Law revision for strengthening the prohibition of design imitation in the metaverse
Takako OKADA

As more and more companies use the metaverse for business, the use of intellectual property intersecting the physical and virtual world is accelerating, such as selling goods in the virtual world with the same brand and design as those in the physical world. The current Trademark and Design Act basically assumes infringement in the physical world and is insufficient for preventing imitations intersecting the physical and virtual world. Thus, the Japanese government considered the revising of the Unfair Competition Prevention Act (the “UCPA”) to strengthen the prohibition of such imitations, and recently submitted a bill to the Diet to clarify that acts of imitating another person’s product design in the virtual world will also be covered under the UCPA. Specifically, the following underlined passage will be added to Article 2, paragraph 1(iii), which stipulates one of the acts defining “unfair competition” under the UCPA.

Article 2, paragraph 1(iii) of the UCPA:

“the act of transferring, leasing, displaying for transfer or lease, exporting, importing, or providing through telecommunication lines goods that imitate the design of another person’s goods (excluding designs indispensable to the functioning of the goods)”

In a law revision back in 2003, the phrase “or providing through telecommunication lines” was added for other acts of unfair competition (such as Article 2, paragraph 1(i) and (ii) of the UCPA for protection of well-known/famous indication of goods or businesses) but was not added for the act of imitating the design of another person’s goods (Article 2, paragraph 1(iii) of the UCPA). This was because “goods” were construed to be only tangible goods back then. Now with the rise of the metaverse, circumstances have changed. With the new law revision, “goods” that will be protected under the revised Article 2, paragraph 1(iii) of the UCPA will likely be construed to include not only tangible goods, but also intangible goods (including virtual goods sold in the virtual world).

It is also important to know that Article 2, paragraph 1(iii) of the UCPA provides protection against acts of imitation for only “3 years” from the first sale in Japan of the goods being imitated. There are discussions on whether to extend this period of protection, and although it was not included in the current revision, the government will continue to consider this issue further.