Web3, the up-and-coming decentralized iteration of the World Wide Web built on the blockchain, presents a unique opportunity for fashion brands to provide consumers with phygital—physical plus digital—experiences. Creating phygital experiences gives fashion brands the powerful opportunity to merge the physical and digital, leading to enhanced consumer experiences.

These emerging phygital fashion innovations were on full display during the 2022 New York and Paris Fashion Weeks. During these Fashion Weeks, some brands showcased developments in the phygital fashion space and gave the industry a glance into what the future will look like when Web3 technologies and fashion combine.

As expected, alongside the proliferation of innovation in this space, there has been a flurry of activity at the United States Patent and Trademark Office by brands seeking to protect Web3 fashion innovations with both patents and trademarks. Along with this, there has been an increase of questions regarding what extent existing fashion trademarks are protected in Web3.

Recent Web3 Innovations in the Fashion Industry

During the 2022 New York and Paris Fashion Weeks, designers brought Web3 to the runway. This year, popular brands such as Puma SE (“Puma”), Pierre Balmain S.A. (“Balmain”), Prada S.p.A. (“Prada”), and Gucci S.p.A. (“Gucci”) incorporated Non-Fungible Tokens (NFTs) into their Fashion Week presentations. For background, NFTs are unique digital assets existing on the blockchain. NFTs can be tied to digital items such as avatars, digital art, or music. An NFT can also be linked with a physical object or provide the NFT owner access to real-life experiences. Linking NFTs to various digital and physical items provides an individual with immutable proof of ownership. Tapping into the different functions and utilities that NFTs offer, fashion brands are beginning to leverage NFTs to offer consumers unique experiences, limited edition items, and special membership programs.

Balmain’s new membership club, “The Balmain Thread,” is one of the most talked about NFT offerings from Paris Fashion Week. Partnering with minting platform MINTNFT, Inc. (“MINTNFT”), Balmain became the first fashion house to create an NFT-based membership program. During the Balmain Festival event at Paris Fashion Week, attendees could access and join the Balmain Thread using their mobile devices by taking photos and minting these photos on the blockchain. Using a mobile application called “The Moment,” attendees captured photos at the event and turned them into unique digital collectibles on the blockchain. Recognizing the future of phygital experiences in the fashion industry, Balmain’s CMO, Txampi Diz remarked, “[w]e’re excited about the future that lies ahead, as the physical and digital continue to merge, offering us new ways to introduce this house to broader audiences, as we build upon Olivier Rousteing’s determination to further democratize fashion.”[1] James Sun, CEO and Co-Founder of MINTNFT, further commented on the future opportunities that Web3 will present the fashion industry, stating, “[w]e believe Web3 will drive a new wave in engagement, enabling companies to unlock access and provide richer experiences for their communities like never before.”[2]

The Balmain Thread is not Balmain’s first foray into the Web3 Space. In 2021, Balmain released an NFT for a digital pair of sneakers and paired each NFT with a physical version of those sneakers. Balmain also coupled the sneaker NFT with VIP experiences, including personal training sessions with a celebrity trainer. Additionally, earlier this year Balmain collaborated with Mattel to launch a Barbie x Balmain collection that featured over 50 pieces of physical clothing items and accessories as well as limited edition Barbie x Balmain NFTs.

Figure 1:  Barbie X Balmain NFT (Photo: MINTNFT)

During New York Fashion Week, Afterpay US Services, LLC (“Afterpay”) unveiled its “Keys to New York Fashion Week” collection. To create this collection, Afterpay partnered with five fashion designers: Altu by Joseph Altuzarra, anOnlyChild, Jonathan Simkhai, Kim Shui, and The Blond, each of whom designed a limited edition NFT key. Each designer’s NFT included a one-of-a-kind digital collectible paired with a limited edition physical product or an exclusive New York Fashion Week experience. For example, Altu by Joseph Altuzarra paired its key with a special edition tote bag or membership to one of New York’s art museums. The Blonds’ key came with either an invitation to the Blonds’ New York Fashion Week After Party or a signed copy of the designer’s forthcoming book.

Figure 2: Altu by Joseph Altuzarra’s NFT Key Photo (Photo: Afterpay)

In March, New York and Paris Fashion Weeks were joined by a digital counterpart, the “Metaverse Fashion Week” held in Decentraland, a decentralized virtual reality platform.[3] Metaverse Fashion Week included runway shows and events showcasing both “traditional” and digital fashion brands. Like the 2022 New York and Paris Fashion Weeks, Metaverse Fashion Week offered phygital experiences by providing consumers with the “physical twin” of a digital item.

Protecting Web3 Innovations in the Fashion Industry

As the fashion industry increasingly utilizes Web3 technologies, more risks, and opportunities, are presented regarding the intellectual property protections covering these innovations. Nike, Inc. (“Nike”) has been active in the patent space, with several issued patents covering systems and methods for registering sneakers on the blockchain as an NFT token. Nike’s patents correspond to its product called Cryptokicks, which replicate Nike’s famous “Dunk” design. For example, one of Nike’s pending patents, U.S. Patent Application No.  17/699,152, even covers video game integration for Cryptokicks and future Nike NFTs. Here is a representative claim from that patent:

A method of integrating a cryptographic digital asset into a digital software application, the digital software application including code that, when executed, displays a character avatar on a display associated with a user device, the character avatar being operably controlled by a user via the user device, the method comprising:

receiving a digital asset identification (ID) code, the digital asset ID code existing together with a unique owner ID code on a distributed blockchain ledger, the digital asset ID code including a code string segmented into a series of code subsets, wherein a first plurality of the code subsets includes data indicative of a plurality of attributes of the digital asset;

representing the cryptographic digital asset on the display, wherein the cryptographic digital asset comprises a virtual object having an appearance that is based on the first plurality of the code subsets of the digital asset ID code, the virtual object further including a plurality of object attributes; and

modifying at least one of the object attributes according to an aspect of the digital software application or interaction between the character avatar and the virtual object.

As more brands continue to tap into Web3 phygital opportunities and position themselves in the market, patent filings in this space are bound to grow. Companies operating in this space should definitely evaluate filing patent applications to protect their technologies, while also being aware of third party patents and the overall relevant patent landscape.

Similarly, companies should protect their Web3 brands through federal trademark registrations. Among other things, federal registration gives trademark owners provides companies with national protection, as opposed to the location-specific protection afforded to common law trademark rights. Additionally, a federal trademark registration provides enhanced damages options, deters potential infringers and limits the potential defenses an alleged infringer can make in a future dispute concerning the right.

Hermes International S.A.’s (“Hermes”) “MetaBirkin” case has served as a cautionary tale for many brands, underscoring the importance of Web3 trademark protection for fashion brands.[4] In January 2022, Hermes sued artist Mason Rothschild for trademark infringement of its iconic Birkin bag through Rothschild’s creating and selling of a virtual version called “MetaBirkins NFTs.” Though this case is still pending, the Hermes “MetaBirkin” case caught the attention of many brands and lead to an uptick in the registration of Web3 trademarks. For example, this year Gucci and Nike have both filed trademark applications to protect their marks in the metaverse.

Digital Fashion also presents brands with new opportunities in the copyright space. Traditionally, physical clothing has faced a hurdle in obtaining copyright protection because physical clothing items are considered “useful articles.” However, the digital counterparts to these items are 3D designs and most likely considered a pictorial or graphical work under the Copyright Act. Thus, digital clothing might not face the same hurdle because these items lack the “functionality” found in physical clothing. Brands that have previously been unsuccessful in securing copyright protection for their physical goods should consult with their IP counsel to determine if there is a way forward for pursuing copyright protection in the digital world.

Fashion brands looking to expand into the Web3 space will continue to seek patent, trademark, and copyright protections for these innovations. Seeing that Morgan Stanley estimates that the digital demand for fashion and luxury brands could reach $50 billion by 2030, securing intellectual property protection for phygital fashion designs and experiences will only become increasingly more important.[5] It is in the best interest of such brands to confer with their IP counsel early in the process of developing and implementing these innovations to maximize protection and leverage. Likewise, brands that do not have any immediate plans to break into the Web3 space should do the same to avoid a situation similar to the one presented in the MetaBirkin case.

[1] https://www.businesswire.com/news/home/20220927005479/en/MINTNFT-Announces-Industry-First-NFT-Based-Membership-Program-for-Balmain-During-Paris-Fashion-Week

[2] https://www.businesswire.com/news/home/20220927005479/en/MINTNFT-Announces-Industry-First-NFT-Based-Membership-Program-for-Balmain-During-Paris-Fashion-Week

[3] https://metaversefashionweek.com

[4] Hermes International v. Mason Rothchild, Case No. 1:22-cv-00384 (SDNY).

[5] https://www.reuters.com/article/global-luxury-metaverse-idCNL8N2S73MG