IP Australia releases new guidance on classifying emerging technology trade marks

Time to review your portfolio 7 min read

IP Australia recently released new guidance on how to classify trade mark goods and services that relate to the emerging technologies of virtual goods, the metaverse, non-fungible tokens (NFTs) and blockchains.

This guidance, which took effect immediately, follows the recent surge in trade mark filings specifying those emerging technologies, and the release of the 2023 12^th edition of the Nice Classification (which we wrote about previously here). It seeks to align the practice in Australia with those of other trade marks offices such as the EU and the UK.

In this Insight, we outline how the guidance may be relevant to your business and also provide some practical suggestions for dealing with applications and registrations affected by it.

Key takeaways

• Trade mark applicants should refer to the guidance when preparing a specification of goods and/or services that relate to these emerging technologies, to avoid classification objections being raised against their application on any grounds set out in the guidance. Eg:
  • All virtual goods are to be classified in Class 9 and must be sufficiently specific.
  • Classification of services provided in the metaverse will depend on the purpose and real-world impact of the services. The correct class will often be the same as the class for the equivalent real-world services. The preference is to use the term 'virtual environments' over 'metaverse' (or 'Web3').
  • Classification of goods or services using NFTs or blockchain will depend on the class of the underlying goods, and must also be sufficiently specific.
• We still await guidance on how these emerging technology goods or services will be interpreted in an objection against an existing application, or in an infringement context.

Who in your organisation needs to know about this?

Trade mark owners, trade mark attorneys, in-house counsel.

'Classifying' goods/services

A trade mark is registered in respect of goods and/or services that are classified under different 'classes'. Australia uses a classification system comprising:

• the Nice Classification; and
• IP Australia's national classification.

The Nice Classification sets out 45 different classes, split into 34 goods classes and 11 services classes. Each class has a heading, explanatory note and list of standard goods/services that must be recognised in that class. IP Australia's national classification supplements the Nice Classification to recognise additional goods/services in each class.

Rise in trade mark filings relating to emerging technologies

In line with global trends, Australia has seen a sharp increase in trade mark filings for, particularly, NFTs and the metaverse in recent years—see chart below. The number of filings for NFTs increased from 1 in 2019 to more than 2,000 in 2022. The sharp increase in 2021, in particular, coincided with the digital artist Beeple's US$69 million sale of his NFT artwork titled, 'Everydays: The First 5000 Days'—a collage of 5,000 digital images—at an auction on 11 March 2021. In comparison, the number of filings for 'metaverse' has also increased from 1 in 2020 to more than 100 in 2022.

The Nice Classification was not set up for these new kinds of goods/services. It was established in 1957 at a time of a predominantly physical goods-based market operated by brick-and-mortar stores. Over time, WIPO has changed the Nice Classification in response to changing goods/services trends when required. For example, in 2001, it added the new services Classes 43, 44 and 45 in response to the increasingly service-based market. So far, it has not added any new classes in response to new emerging technologies; rather, it has sought to address them by adding new standard goods/services to the existing classes. This led to the 'software' Classes 9 and 42 becoming increasingly used (and overcrowded) as the 'technology' classes—which might help to explain why these classes have remained within the top five filed classes for at least the past 10 years in Australia.

So the question arises: How do we classify these new goods/services?

IP Australia's new guidance

In summary, under the new guidance, IP Australia will:

• classify all virtual goods in Class 9
• classify services provided in the metaverse according to the purpose and real-world impact of those services (which will often be the same as the class for the equivalent real-world services)
• classify goods or services related to NFTs and blockchains according to the underlying goods or services to which they relate.

The descriptions of those goods or services relating to these emerging technologies in an application must be sufficiently specific.

To illustrate these principles by way of example:

• A claim for simply 'virtual goods', 'downloadable goods', 'NFT' or 'blockchain' would not be acceptable as they are not sufficiently specific.
• A claim for downloadable virtual clothing would be classified in Class 9, as would downloadable virtual clothing authenticated by NFTs. However, real clothing authenticated by NFTs would be classified in Class 25.
• Education services or banking services provided in the metaverse would be no different in nature to real-world education services (Class 41) or banking services (Class 36) and, therefore, would be classified in the same class, Class 41 or Class 36, respectively. However, restaurant services or travel services provided in the metaverse would be different in nature to real-world restaurant services (Class 43) or travel services (Class 39) and, therefore, would be classified as entertainment services provided in virtual environments in Class 41.
• Downloadable computer software for blockchain technology would be classified in Class 9, and electronic funds transfer provided via blockchain technology would be classified in Class 36, which are the same classes as the underlying goods or services, downloadable computer software (Class 9) and electronic funds transfer (Class 36), respectively.

Some remaining (and new) questions

IP Australia's new guidance provides some useful initial, but not complete, guidelines on how to deal with trade marks issues relating to these emerging technologies.

For instance, the guidance still does not answer how similarity of goods/services will be assessed during examination (under section 44 of the Trade Marks Act 1995 (Cth)) or for infringement purposes (under section 120). Will 'Downloadable virtual clothing authenticated by NFTs'—which would be in Class 9—be considered 'similar' (ie the 'same' or 'of the same description') as 'Clothing authenticated by NFTs', which would be in Class 25? For now, this issue will continue to be assessed on a case-by-case basis until further guidance is released or it becomes the subject of a decision issued by IP Australia or the courts.

The guidance also raises some new issues and questions:

• All virtual goods being classified in Class 9 will inevitably contribute to the overcrowding of that class. This means applications for Class 9 virtual goods might face more citation objections, as IP Australia's cross-search during examination would reveal at least all other prior trade marks in Class 9, such that applicants might find it increasingly difficult to register their trade marks for virtual goods. To overcome those objections, applicants would need to submit arguments that differentiate their virtual goods (eg differentiate their virtual clothing from, say, virtual cars), or pursue other more time-consuming and costly options.
• The current cross-search practice means that only certain classes are searched against each other during examination. Using one of the examples above, Class 9 and Class 25 are currently not cross-searched classes such that an existing registration for 'Downloadable virtual clothing authenticated by NFTs' would not be cited against an application for the same trade mark for 'Clothing authenticated by NFTs'. Does the new guidance mean that the cross-search practice would need to be reviewed?
• There is also the more vexed question as to whether a trade mark for virtual goods or services is actually functioning as a badge of origin of quality. The classification under the guidance means that those goods and services comprise essentially of data. Using one of the examples above, Class 9 downloadable virtual clothing sold in the metaverse would not, in fact, be clothing at all, but data. How could the applicant/owner be said to control the quality of that data when they are provided through a third party's platform? This question would be relevant to the issue of valid ownership and use which require sufficient control (eg quality control) over the use of the trade mark by the owner/applicant and will likely need to be answered by the courts.

Actions you can take now

• Review your portfolio to see if you should register new trade marks for any of these emerging technologies in accordance with this new guidance.
• Applicants/owners of existing applications/registrations for trade marks for any of these emerging technologies should also review their specifications of goods or services to check that they align with this new guidance, and otherwise, seek advice on how this guidance might affect the scope of their application/registration.