to vary from case-to-case, again jeopardizing the ‘foundation built on judicial precedents and predictability’. It affects registration, strategy, scope and remedies. The UKIPO and EUIPO have made an important start by insisting on precise classification but administrative clarity and global implementation remain lacking.

Third, the metaverse makes old trademark harms easier to produce at scale. Confusion, dilution and even counterfeiting-like behavior can happen rapidly, sometimes without the knowledge and intention of the creator, because digital fashion is easy to copy, globally visibly, economically cheaper to create and distribute, requires low investment on resources and is detached from ordinary supply chain which requires extensive interconnected labour, sponsors and market. With free social media platforms and access to global audience, the permeation of a digital creation can be so rapid that big fashion brands would find it difficult to keep abreast. In fashion, when a brand carries enormous commercial weight, this matters a great deal. Luxury brands are not simply protecting fabric or leather; they are protecting the prestige and exclusivity tied to their marks or status symbol.

Fourth and last, our discussion here reveals that another major actor, the platforms, plays a central role in this enigma. Platform governance becomes incredibly important as this is the medium/bridge to carry the disputed virtual goods to the consumers and buyers. In practice, trademark enforcement in digital fashion will not depend only on brands suing the artist or the NFT seller, it will also depend on whether gaming platforms, marketplaces, avatar ecosystems and social platforms adopt stronger licensing, moderation and takedown systems. The future of trademark protection in virtual worlds may be shaped as much by intermediary responsibility as by classic infringement litigation.[24] Although platforms often try to reduce their liability by arguing that they comply with notice-and-takedown requests once infringement is reported, this approach is likely to be insufficient in the metaverse. The scale and speed of digital fashion markets mean that brands may not be able to identify and report infringing virtual goods quickly enough, especially where content is constantly being uploaded, modified, and traded across platforms. By the time a takedown notice is sent, consumers may already have been exposed to the item and confused about its connection with the brand. The problem becomes even more serious because the legal status of many digital assets is still unclear. If it is uncertain whether a virtual item is a product, an NFT-linked certificate, an artistic work, or a form of expressive content, platforms themselves may struggle to decide whether takedown is legally required or whether removal is merely a precaution. In this way, notice-and-takedown systems may work as a partial defence for platforms, but they do not offer a fully effective solution to trademark harm in metaverse environments.

Looking ahead, two emerging issues carries the potential to make the present predicament worse. First, would be the rise of AI- generated fashion assets which will make branded-looking virtual goods production much easier, faster, cheaper and in bulk. Second. will be the issue of interoperability across platforms i.e., if a digital fashion item can move from one virtual environment to another, questions of classification, exhaustion and enforcement will become more difficult.

For these reasons, the next step should not be to engender a separate “metaverse trademark law” rather should clarify how existing doctrines apply to forms of digital use.

Conclusion

The present trademark law can protect fashion brands in metaverse only partially and unevenly. The law already has enough flexibility to address the obvious issues of confusion and exploitation, which are most often dealt under the same principles as the e-commerce law. UK, EU and international developments prove that regulators and courts are trying to adapt old principles to new markets but the effectiveness of trademark law is weakened by three continuing problems: uncertainty over classification of NFTs, difficulty in pin-pointing jurisdictional mark of infringement across border and drawing a concrete line between artistical expression and brand exploitation.

The best way forward is not to revert to the drawing boards to draft entirely new legal systems for the metaverse. Instead, brands should register marks for virtual goods and related services with greater precision, regulators should continue issuing clearer guidance on NFT-linked assets and metaverse services and courts should docus on the market function rather than applying the straightjacket formula of label attachment.

Digital fashion is not a passing novelty; it is becoming part of mainstream brand strategy. The law needs to catch up in a way that protects innovation without turning virtual marketplaces into a free-for-all for trademark misuse.

Bibliography

1. AMS Neve Ltd v Heritage Audio SL (C-172/18) EU:C:2019:674………. 6
2. Eleonora Rosati, ‘The Localization of IP Infringements in the Online Environment: From Web 2.0 to Web 3.0 and the Metaverse’ (WIPO, 2023) https://www.wipo.int/documents/2810628/2827506/case-strudy-the-localiaztion-of-ip-infringement.pdf accessed 9 March 2026……. 4, 5
3. European Union Intellectual Property Office, ‘4.3 Non-Fungible Tokens (NFTs)’ (EUIPO Trade Mark Guidelines, 2024) https://guidelines.euipo.europa.eu/2214311/2215372/trade-mark-guidelines/4-4-3-non-fungible-tokens–nfts- accessed 8 March 2026…. 3
4. Hermès International v Rothschild jury verdict reported 8 February 2023…………………………………………………………………………………………. 7
5. Hermès International v Rothschild No 1:22-cv-00384 (SDNY complaint filed 14 January 2022)……………………………………………………………. 7
6. Hermès International v Rothschild post-trial injunction reported 23 June 2023…………………………………………………………………………………… 7
7. International Bar Association ‘Digital Regulation in the Metaverse Era: India’ (IBA, 2024) https://www.wipo.int/meetings/en/details.jsp?meeting_id=75574 accessed 8 March 2026…………………………………. 6
8. International Bar Association ‘The metaverse: a view from Europe’ (IBA, 2023) https://www.ibanet.org/document?id=Metaverse-project-Europe accessed 9 March 2026…………………………………………………………… 4
9. John Villasenor and Sam Albright ‘NFTs and Birkin Bags: A Hermes Lawsuit Tests the Limits of Trademark Rights’ (Brookings, 2022) https://www.brookings.edu/articles/nfts-and-birkin-bags-a-hermes-lawsuit-tests-the-limits-of-trademark-rights/ accessed 10 March 2026.. 5
10. L’Oréal SA v eBay International AG (C-324/09) EU:C:2011:474….. 6, 9
11. Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8…. 6, 7
12. Mark Cuban ‘Non-fungible tokens’ (Britannica, 2026) https://www.britannica.com/topic/non-fungible-token-data accessed 7 March 2026…………………………………………………………………………. 3
13. Meta ‘What is the Metaverse’ (Meta) https://www.meta.com/en-gb/metaverse/what-is-the-metaverse/?srsltid=AfmBOoo0tKISZDFMucbixkj4vXegKftwUxdTr88MElYJ6bg4eFcvcIph accessed 7 March 2026…………………………………………………………… 3
14. Nike, Inc v StockX LLC No 1:22-cv-00983 (SDNY, filed 2022); SGB Media ‘Nike Inc and StockX LLC Setlle 2022 Lawsuit over NFT Trademark Infringement’ (SGB Media, 2025) https://sgbonline.com/exec-nike-inc-and-stockx-llc-settle-2022-lawsuit-over-nft-trademark-infringement/ accessed 10 March 2026…………….. 7
15. Nitin Gaur ‘The rising NFT tide lifts all token: So what is an NFT?’ (IBM) https://www.ibm.com/think/topics/nft accessed 7 March 2026.. 3
16. Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark, art 9…… 4
17. Thayssa Bohadana Martins ‘Beyond the Bag: MetaBirkins, Hermes and the Legal Frontier of NFTs in Trademark Law’ (2025) 10(1) University of Balogna Law Review 121 https://bolognalawreview.unibo.it/article/download/20653/20156/98548 accessed 10 March 2026…………………………………………………………. 5
18. Trade Marks Act 1994, s 10…………………………………………………….. 3
19. UK Intellectual Property Office, ‘PAN 2/23: The Classification of Non-Fungible Tokens (NFTs), Virtual Goods and Services Provided in the Metaverse’ (Gov.uk, 2023) https://www.gov.uk/government/publications/practice-amendment-notice-223/pan-223-the-classification-of-non-fungible-tokens-nfts-virtual-goods-and-services-provided-in-the-metaverse accessed 8 March 2026…………………………………………………………………………………… 3
20. UKIPO and EUIPO (n 4); European Union Intellectual Propoerty Office, ‘4.4.1 Virtual Goods’ (EUIPO Trade Mark Guidelines, 2024) https://guidelines.euipo.europa.eu/2214311/2215360/trade-mark-guidelines/4-4-1-virtual-goods accessed 9 March 2026………………….. 4
21. World Intellectual Property Organisation ‘Trademark Enforcement Issues in the Metaverse’ (WIPO, 2023) https://www.wipo.int/meetings/en/details.jsp?meeting_id=75574 accessed 6 March 2026……………………………………………………….. 5, 6

[1] Meta ‘What is the Metaverse’ (Meta) https://www.meta.com/en-gb/metaverse/what-is-the-metaverse/?srsltid=AfmBOoo0tKISZDFMucbixkj4vXegKftwUxdTr88MElYJ6bg4eFcvcIph accessed 7 March 2026

[2] Nitin Gaur ‘The rising NFT tide lifts all token: So what is an NFT?’ (IBM) https://www.ibm.com/think/topics/nft accessed 7 March 2026. 

[3] Mark Cuban ‘Non-fungible tokens’ (Britannica, 2026) https://www.britannica.com/topic/non-fungible-token-data accessed 7 March 2026

[4] UK Intellectual Property Office, ‘PAN 2/23: The Classification of Non-Fungible Tokens (NFTs), Virtual Goods and Services Provided in the Metaverse’ (Gov.uk, 2023) https://www.gov.uk/government/publications/practice-amendment-notice-223/pan-223-the-classification-of-non-fungible-tokens-nfts-virtual-goods-and-services-provided-in-the-metaverse accessed 8 March 2026; European Union Intellectual Property Office, ‘4.4.3 Non-Fungible Tokens (NFTs)’ (EUIPO Trade Mark Guidelines, 2024) https://guidelines.euipo.europa.eu/2214311/2215372/trade-mark-guidelines/4-4-3-non-fungible-tokens–nfts- accessed 8 March 2026 

[5] Trade Marks Act 1994, s 10.

[6] Regulation (EU) 2017/1001 of the European Parliament and of the Council of 14 June 2017 on the European Union trade mark, art 9.

[7] International Bar Association ‘The metaverse: a view from Europe’ (IBA, 2023) https://www.ibanet.org/document?id=Metaverse-project-Europe accessed 9 March 2026

[8] UKIPO and EUIPO (n 4); European Union Intellectual Propoerty Office, ‘4.4.1 Virtual Goods’ (EUIPO Trade Mark Guidelines, 2024) https://guidelines.euipo.europa.eu/2214311/2215360/trade-mark-guidelines/4-4-1-virtual-goods accessed 9 March 2026

[9] Eleonora Rosati, ‘The Localization of IP Infringements in the Online Environment: From Web 2.0 to Web 3.0 and the Metaverse’ (WIPO, 2023) https://www.wipo.int/documents/2810628/2827506/case-strudy-the-localiaztion-of-ip-infringement.pdf accessed 9 March 2026

[10] Thayssa Bohadana Martins ‘Beyond the Bag: MetaBirkins, Hermes and the Legal Frontier of NFTs in Trademark Law’ (2025) 10(1) University of Balogna Law Review 121 https://bolognalawreview.unibo.it/article/download/20653/20156/98548 accessed 10 March 2026

[11] John Villasenor and Sam Albright ‘NFTs and Birkin Bags: A Hermes Lawsuit Tests the Limits of Trademark Rights’ (Brookings, 2022) https://www.brookings.edu/articles/nfts-and-birkin-bags-a-hermes-lawsuit-tests-the-limits-of-trademark-rights/ accessed 10 March 2026.

[12] WIPO (n 9)

[13] World Intellectual Property Organisation ‘Trademark Enforcement Issues in the Metaverse’ (WIPO, 2023) https://www.wipo.int/meetings/en/details.jsp?meeting_id=75574 accessed 6 March 2026

[14] L’Oréal SA v eBay International AG (C-324/09) EU:C:2011:474

[15] AMS Neve Ltd v Heritage Audio SL (C-172/18) EU:C:2019:674

[16] Lifestyle Equities CV v Amazon UK Services Ltd [2024] UKSC 8

[17] WIPO (n 13)

[18] International Bar Association ‘Digital Regulation in the Metaverse Era: India’ (IBA, 2024) https://www.wipo.int/meetings/en/details.jsp?meeting_id=75574 accessed 8 March 2026

[19] Hermès International v Rothschild No 1:22-cv-00384 (SDNY complaint filed 14 January 2022)

[20] Hermès International v Rothschild jury verdict reported 8 February 2023

[21] Hermès International v Rothschild post-trial injunction reported 23 June 2023

[22] Nike, Inc v StockX LLC No 1:22-cv-00983 (SDNY, filed 2022); SGB Media ‘Nike Inc and StockX LLC Setlle 2022 Lawsuit over NFT Trademark Infringement’ (SGB Media, 2025) https://sgbonline.com/exec-nike-inc-and-stockx-llc-settle-2022-lawsuit-over-nft-trademark-infringement/ accessed 10 March 2026

[23] Lifestyle (n 16)

[24] L’oreal (n 14)