Counterfeiting in the metaverse

THE NEGATIVE impact of counterfeiting on the global economy include depriving governments of tax revenue, reducing business income, displacing sales of original merchandise, and increasing the cost of products.

In the first nine months of 2024, the estimated market value of intellectual property (IP) infringing goods seized in the Philippines reached a staggering P35.24 billion, surpassing the previous record of P26.89 billion in 2023.

Data from the National Committee on Intellectual Property Rights (NCIPR) noted that an estimated market value of P26.86 billion of total goods were seized from January to December 2023, surpassing the previous record of P24.90 billion registered in 2021.

Out of the recorded 3,087 enforcement operations by the NCIPR conducted in 2023, about 94 percent were done by the Bureau of Customs (BOC), followed by the National Bureau of Investigation (NBI), with a haul worth P1.20 billion; the Philippine National Police (PNP), with a P285.93 million value; the Food and Drug Administration (FDA), with a P1.58 million value; and the Optical Media Board (OMB), with a P221,500 haul.

Counterfeiting is a serious crime that involves making or selling an unauthorized replica or imitations of a valuable genuine product.

The goal is usually for illegal or dishonest purposes, specifically to profit unfairly from the reputation of the trademark owner.

Counterfeiting in the metaverse (known as “virtual counterfeiting”) will be one of the issues to be discussed in the upcoming 76th Asian Patent Attorneys Association (APAA) Council Meeting at the SMX Convention Center and Conrad Hotel in Pasay City from November 18 to 21, 2024.

The metaverse is an emerging three-dimensional virtual platform led by artificial intelligence (AI), VR (virtual reality), AR (augmented reality) and blockchain technology where users freely interact with each other.

Considered a replica of real consumption, counterfeiting in the metaverse is the sale of digital assets without the proper legal rights, remedies, or freedom to resell them. Counterfeit goods are traded in the metaverse using Non-Fungible Tokens (NFTs), which are already flooded with counterfeits.

Since the customer does not physically interact with the product before making the purchase, the chances of what is ordered and what is ultimately delivered being different have increased substantially. There are also instances of non-delivery of products and fraud being committed on customers.

APAA delegates will discuss whether current IP laws in each jurisdiction support initiating legal action against a virtual counterfeiter.

An interesting scenario involves the blurred boundaries in the context of metaverse and jurisdiction of courts to entertain and try virtual counterfeiting.

The right-holder may be in country “A,” the counterfeiter in country “B,” the user/consumer in country “C” and the “metaverse”, an interactive medium operated by an entity based in country “D” hosting on webservers located in country “E.”

In the context of trademarks, delegates will also discuss whether there is the need for an amendment to the NICE classification, which is an international classification of goods and services applied for the registration of marks.

The 12th Edition Version 2024 (effective January 1, 2024) includes “downloadable application software for virtual environments” and “downloadable virtual clothing” in class 09 while “hosting software platforms for virtual reality-based work collaboration” and “hosting virtual environments” in class 42.

The IP laws aim to protect and secure the exclusive rights of scientists, inventors, artists and other gifted citizens to their intellectual property and creations, particularly when beneficial to the people, for such periods as provided in the law. Nobody else can copy or reuse that creation without the owner’s permission.

Established in December 1969, membership of APAA is open to individuals practicing the profession of patent attorney in the Asian region as well as organizations that comprise such individuals and are constituted in the Asian region.

Some of APAA’s activities include exchanging information and views concerning IP protection on issues involving anti-counterfeiting, copyright, patents, designs, trademarks, and emerging IP rights.

The Intellectual Property Association of the Philippines (IPAP) was founded on March 31, 1977 with the aim of professionalizing the steadily growing practice of IP law in the Philippines.

***

Atty. Dennis R. Gorecho is a Junior Partner who heads the Seafarers’ Division of the Sapalo Velez Bundang Bulilan Law Offices. For comments, e-mail info@sapalovelez.com, or call 09175025808 or 09088665786./PN