Introduction to Fashion Law in the Metaverse and the Digital Era

I. Overview –

The renowned fashion icon Coco Chanel believed in the concept of fashion extending beyond the realm of clothing and encompassing a broader scope. She famously said, “Fashion is not something that exists only in dresses. Fashion is in the sky, in the street, fashion has to do with ideas, the way we live, what is happening.” Almost 50 years later in these contemporary times, the notion of fashion has transcended its traditional boundaries of tangible garments and adornments and has permeated the realm of virtual reality, popularly referred to as the Metaverse. This emergence has given rise to a novel domain of law, known as the “Fashion Law in the Metaverse,” that pertains to legal concerns associated with virtual fashion, intellectual property, and e-commerce.  

What exactly is this Metaverse, you may ask? Meta thinks it will include fake houses you can invite all your friends to hang out in, to cite a few examples. Microsoft seems to think it could involve virtual meeting rooms to train new hires or chat with remote co-workers. And on these lines, the Fashion industry has started enrolling digital avatars to flaunt the newest virtual fashions, virtual fashion shows, and even virtual stores.[1] This new terrain, however, brings with it new legal issues and considerations about ownership, authenticity, and trademark protection.

II. The intersection of Fashion and Technology –

The way people shop for and interact with clothing is changing because of the prevalence and pervasiveness of modern technologies. The development of wearable technologies and the introduction of virtual fashion experiences are only two examples of how technology has expanded the fashion business. Consumers can now virtually try on apparel and accessories from the convenience of their own homes thanks to advancements in augmented reality (AR) and virtual reality (VR) technologies.[2] There are new legal difficulties in areas like intellectual property, data privacy, and consumer protection as a result of the merging of the fashion and technology industries.

III. Rising legal issues in the digital fashion space

A range of legal issues arise due to the intersection of fashion and technology, some of them are –

a) Intellectual Property Infringement – With the ease of digital reproduction and distribution, protecting intellectual property rights becomes crucial. Infringement can occur if someone copies or otherwise uses a digital fashion design without permission.

In Hermès International, et al. v. Mason Rothschild[3], a New York federal jury heard one of the first cases ever filed applying preexisting trademark rights in physical-world goods to the virtual world and found in favour of the trademark owner. According to the complaint, Rothschild had earned over one million dollars by selling “MetaBirkins,” virtual Birkin bags authenticated by NFTs. Hermès International, the Plaintiff, claimed that Rothschild’s use of METABIRKIN as a trademark for the virtual goods was an infringement of Hermès’s BIRKIN trademarks and that the images he used likewise violated its trade dress rights in the highly famous and valuable Birkin bag.[4]

b) Counterfeit and Knock-out sales – These have increased as technology has made it simpler to create and distribute phoney clothing. Selling knockoffs is detrimental to real clothing companies and deceives shoppers. For instance, Taobao, owned by Alibaba, was taken to court for the selling of fake luxury items, which sparked a conversation on the duty of online marketplaces to police their users’ behaviour.

c) Information Security and Privacy – Virtual try-ons, augmented reality stores, and individualized style suggestions all gather and analyze user data. Protecting users’ privacy, preventing data breaches, and adhering to applicable data protection regulations are all top priorities as most legal issues arise from these factors. In 2018, Lululemon, a fitness gear retailer, was sued on grounds that it breached customers’ privacy by disclosing their information to a third party without first obtaining their permission.

d) Contractual and Licensing Agreements – Licensing and contract conditions play an important role in the production and distribution of digital fashion assets like virtual apparel. Legal issues can be avoided by clearly outlining who owns what and who gets what in terms of usage and royalties.[5]

e) Online Advertising and Influencer Marketing – The rise of virtual influencers and the prevalence of influencer marketing in the digital fashion space raise issues related to advertising standards and disclosure requirements. To ensure that influencers properly reveal their ties with companies when advocating products or services, regulators such as the United States Federal Trade Commission (FTC) have been strictly enforcing disclosure laws.

Intellectual Property Rights in the Metaverse –

As the digital demand for fashion and luxury companies is expected to reach $50 billion by 2030[6], it will become vital to secure intellectual property protection for phygital fashion designs and experiences.

 I. Copyright protection for digital fashion designs

Copyright protection for digitally created garment designs is a developing field. Original creative works that are fixed in a tangible form, such as books, songs, and paintings, are principally protected by copyright law. However, due to the immaterial and ever-changing nature of digital information, it might be difficult to apply copyright to digital fashion designs.

It may afford protection for novel and fixed fashion designs that fulfil certain criteria. Thus, a digital fashion design that is both novel and preserved in a palpable form (such as a digital file) may be entitled to intellectual property protection. The legal safeguards would prohibit anyone from duplicating the design without authorization. However, it’s important to note that copyright protection may not extend to functional aspects of clothing or fashion design. This means that copyright might not cover elements like the cut, shape, or style of clothing, as those aspects can be considered functional rather than purely artistic or creative.[7] For example, Manish Malhotra’s lehenga dress itself is not protectable, but the design of that lehenga is protectable.

The “Fabricant” is a digital fashion house that specializes in creating virtual clothing and promoting sustainability in the fashion industry. It generates digitally generated fashion shows, complete with avatars, sets, and videos that can be either hyperreal or surreal, or some combination of the two. It uses digital craftsmanship to save unnecessary waste instead of making couture in a studio.

To further assure the authenticity of the digital garment and its uniqueness, Fabricant has partnered with blockchain businesses that are capable of tokenizing digital assets.[8] In this approach, an electronic garment stops being reproducible and instead becomes a rare collectable. All the people who helped make the clothing may be linked to that one unique item using blockchain technology, which helps sort out questions of ownership, authorship, and co-creation.

II. Patents and design patents

When it comes to protecting innovative and ornamental aspects of virtual fashion designs or technologies, patents play a major role. Obtaining these patents requires meeting specific legal requirements, including novelty, non-obviousness, and industrial applicability. The industry usually deals with two types of –

a) Utility Patent – Inventions such as new processes, techniques, or systems are safeguarded by utility patents. Novel hardware, software, algorithms, or methods utilized in virtual fashion development, rendering, customisation, or virtual try-on systems may be eligible for utility patent protection in the virtual fashion business. For instance, a utility patent may be filed for an original algorithm that creates digital clothing according to a person’s dimensions.

b) Design Patent – These safeguard the purely aesthetic qualities of a manufactured item. Design patents can be useful for safeguarding original and inventive elements of the virtual fashion business. The aesthetic qualities of an item, like its form, pattern, or arrangement in an electronic garment, are protected by design patents. They may be useful for safeguarding computer-generated versions of garments, accessories, and other fictitious fashion products.

Virtual Influencers and Advertising Regulations

The growth of online fashion influencers is a fascinating trend that has received a lot of media coverage recently. Avatars created by computers that are meant to seem like real people and engage with their followers on social media platforms are known as “virtual influencers.” The acceptance and impact of these influencers in the industry vary among different audiences and markets.

I. Challenges in regulating virtual influencer marketing[9]

a) Identification – When it comes to virtual influencers, it may be tough for audiences to tell the difference between communicating with a real person and a computer program. The need for openness and disclosure is called into question. Regulating the identification, thus becomes crucial to ensure that audiences are aware of the virtual nature of these influencers and the potential for marketing or promotional content.

b) Deception – Virtual influencers have the potential to obscure the distinction between reality and fiction. They can create the illusion of authenticity and credibility, which may lead to deceptive behaviour. For example, if a virtual influencer promotes a product without adequately disclosing their virtual nature or a paid partnership, the audience may mistakenly believe that the endorsement is genuine.

c) Impact and Influence on Human Influencers – Concerns have been raised concerning the effect that the emergence of virtual influencers will have on human influencers and career prospects in the fashion industry. Human influencers who build their success on their personal brand and in-person appearance may be affected by marketers’ growing interest in virtual influencers. They may find it harder to gain commercial partnerships and platform monetization as a result of the trend toward virtual influencers. Finding a happy medium between online and offline swayers while protecting job prospects is a complex task.

d) Unrealistic Beauty Standards – The immaculate and idealized beauty standards portrayed by virtual influencers might lead to unhealthy comparisons between real life and the virtual world. Virtual influencers’ promotion of such unattainable standards has the potential to damage people’s sense of self-worth and body image.

Thus, a multifaceted strategy that includes coordination among regulators, industry stakeholders, influencers, and consumers is necessary to address these difficulties and ethical considerations. The first steps toward responsible and ethical behaviours in the virtual influencer sector are to establish clear criteria for openness and disclosure, monitor deceptive tactics, promote diversity and inclusion, and stimulate real participation.

Data Privacy and Security Concerns

I. Collection and use of personal data in virtual fashion platforms

Personal data includes personally identifiable information (PII) like names, addresses, email addresses, and payment details. Challenges associated include –

• Users may not always be fully aware of how their data is being collected, stored, and used on these platforms.
• These platforms may be targeted by hackers seeking to gain unauthorized access to the personal data stored on their servers.
• Ensuring the accuracy and quality of the collected personal data can be challenging. In virtual fashion platforms, faulty or inadequate data can cause incorrect suggestions, sizing concerns, and poor user experiences.
• These platforms may operate globally, and data may be transferred across international borders. This poses challenges as different jurisdictions have varying data protection laws and regulations.
• Retaining personal data for longer than necessary can increase the risk of data breaches and privacy violations. The virtual space tends to do this very often.
• Virtual fashion platforms often involve online transactions and thus, cybercriminals may attempt to intercept or manipulate these transactions to gain unauthorized access to financial information

II. Concerns with virtual Fitting rooms and AR shopping experiences

These experiences allow users to try on clothes virtually or overlay virtual garments on their real-world selves.[10] While these technologies offer convenience and enhanced shopping experiences, they also raise privacy concerns:

a) Biometric information – Virtual try-on services frequently employ face recognition or body scanning technology to assess a user’s proportions and create 3D models. Concerns concerning privacy, consent, and the possible abuse of personal information are raised concerning the collection and storage of biometric data.

b) Image and Video Capture – Capturing photographs and videos of consumers trying on virtual clothing is a feature that may be included in augmented reality shopping experiences. Users may worry that their photographs may be saved or shared without their knowledge or permission. A high chance of misusing these photos may occur.

c) User tracking – These platforms monitor users’ activity to make more tailored suggestions and better tailor the user’s overall experience. Users may see this tracking as an invasion of privacy if they are not informed of its scope and intent.

A need for prioritising strong data protection measures, informed consent, compliance with applicable regulations, regular security audits, and investments in a robust cybersecurity infrastructure is the need of the hour.  In addition, educating users about their data privacy rights and providing transparent information about data collection and use can aid in establishing trust and reducing privacy concerns.[11]

Contractual and Licensing Agreements –

The below-listed challenges pose significant hurdles for designers, creators, platform operators, and users alike.

I. Challenges for Licensing Agreements for Digital Fashion Assets

a) Intellectual Property Protection – Securing intellectual property for fashion-related digital assets like digital apparel designs is difficult. In the digital realm, it may be difficult to ascertain ownership, restrict usage without permission, and handle concerns of copyright infringement.

b) Standardization and Interoperability – Consistent license agreements across platforms and virtual worlds are difficult to set up, highlighting the need for standardization and interoperability. It might be challenging to standardize a licensing system for digital fashion assets across platforms due to potential differences in technological requirements and file formats.[12]

c) Changing Technology and Fears of Piracy –The license agreements in the digital fashion industry have difficulties in keeping up with the fast development of technology. Digital fashion assets are vulnerable to piracy, which threatens the market value of licensed designs and the income of their creators and licensors.

II. Terms and Conditions

It is important to take one’s sweet time when designing and executing detailed terms and conditions that protect user privacy, gain informed permission, and lessen the likelihood of data breaches. Another challenge is striking a fair balance between the rights and duties of platform operators, content providers, and users when it comes to user-generated material. It takes finesse to successfully navigate concerns like copyright infringement and defamation in the context of user-generated material. In addition, it is crucial to guarantee that user rights are respected inside virtual fashion platforms by implementing fair and efficient governance structures. Administrators and platform operators have a difficult challenge when trying to strike a balance between protecting users’ privacy and allowing for free speech. Trust, participation, and a vibrant digital fashion environment can only be achieved if these obstacles are overcome.

III. Enforcing Contracts and Dispute Resolution

a) Jurisdictional issues – Determining which laws and jurisdictions apply to a given contract or dispute in the metaverse can be difficult. It is challenging to develop a clear legal framework for resolving issues in virtual worlds due to its decentralized character and worldwide user base.

b) Cross-platform Interoperability -There is considerable difficulty in enforcing contracts and settling disputes across various virtual worlds and platforms. Recognizing decisions and judgements from different virtual worlds requires consistent enforcement methods, which is difficult to do yet essential.[13]

c) Lack of physical evidence – Due to the Absence of Physical Evidence in the Digital World. Challenges in the metaverse arise when trying to verify claims, produce proof of agreement, and settle competing accounts without the use of traditional physical documentation.

All this boils down to one fact – the Metaverse requires stricter laws. The proliferation of the metaverse and the rising popularity of virtual clothing technologies have brought into focus the need for novel and nuanced rules and guidelines in this area. Clarifying ownership, licensing, and enforcement mechanisms for digital fashion assets, including virtual clothing and accessories, is crucial. New regulations need to address jurisdictional challenges, taxes, and compliance requirements for international virtual fashion commerce. Specific regulations targeting fraud and scams within the platforms are necessary to maintain user trust and protect consumers from deceptive practices.

Conclusion –

Marc Jacobs’s insightful observation, “Clothes mean nothing until someone lives in them,” highlights the transformational potential of digital fashion within the realm of human experience, stressing the importance of the confluence of Metaverse with Fashion Law.

Undoubtedly, the emergence of the Metaverses has opened a new era in clothing design, one in which clothes go beyond basic physicality and entwine with the very essence of virtual life. As consumers become increasingly immersed in these digital worlds, the distinctions between the real and the virtual begin to blur as a result of fashion’s transcendent significance and influence.

In the midst of this revolutionary shift, the credibility of Fashion Law in the Metaverse becomes an important consideration. A trustworthy and well-protected legal framework is essential to the success of the digital fashion industry. For instance, for a designer’s work to be recognised and acknowledged, intellectual property rights must be strengthened, and measures against online forgery must be taken. Collaboration between legal experts, fashion industry leaders, and technological innovators becomes paramount.

With empathy and foresight, the legal community can provide a guiding hand that allows fashion to flourish in the digital domain while honouring the profound sentiment behind Marc Jacobs’ words – that clothes indeed find their true meaning when lived in, even if that living takes place in the boundless realms of the Metaverse.

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[1] What is the Metaverse, exactly? Wired (2023), https://www.wired.com/story/what-is-the-metaverse/

[2] Intersection of Technology and Fashion, Woodworking Network, https://www.woodworkingnetwork.com/opinion/intersection-technology-and-fashion

[3] 1:22-cv00384-JSR (S.D.N.Y. May 18, 2022)

[4] Trademarks in the Metaverse, https://www.inta.org/wp-content/uploads/public-files/perspectives/industry-research/20230406_METAVERSE_REPORT.pdf

[5] Fashion Law Journal, Rise of virtual fashion and legal concerns Fashion Law Journal (2023), https://fashionlawjournal.com/rise-of-virtual-fashion-and-legal-concerns/

[6] Oxford University Press, Copyright and Digital Fashion Designers, https://academic.oup.com/jiplp/article/18/1/42/6974661

[7] ibid

[8] Hernandez, Vogelsteller and Siele

[9] Rezende, R. (2021) The fashion industry in the Digital World: Challenges and Solutions, VTEX. https://vtex.com/en/blog/strategy/fashion-industry-challenges-solutions/

[10] Dietmar, J. (2021) Virtual dressing rooms: A guide for fashion retailers, Forbes. https://www.forbes.com/sites/forbestechcouncil/2021/09/16/virtual-dressing-rooms-a-guide-for-fashion-retailers/

[11] Virtual Fitting Room Market Growth and Global Report.< https://www.fortunebusinessinsights.com/industry-reports/virtual-fitting-room-vfr-market-100322>

[12] Licensing agreement in the Fashion Industry (2023), LegaMart https://legamart.com/articles/licensing-agreement-in-fashion-industry/

[13] Contractual negotiations in the fashion industry, Legal Service India – Law, Lawyers and Legal Resources.  https://www.legalserviceindia.com/legal/article-9930-contractual-negotiations-in-the-fashion-industry-types-of-agreements-and-licensing-agreement.html

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Author: Ayushi Mishra

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