Over the last six months, the convergence of artificial intelligence, gaming, and the metaverse has produced a flood of innovation that is redefining brand engagement and generating a new surge of legal disputes. Generative-AI Fortnite skins, Gucci-branded non-playable characters (NPCs), and knock-off NFT fashion drops are not one-off marketing ploys. Instead, they represent the frontier of a virtual-goods marketplace, which is projected to exceed USD $509 billion globally by 2033[1]. Although these new immersive spaces provide opportunities for creative brand promotion, they also magnify the risk of trademark infringement.
Market Snapshot
The market opportunities are staggering. Nearly 700 million global users engage with immersive platforms, interest in NFTs continues to grow, and AI tools enable near instantaneous content creation [2]. This exceptional growth generates more trademark disputes, as brand owners contend with the dramatic increase in unauthorized and infringing use of their marks, trade dress, copyrights, and other intellectual property.
Risk Dynamics
Virtual environments create virtually endless opportunities for the proliferation of user-generated content (UGC). For example, one AI-generated logo or skin can easily move across platforms, games, and NFT marketplaces. This multiplies the instances of potential infringement, and raises complicated questions regarding what qualifies as “use in commerce,” and whether and to what extent platforms that host or distribute allegedly infringing content can rely on safe harbor or immunity doctrines under current legal frameworks [3].
Case Law Trends
Recent case law has begun to define how courts approach trademark disputes involving NFTs, AI, and virtual goods.
In Hermès Int’l v. Rothschild (MetaBirkin), a district court in New York held that the Trademark Act allowed Hermès to assert its trademark rights against NFTs imitating a luxury handbag line[4]. The jury in that case unanimously found the NFTs were infringing and awarded Hermès $130,000 [5]. In another case, a California district court denied Midjourney’s motion to dismiss artists’ allegations of vicarious trade dress infringement based on the generative AI platform’s alleged inclusion of a “trade dress database that can recall and recreate the elements of each artist’s trade dress.” [6]. In Roblox Corp. v. Wowwee Grp. Ltd., a third court held Roblox adequately pled that physical dolls infringed trade dress in the platform’s in-game character designs (“Avatars”) [7]. Each of these cases represents a growing consensus among courts to analyze this new wave of emerging technologies within traditional trademark enforcement frameworks.
These issues have begun to reach the federal appellate courts as well. In July 2025, the Ninth Circuit ruled in Yuga Labs v. Ripps that NFTs can qualify as “goods” under the Trademark Act [8]. In that case, Yuga alleged that Ripps counterfeited Yuga’s Bored Ape Yacht Club (“BAYC”) NFTs in violation of the Lanham Act [9]. The court held that Plaintiff’s Bored Ape Yacht Club NFTs were goods under the Trademark Act and applied its standard likelihood of confusion analysis to determine infringement [10]. In so holding, the court emphasized that it must not “embarrass the future” when applying “established legal rules to the ‘totally new problems’ of emerging technologies.” [11]
Viewed holistically, these rulings signal that trademark law is steadily adapting to the digital economy, giving brand owners clearer guidelines for enforcing their rights in virtual marketplaces.
As discussed below, the USPTO has also taken the position that virtual goods are still “goods” entitled to trademark protection [12].
Risk-Mitigation Checklist
For brand owners, proactive strategies are essential. Key steps include:
- Deploying trademark, domain, and NFT watching services to monitor infringement in virtual spaces, especially for key brand assets.
- Negotiating AI-training clauses to control how key marks are or could be used in datasets.
- Updating platform terms of service to account for the various uses of digital brand assets and reduce enforcement gaps.
- Filing strategic trademark applications covering “virtual goods” in key classes, for example:
- Class 9: Downloadable virtual goods in the nature of image files of [**indicate type of accessories, e.g., clothing] for use in online virtual worlds.
- Class 35: Provision of an online marketplace for buyers and sellers of downloadable virtual goods authenticated by non-fungible tokens (NFTs) for virtual environments.
- Class 41: Entertainment services, namely, providing on-line, non-downloadable virtual [**indicate goods, e.g., jewelry] for use in virtual environments created for entertainment purposes.
- Class 42: Graphic design of virtual goods for use in virtual worlds.
Looking ahead, companies should expect increased litigation in the next year that will continue to test how courts will address issues related to AI-generated content and cross-platform brand assets. This litigation will hopefully provide guidance on the issues of liability, safe harbor provisions, and the scope of trademark rights in virtual marketplaces.
As companies continue to experiment with the creative and lucrative opportunities presented by AI and immersive worlds, it is imperative they develop an IP enforcement playbook for handling the inevitable rise in infringement. By implementing safeguards now, brand owners can capitalize on the virtual-goods boom and have the tools they need to protect and enforce their brands and other intellectual property in the virtual universe. They can also reduce the risk of being sued for infringing the rights of others.
References
[1] SPHERICAL INSIGHTS, https://www.sphericalinsights.com/reports/virtual-goods-market (last visited Oct. 3, 2025) (“The Worldwide Virtual Goods Market Size is Expected to Reach USD 509.24 Billion by 2033.”).
[2] Newzoo, “Metaverse & Virtual Goods Report,” 2024.
[3] 47 U.S.C. § 230; see Moses & Singer, From Immunity to Liability: The Complexities of Section 230 and Intellectual Property (Apr. 13, 2023), https://www.mosessinger.com/publications/from-immunity-to-liability-the-complexities-of-section-230-and-intellectual-property..
[4] See Hermès Int’l v. Rothschild, 590 F. Supp. 3d 647, 650–51, 655 (S.D.N.Y. 2022).
[5] See Hermès Int’l v. Rothschild, 678 F. Supp. 3d 475, 481 (S.D.N.Y. 2023) (appeal pending in Hermès Int’l v. Rothschild, 23-1081 (2d Cir. 2023)).
[6] See Andersen v. Stability AI Ltd., 744 F. Supp. 3d 956, 978–81 (N.D. Cal. 2024).
[7] See Roblox Corp. v. WowWee Grp. Ltd., 660 F. Supp. 3d 880, 886–888, 892 (N.D. Cal. 2023).
[8] See generally Yuga Labs, Inc. v. Ripps, 144 F.4th 1137, 1157–59 (9th Cir. 2025).
[9] See id. at 1148–49.
[10] See id. at 1159, 1167–74 (citing AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348–49 (9th Cir. 1979) (applying the eight Sleekcraft factors)). Under that analysis, the Ninth Circuit concluded that “Yuga [wa]s not entitled to prevail on its trademark-infringement and cybersquatting claims at” the summary judgment “stage because it ha[d] not proven as a matter of law that Defendants’ RR/BAYC project is likely to cause consumer confusion in the marketplace.” Id. at 1177 (emphasis in original) (acknowledging “Yuga may ultimately prevail on these claims, but to do so it must convince a factfinder at trial”).
[11] See id. at 1149 (internal quotation marks omitted).
[12] See USPTO Trademark ID Manual, https://idm-tmng.uspto.gov/id-master-list-public.html (last visited Oct. 20, 2025) (e.g. Classes 9, 35, 41, 42)..
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