From Pong and Donkey Kong to Assassin’s Creed and Need for Speed, video games have come a long way in recreating the physical world on a computer screen. Now, the cutting edge of video game technology involves the metaverse and “virtual reality,” an immersive experience using headsets and hand-tracking controllers to simulate a three-dimensional world.

Not everyone, however, is eager to see aspects of our real world replicated online. In a recent decision from the U.S. District Court for the Western District of Washington, Saber Interactive Inc. v. Oovee, LTD., 2022 WL 5247190 (Oct. 6, 2022), one video game developer sued a competitor over the right to depict the design and trade dress of a tractor in competing driving simulation games.

While trademark law aims to protect against use of a mark that may cause a likelihood of confusion among consumers, this protection cannot run afoul of Constitutional rights of free speech. And an open question remains among U.S. courts concerning the use of intellectual property in the metaverse, and whether one can represent reality — and real-world trademarks — in these virtual worlds without infringing IP rights.

In this article, we examine how one court, in Saber v. Oovee, balanced First Amendment constitutional protections with trademark law property interests and explore through the lens of a second court, in Hermès International et al v. Rothschild, 2022 WL 1564597 (SDNY 2022), the open question of IP in the metaverse where that court similarly considered another virtual use of a mark using NFTs.

The Rogers Test

A trademark can be any word, symbol, design, or other device used by an entity to identify and distinguish goods or services from those sold by another entity. For consumers, trademarks are an important indicator and shorthand when considering various products in the marketplace, and the Lanham Act sets out the federal remedies that one may seek if a trademark is infringed.

Typically, the benchmark test for determining whether a party’s trademark is infringed by a particular use is the “likelihood of confusion test,” where a court will consider various factors such as the similarity of the marks and products, sophistication of consumers, similarity of marketing and advertising channels, and evidence of actual confusion by consumers, among others.

In many circuits, however, this test only comes secondary to another if the trademark use occurs within an “expressive work.” In these cases, the court will first apply the “Rogers” test.

This test originated in the 1989 Second Circuit decision in Rogers v. Grimaldi, which saw famed performer Ginger Rogers sue the producers and distributors of the film Ginger and Fred for creating the false impression that she was involved with the film — seeks to protect free speech in artistic works despite activity that might otherwise conflict with the Lanham Act.

Before a court will undertake a Rogers test analysis, a defendant bears the initial burden of demonstrating that its allegedly infringing use is part of an expressive work. Generally, this is an easy burden to overcome, as in the past courts have stated that, in determining whether a work is expressive, a court will analyze whether the work is “communicating ideas or expressing points of view,” and a work “need not be ‘the expressive equal of Anna Karenina or Citizen Kane’ to merit consideration as an expressive work.”

Once reached, the burden shifts to the plaintiff to satisfy either of the two prongs of the Rogers test: (1) that the use by the defendant has no artistic relevance, or (2) that the use explicitly misleads consumers as to the source of the work.

Stated somewhat differently, the Rogers test balances trademark interests with First Amendment speech interests, and use of another’s trademark will not violate the Lanham Act unless the use of the trademark has no artistic relevance to the underlying work whatsoever, or, if it does have some artistic relevance, unless the use of the trademark explicitly misleads as to the source or content of the work.

Saber Interactive Inc. v. Oovee, LTD.

In 2020, Saber, a video game developer, entered into an exclusive licensing agreement with PTZ, the manufacturer of a tractor model called the K-700, providing Saber the right to use the design of the K-700 in its driving simulation game, Mudrunner.

This license also granted Saber the right to take legal action against others that had previously infringed, are currently infringing, or would in the future infringe on Saber’s right to the K-700 design.

Oovee, a competing video game developer, sells a driving simulation game called Spintires, which also features a tractor with the K-700 design. Based on this use, Saber sued Oovee for unfair competition, trade dress infringement, and unjust enrichment, and Oovee filed a motion to dismiss the case.

As a preliminary matter, the district court determined that Spintires is an expressive work, comparing it to the video game in VIRAG, S.R.L. v. Sony Computer Entertainment America LLC, 699 Fed.Appx. 667 (2017), in which the Ninth Circuit affirmed a district court's determination that a racecar driving simulation game contained elements like “characters, plot, music, and extensive interactions between players and the games’ virtual world,” and was therefore an expressive work entitled to First Amendment protection.

Then, in applying the Rogers test, the court concluded that Saber failed to meet the burden of either prong. While Saber argued that “Spintires has no or minimal artistic expression,” it failed to explain how Oovee's use of the K-700 was artistically irrelevant. The court, thus, did not consider this prong.

Saber was equally deficient in showing that Oovee's use of the K-700 explicitly misleads consumers to believe that PTZ or Saber endorsed or sponsored Spintires. The court explained that “explicitly misleading” is a high bar that requires an overt claim or explicit misstatement about the source of the work. Saber produced no such evidence, and the court’s Rogers test analysis concluded that the First Amendment protected Oovee from an infringement claim.

The Rogers Test in the Metaverse

Of the few metaverse-related cases, most have added both clarity and ambiguity to the puzzle as to how intellectual property law will treat marks in the metaverse context.

The Rogers test was applied in recent case from the Southern District of New York, Hermès International et al v. Rothschild, in which artist Mason Rothschild faced claims of trademark infringement brought by the luxury brand for Rothschild’s use of the Birkin mark and bag design in his series of MetaBirkin NFTs.

In January of this year, Rothschild urged the court to apply the Rogers test, arguing that his use was artistically relevant (and thus free speech protected by the Constitution) did not explicitly mislead consumers into believing that Hermès had endorsed or had a role in creating the NFTs.

While that court agreed that the Rogers test was applicable, it also determined, in a May 2022 order, that Hermès made sufficient allegations in its complaint to show that the MetaBirkin NFTs were “entirely intended” to trade on the popularity and goodwill of Hermès. Although the bar to prove the “explicit misleading” prong of the Rogers test is high, this type of intentional use led to the court’s denying Rothschild’s motion to dismiss and allowing Hermès’ claims to proceed.

Hermès filed a motion for summary judgment on October 7, which included a detailed argument analyzing the likelihood of confusion test. A ruling on this motion is still forthcoming.

Conclusion

The application of the Rogers test in these two cases highlights the courts’ attempt to balance two valuable, yet competing, interests. Trademark law plays an important role in ensuring that consumers are not misled, and that manufacturers do not mislead, as to the source of a particular good or service. This objective, however, cannot outweigh the fundamental right to free speech under the First Amendment.

Nevertheless, the court’s decision in Hermès recognizes that trademark owners have a legitimate interest in preventing others from exploiting their marks in a new, purely digital metaverse. NFTs and digital assets are unique, not only for their blockchain nature but for their ability to transcend traditional expectations of the competition amongst goods and services protected by current trademark law. Two unrelated products in far-removed markets may compete in the digital realm despite, for example, the fact that consumers of a driving simulation video game would perhaps never overlap with real tractor drivers, or that an owner of a MetaBirkin NFT would have little interest in purchasing a physical Birkin bag.