05 November 2025
Over the last six months, the convergence of AI, 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 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 US$509 billion globally by 2033. Although these new immersive spaces provide opportunities for creative brand promotion, they also magnify the risk of trademark infringement.
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. However, this exceptional growth is generating more trademark disputes as brand owners contend with the dramatic increase in unauthorised and infringing use of their marks, trade dress, copyrights and other intellectual property.
Virtual environments create endless opportunities for the proliferation of user-generated content. 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 around what qualifies as “use in commerce” and whether and to what extent platforms that host or distribute allegedly infringing content can rely on safe harbour or immunity doctrines under current legal frameworks.
Recent case law in the United States 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 (Hermès Int’l v Rothschild, 590 F Supp 3d 647, 650–51, 655, SDDY 2022). The jury in that case unanimously found the NFTs were infringing and awarded Hermès $130,000 (678 F Supp 3d 475, 481).
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” (Andersen v Stability AI Ltd, 744 F Supp 3d 956, 978–81, ND Cal, 2024).
In Roblox v Wowwee Group, a third court held that Roblox adequately pled that physical dolls infringed trade dress in the platform’s in-game character designs (Roblox Corp v WowWee Grp Ltd, 660 F Supp 3d 880, 886–888, 892, ND Cal, 2023).
Each of these cases represents a growing consensus among courts to analyse this new wave of emerging technologies within traditional trademark enforcement frameworks.
These issues are reaching 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 (Yuga Labs, Inc v Ripps, 144 F4th 1137, 1157–59, Ninth Circuit, 2025). In that case, Yuga alleged that Ripps counterfeited Yuga’s Bored Ape Yacht Club NFTs in violation of the Lanham Act. The court held that the plaintiff’s NFTs were goods under the Trademark Act and applied its standard likelihood-of-confusion analysis to determine infringement. After applying the analysis from AMF v Sleekcraft Boats, 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. [Emphasis in original]
In so holding, the court emphasised that it must not “embarrass the future” when applying “established legal rules to the ‘totally new problems’ of emerging technologies”.
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.
For brand owners, proactive strategies are essential. Key steps include:
Key classes include:
Companies should expect increased litigation in the next year, which 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 harbour provisions and the scope of trademark rights in virtual marketplaces.
As companies continue to experiment with creative and lucrative opportunities presented by AI and immersive worlds, it is imperative that they develop an IP enforcement playbook for handling the inevitable rise in infringement. By implementing safeguards now, brand owners can capitalise 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.
This is an Insight article, written by a selected contributor as part of IAM’s co-published content. Read more on Insight
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Case law trends define how US courts approach trademark disputes involving NFTs, AI and virtual goods – IAM Media
