Phygital Autonomy: Protecting Creative IP in Virtual Fashion & The Metaverse.

ABSTRACT

The fashion industry is undergoing a perceptive transformation by the emergence of digital outfits and non-fungible tokens (NFTs), elevated reality clothing, and metaverse platforms. This merging of physical and digital fashion, often known as “phygital fashion,” has created new opportunities for designers, brands, and consumers. However, it has also resulted in the creation of crucial legal challenges in relation to intellectual property protection. Traditional copyright, trademark, and design law frameworks were developed for tangible products and usually struggle to address ownership, infringement issues concerning virtual assets. This article examines the concept of phygital autonomy and analyses the adequacy of existing IP regimes in protecting creative works in the virtual fashion blanket. Through an examination of international legal frameworks and landmark cases primarily drawn from United States jurisprudence, where such issues are actively being litigated the article evaluates the emerging challenges posed by virtual fashion and the metaverse. It argues that while existing IP laws provide a partial solution, regulatory reforms and international harmonisation are necessary to make sure that the effective protection of creative expression in increasingly digitised fashion world.

INTRODUCTION

Fashion has usually been connected to physical goods like clothing, footwear and accessories. But, technology has created an industry that is a crossbred world of physical and digital creations. Now, consumers purchase virtual clothing for their online avatars, attend fashion events in digital world, and participate with brands through virtual reality VR platforms. Luxury fashion brands like Gucci, Balenciaga and Louis Vuitton have adopted virtual fashion with digital collections and NFT based products[1].

The arrival of the metaverse has deepened the importance of intellectual property protection within fashion. Now designers create digital outfits that may exist solely in virtual world, while brands increasingly obtain commercial value from digital assets. Eventually, The legal provisions governing intellectual property remain largely rooted in physical commerce. This raises an important research question that whether existing intellectual property laws enough to protect creative works in virtual fashion and the metaverse?

This article examines the legal challenges in relation with creative IP protection in virtual fashion. It explores the concept of phygital fashion, analyses the application of copyright, trademark, and design law to virtual assets, also discusses important judicial decisions, and determine whether current legal frameworks adequately mention the realities of digital fashion.

BACKROUND AND CONCEPTUAL FRAMEWORK

We use the term “phygital” to refer to the combination of physical and digital experiences into a single commercial ecosystem. Phygital products in fashion include physical garments with digital twins, luxury products authenticated by NFTs, virtual clothing for avatars, and augmented reality fashion experiences. The metaverse can be seen as a network of virtual worlds that users can interact with using digital identities and avatars. Here, fashion serves many of the same functions as it does in physical society, both social and economic. Virtual clothes express identity, status, creativity and personal expression.
Intellectual property law protects creative and commercial interests by three major mechanisms. Firstly, copyright law protects works of art and creativity that are original[2]. Fashion sketches, digital renderings and some artistic design elements may be protected by copyright. Secondly, trademark law protects brand identifiers like logos, names and symbols[3]. Trademarks in virtual environments serve the same purposes as in physical markets to identify source and genuineness. Thirdly, design rights cover the visual appearance of products[4]. Registered industrial designs can be a useful protection against imitation of distinctive fashion products.

The legal frameworks are complicated when moved to virtual fashion. Digital clothing can be duplicated in a second and distributed globally. Metaverse platforms are often trans jurisdictional, which makes enforcement difficult. Moreover, the ownership of virtual goods may involve multiple stakeholders, such as designers, platform operators, software developers, and consumers. Therefore, traditional legal concepts need to be re-visited in the context of digital fashion economies.

LEGAL ANALYSIS

Copyright Protection in Virtual Fashion

Copyright law is an important tool for protecting the creative expression in digital fashion. Digital outfits are usually based on original artistic designs, created with advanced software. These designs may meet the originality standards which are required for copyright protection. In many jurisdictions, they draw a line between artistic expression and the functional aspect of clothing. The decorative parts may be copyright protected, but the shape or utility of the garment as a whole is often not protected by copyright[5]. This difference is less relevant in virtual fashion since digital garments tend to have no utilitarian functions. They are more for aesthetic expression than physical utility. Thus, digital fashion may be entitled to broader copyright protection than traditional clothing, arguably.

There are still challenges. Digital assets can be copied very quickly and anonymously without permission. Users can copy virtual clothes, change the current styles, or make NFTs of copyrighted works without permission. It’s still extremely difficult to detect and enforce copyright infringement across multiple metaverse platforms[6].

Trademark Protection in Virtual Fashion

The trademark law has become the most significant legal tool for the protection of fashion brands in the virtual world. Consumers often associate virtual products with established luxury brands, generating significant commercial value.
The extension of trademarks into virtual environments raises important questions about the scope of trademark rights. There is legal doubt as to whether these registrations necessarily apply to digital products.

Luxury brands are looking to file trademark applications specifically for downloadable virtual goods and NFTs[7]. This approach shows that online commerce is a separate market which needs to be explicitly protected by law.
Trademark infringement in the metaverse may occur when third parties create virtual goods using protected brand identifiers without authorization. Such conduct risks to confuse consumers and might dilute brand reputation. Fake virtual luxury goods also pose challenges similar to those of physical counterfeiting. Virtual copies of luxury bags, sneakers and apparel could undermine exclusivity and creating huge profits for infringers.

Design Protection in Digital Fashion

Industrial design law protects the visual appearance of a product. Fashion designers often rely on design registrations to prevent copying of distinctive goods.
The traditional protection of designs becomes more complex with virtual fashion, since many design systems were developed for physical products. There have been questions as to whether purely digital products satisfy the statutory registration requirements.
Several jurisdictions are starting to adapt their legal framework for digital designs. However, national legal systems are still inconsistent. A globally harmonised approach to the protection of digital design has yet to emerge.

NFTs and Ownership Issues

NFT means non-fungible token. It is a kind of digital asset. Every token is entirely distinct. They are recorded in a blockchain cryptographic ledger. This ledger is a permanent record of authenticity. It displays the exact ownership history of the asset. NFTs are not interchangeable like cryptocurrencies.
Virtual fashion marketplaces are all about NFTs today. It serves as a blockchain certificate for the digital clothing. Ownership of tokens does not, however, convey intellectual property rights[8]. The digital token only points to metadata files off-chain. This means the original designer owns the master copyright.

Consumers wrongly believe they are buying the copyright itself. The resulting confusion is a source of considerable legal uncertainty. Buyers often illegally reproduce or commercialize digital assets. They could start unofficial physical clothing lines. Some buyers illegally change the colours of a garment or digital textures. Others export fashion assets to unauthorized metaverse platforms. These actions lead to serious brand dilution and copyright infringement.
Standard smart contracts can’t automate complex property transfers. Therefore, it is necessary to have well defined and comprehensive contractual frameworks. Brands need to have enforceable End-User License Agreements. Designers should make transferred rights clear at the time of sales. They have to establish clear boundaries of personal use. Clear terms mean fewer commercial disputes and less confusion for consumers.

CASE LAW DISCUSSION

Yuga Labs, Inc. v. Ryder Ripps (2025)[9]

The company behind the popular Bored Ape Yacht Club (BAYC) digital collection, Yuga Labs, Inc., is suing conceptual artists Ryder Ripps and Jeremy Cahen under the Lanham Act. The defendants created a copycat non-fungible token (NFT) collection called “RR/BAYC” that referenced the exact same publicly accessible ape cartoon images used by Yuga Labs. The defendants claimed their project was a “satirical conceptual art and performance project” protected under the First Amendment as expressive work and created to protest alleged hidden messaging in Yuga’s brand.

The Ninth Circuit Court of Appeals in the United States confirmed that NFTs are “goods” under the Lanham Act (15 U.S.C. §§ 1051 et seq.) , thereby bringing virtual assets within the jurisdiction of standard trademark law. While the appellate court vacated the lower court’s automatic summary judgment ruling that the factual likelihood of consumer confusion required a full analysis under the Sleekcraft factors, it specifically rejected the defendants’ First Amendment and nominative fair use defenses. The court found that the copycat collection was primarily a commercial product, not an artistic expression protected by law.

This ruling confirmed the principle that digital tokens are intangible “goods” subject to traditional trademark law, meaning that brand owners, whether operating in the real world or natively in the digital space, have valid, enforceable trademark rights in the blockchain ecosystem. It also limited the First Amendment, showing that cloaking a copycat digital product in the veil of political satire or appropriation art doesn’t protect it from trademark infringement.
The current case is directly relevant to the research on intellectual property enforcement in decentralized networks. It establishes clear legal authority that digital-native brands are afforded the same trademark protections as brick-and-mortar brands while also clarifying the line between commercial exploitation and protected digital artistic commentary.

Nike, Inc. v. StockX LLC (2025)[10]

Nike has sued online resale marketplace StockX for creating and selling “Vault NFTs” that featured Nike’s proprietary trademarks and sneaker designs prominently, without Nike’s consent. StockX responded that its NFTs were not standalone digital products but digital “claim tickets” or “vault receipts” to allow smooth secondary trading of physical sneakers stored at their facility. StockX said that since the sneaker was authentic, it fell under the First Sale Doctrine and nominative fair use. Nike expanded its claim to trademark counterfeiting and false advertising after demonstrating that StockX has allowed counterfeit Nike shoes into its verification flow.

U.S. District Judge Valerie Caproni delivered a major blow to the defense, holding StockX liable for selling fake physical pairs that were linked to the company’s guarantee of “100% Authenticity.” This undermined the core defense of StockX that its digital assets were simply an absolute verification link to authentic physical goods. The dispute eventually ended in a settlement just ahead of a late 2025 jury trial date.
The case stated that the First Sale Doctrine allowing the resale of a physical item lawfully purchased does not automatically give a reseller the right to create, commercialize and trade separate digital tokens using a brand’s protected trademark assets.

This case contributes directly to the research on consumer confusion at the crossroads of the phygital (physical and digital) consumer goods. It shows that platforms cannot count on the goodwill of established brands by issuing a “authenticity receipt” that lays out a structure for how multi-brand marketplaces must structure secondary digital asset offerings without risking trademark dilution or counterfeiting liabilities

Juventus F.C. v. Blockeras s.r.l. (2023)[11]

The big Italian football club Juventus F.C. sued a digital tech company Blockeras s.r.l. that had minted and commercialized non-fungible tokens (NFTs) with digital trading cards of the famous football player Christian Vieri in a historic Juventus jersey. The digital cards prominently featured the registered word marks of Juventus (the word “JUVENTUS”) and the famous black and white jersey design. Blockeras argued that the club did not have clear trademark registrations under the Nice Classification in relation to digital assets or downloadable software (such as Class 9 or 42), so the club’s physical merchandise and sporting event registrations do not prevent the formation of independent digital tokens.

The Intellectual Property Chamber of the Court of Rome (Tribunale di Roma) has granted Juventus F.C. a landmark preliminary injunction against Blockeras. The court found that a brand’s reputation and traditional trademark protections apply to identical or closely related virtual merchandise, rejecting the defense’s narrow interpretation of the Nice Classification. It ordered for the immediate removal of the offending NFTs from all the digital marketplaces and banned further marketing.

The European ruling has confirmed that the protection of an existing trademark extends naturally to virtual environments and digital goods even if the brand owner has not yet expressly registered for digital products . It found that digital assets are capable of diluting or appropriating prestige and commercial value of real world marks and subject to traditional anti-infringement enforcement.

This case sets important global context for scholarship by establishing that the digital expansion of trademark enforcement is not a standalone trend specific to United States courts. It establishes an important legal precedent for European civil law systems, demonstrating how luxury fashion houses and sports brands can both protect their visual assets from unauthorized digital generating.

CRITICAL ANALYSIS AND FINDINGS

Virtual fashion emerges by confronting a basic assumption of intellectual property law: that creative works exist in discoverable, physical markets. The traditional laws of fashion were written to govern the making, selling and distributing of physical goods. Virtual clothes, tokenized digital assets and metaverse wearables defy this legacy construct as they are at once creative works, commercial products and digital experiences, leaving legal systems grappling with how to categorize and protect them.

One of the main themes in recent litigation is the judiciary’s preference to build on legacy legal principles rather than create new doctrines for virtual worlds. Courts usually view digital assets as an extension of traditional commerce, rather than a completely new form of property. However, this approach is countered by the inability of the law to address technological change that is radically different from the physical marketplace, and by the fact that it fails to answer the larger questions of ownership of the digital world and rights in virtual assets.

Research shows that the commercial value of virtual fashion is increasingly tied to the brand identity rather than the digital product itself. In the metaverse, consumers buy association, exclusivity and digital status, not functional goods[12]. As a consequence, intellectual property conflicts are moving away from the protection of the creative design layout and are meant to protect the economic value produced by brands with an intensity that shifts the power balance towards large commercial rights owners and away from independent creators.

A key structural weakness is the increasing disparity between rapid technological change and sluggish legislative progress. Statutory responses are still fragmented, contradictory and inconsistent across global jurisdictions, despite an aggressive adoption of decentralized authentication and virtual marketplaces by fashion houses. The ownership rights and the enforcement mechanisms are made highly unpredictable in this regulatory vacuum and the industry is forced to depend on ad hoc judicial interpretation instead of comprehensive statutory guidance.

The concept of ‘phygital autonomy’ raises an emerging policy issue in the contemporary creative industries. Fashion creators are at risk of losing control over the reproduction, modification and commercialisation of their designs online, in the interconnected physical and digital spaces of fashion. Existing legal frameworks protect isolated design or brand elements, but fail to recognize integrated ecosystem dynamics, where physical products and their digital counterparts are commercially inseparable.

CONCLUSION

The rapid rise of virtual fashion exposes critical structural limitations of traditional intellectual property (IP) regimes. Copyright, trademark and design laws offer basic protections, but these regimes were created exclusively for physical marketplaces and do not translate well into decentralized, digital ecosystems. At present, the most powerful tool for enforcement for virtual fashion brands is trademark law. Recent cases such as Yuga Labs v. Ripps , Nike, Inc. v StockX LLC , and Juventus F.C. v Blockeras S.r.l. shows that courts are highly responsive in extending trademark rights into virtual worlds. But, higher dependency on trademark law carries the risk of creating a commercial monopoly, which would eventually suppress creative expression, fair use, and artistic freedom in digital media.

Copyright law is a polarized combination of challenges and opportunities in enforcement. Physical clothes are frequently denied copyright protection because of the “useful articles” doctrine. Virtual clothes, though, are inherently non-useful and purely expressive creations that merit robust copyright authorship. But the reality of decentralized networks, anonymous actors, and the near-zero marginal cost of digital duplication, severely undercut this theoretical advantage.

Design rights and design patents are still very much under-developed as regards virtual products. Most international registries still demand a design be attached to a physical article of manufacture. This leaves a dangerous statutory gap that does not protect purely digital silhouettes, textures and avatars from direct copycat exploitation. The extreme fragmentation of international IP enforcement is a serious operational difficulty. Brands navigating borderless, global metaverse platforms face extreme legal uncertainty, as different jurisdictions for NFTs, smart contracts and digital property rights apply conflicting legal definitions.

The concept of “phygital autonomy” requires a uniform legal doctrine that ensures creative control over physical and virtual reality[13]. Designers need an absolute and enforceable right to control the reproduction, alteration and commercial exploitation of their visual assets, and to prevent third parties from separating a physical design from its digital twin.

BIBLIOGRAPHY

Cases

1. Juventus FC v Blockeras Srl (Tribunale di Roma, 20 July 2022).
2. Nike Inc v StockX LLC No 22-CV-983 (SDNY 2025).
3. Star Athletica LLC v Varsity Brands Inc 580 US 405 (2017).
4. Yuga Labs Inc v Ryder Ripps and Jeremy Cahen No 24-879 (9th Cir 2025).

Treaties and International Instruments

1. Agreement on Trade-Related Aspects of Intellectual Property Rights 1994.
2. Berne Convention for the Protection of Literary and Artistic Works 1886.

Books

1. Scafidi S, Fashion Law: A Guide for Designers, Fashion Executives and Attorneys (Fashion Law Institute 2011).

Reports

1. European Union Intellectual Property Office, Virtual Goods, NFTs and the Metaverse (EUIPO 2023).
2. World Intellectual Property Organization, Intellectual Property and the Metaverse (WIPO 2023).
3. World Intellectual Property Organization, NFTs and Intellectual Property Rights (WIPO 2023).
4. World Intellectual Property Organization, Intellectual Property and Emerging Digital Ecosystems (WIPO 2024).

[1] World Intellectual Property Organization (WIPO), Intellectual Property and the Metaverse (WIPO 2023).

[2] Berne Convention for the Protection of Literary and Artistic Works 1886, art 2.

[3] Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) 1994, arts 15–16.

[4]TRIPS Agreement 1994, arts 25–26.

[5] Star Athletica LLC v Varsity Brands Inc 580 US 405 (2017).

[6] WIPO, NFTs and Intellectual Property Rights (2023).

[7] European Union Intellectual Property Office (EUIPO), Virtual Goods, NFTs and the Metaverse (2023).

[8] WIPO, NFTs and Intellectual Property Rights (2023).

[9] Yuga Labs Inc v Ryder Ripps and Jeremy Cahen No 24-879 (9th Cir 2025).

[10] Nike Inc v StockX LLC No 22-CV-983 (SDNY 2025).

[11] Juventus FC v Blockeras Srl (Tribunale di Roma, 20 July 2022).

[12] Susan Scafidi, Fashion Law: A Guide for Designers, Fashion Executives and Attorneys (Fashion Law Institute 2011).

[13] WIPO, Intellectual Property and Emerging Digital Ecosystems (2024).