Virtual Goods and Digital Brand Toolkit: NFTs, Game Items, and Online Identity

By Casey Scott McKay · 2024-06-06

A brand that exists only in physical goods now has an infringement problem in places it never sold anything, and the doctrine governing those places is a mix of ordinary trademark law and a First Amendment defense that recently narrowed. This toolkit maps the whole territory: how to file for virtual goods and what the classes actually mean, why an NFT is a token and not a work and why that distinction decides most disputes, where the expressive-use defense begins and ends after the Supreme Court returned source-identifying use to the ordinary confusion analysis, how in-game economies and user-generated content create liability nobody drafted for, and what a digital identity program looks like when handles, avatars, and wallet addresses are all brand assets. It covers enforcement against decentralized infringers, the smart-contract royalty that does not travel, and the licensing terms that make a digital collaboration survivable. It closes with an authorities table and the forms that paper each step.

IP and Technology > Internet | Toolkit | Published 6 June 2024 - Updated 25 December 2024 | Casey Scott McKay - marksy.us

Summary. A brand that exists only in physical goods now has an infringement problem in places it never sold anything, and the doctrine governing those places is a mix of ordinary trademark law and a First Amendment defense that recently narrowed. This toolkit maps the whole territory: how to file for virtual goods and what the classes actually mean, why an NFT is a token and not a work and why that distinction decides most disputes, where the expressive-use defense begins and ends after the Supreme Court returned source-identifying use to the ordinary confusion analysis, how in-game economies and user-generated content create liability nobody drafted for, and what a digital identity program looks like when handles, avatars, and wallet addresses are all brand assets. It covers enforcement against decentralized infringers, the smart-contract royalty that does not travel, and the licensing terms that make a digital collaboration survivable. It closes with an authorities table and the forms that paper each step.

Keywords: virtual goods · nft trademarks · digital collectibles · class 9 filings · downloadable virtual goods · metaverse · game items · in-game economy · rogers test · jack daniels · expressive use · digital identity · avatar · skins · user generated content · smart contract · on-chain royalty · platform terms · digital twin · brand extension

Start Here

Marisela Okonjo is general counsel of Pellet & Vane, a sixty-year-old maker of mechanical watches. In one month she encounters five things her predecessors never did.

Someone is minting and selling NFTs depicting Pellet & Vane watches, with the brand name in the collection title, on a marketplace with no U.S. presence and a pseudonymous seller.

A game studio has added a virtual watch to a popular title that is visually identical to Pellet & Vane's most recognizable model, without a license, and is selling it as a cosmetic item.

The company's own marketing team wants to launch a digital collectible tied to a physical watch — a "digital twin" — and nobody knows what to file, where, or in what class.

A Discord server with forty thousand members, branded with the Pellet & Vane logo and run by enthusiasts, is now selling merchandise.

And the company's registrations, filed across six decades, cover watches, clocks, jewelry, and retail services — and nothing that exists on a screen.

Five problems. One underlying condition: the brand's rights were built for a world of physical goods, and the infringement has moved somewhere else.

This toolkit answers three questions.

What are the rights, and do you have them? Virtual goods are goods, they sit in classes, and a registration for physical watches may not reach a virtual one.
When is the use lawful? The expressive-use defense is real and narrower than it was, and the line now runs through whether the mark is used as a source identifier.
How do you enforce against a defendant you cannot identify in a market with no operator? Sometimes you cannot, and knowing that in advance changes the budget.

If you read only one thing, read Trademarks in Virtual Worlds. It explains where the Rogers framework applies and where the Supreme Court put it back in its box, and that distinction determines whether you have a case at all.

Part One: Filing for Virtual Goods

The registrations you have may not reach

A registration for watches covers watches. A virtual watch, sold as a downloadable digital item usable in a game or virtual environment, is a different good in a different class.

Where virtual goods sit. Downloadable virtual goods are generally classified in Class 9 as downloadable software or downloadable image files. Retail store services for virtual goods and entertainment services providing non-downloadable virtual goods sit in the service classes. The relevant identification language has developed considerably, and the Office expects specificity about both the nature of the digital item and its subject matter.

The identification discipline. "Downloadable virtual goods, namely, computer programs featuring watches for use in online virtual worlds" is the shape of an acceptable identification. It names the digital nature, the class of item, and the subject matter. A bare "NFTs" identification is not acceptable, because an NFT is a token — the good is whatever the token relates to.

Whether you need a separate filing. Sometimes the existing registration reaches far enough that a virtual use is confusingly similar, and a claim can be brought without a new filing. But relying on that is a litigation position rather than a portfolio position, and it does not give you what a registration gives: a citation blocking others, marketplace registry enrollment, and prima facie validity in the relevant goods. 15 U.S.C. § 1057(b).

Intent to use is the right basis for most brands. A company planning a digital extension can file under 15 U.S.C. § 1051(b) and secure constructive use from the filing date under 15 U.S.C. § 1057(c), long before the product exists.

The bona fide intent requirement is real. A defensive filing across every conceivable virtual good with no plan and no documentation is vulnerable. Document the intent — a project plan, a budget line, a development agreement — at the time of filing. See Intent-to-Use Applications; Clearing and Filing for Virtual Goods, NFTs, and Digital Collectibles.

Specimens for things that do not exist physically

A screenshot of a marketplace listing, a storefront within a virtual environment, or a download page can serve, provided it shows the mark associated with the goods and a means of obtaining them. 37 C.F.R. § 2.56. A rendering of a virtual item with a logo, unattached to any point of sale, is decoration rather than use. See Specimen Refusals Guide.

Failure to function, in a new setting

A mark applied to a virtual item purely as decoration — a logo on a virtual t-shirt that players buy because it looks like the logo — raises the same ornamentality problem as a logo across the chest of a physical shirt. Placement, secondary source, and evidence of source-identifying perception are the answers. See Failure to Function; Overcoming an Ornamentality or Failure-to-Function Refusal.

Part Two: What an NFT Actually Is, and Why It Matters

A non-fungible token is a record on a distributed ledger. It is not the image, not the item, and not the rights.

The three separable things. The token, which is a ledger entry. The asset the token points to, which usually lives somewhere else entirely. And the rights in that asset, which are whatever a written agreement says they are — and if nothing says, the buyer of a token has bought a ledger entry.

Why practitioners get this wrong. Marketing language conflates them. "Buy this artwork" describes a transaction in which the buyer receives a token referencing a file, with no copyright, no license, and often no assurance the file will remain accessible.

Three consequences that matter.

One: the terms are the product. Whatever rights a purchaser receives come from a license or terms of sale, not from the token. A brand issuing digital collectibles must publish terms saying what the holder may and may not do — personal use, commercial use, derivative works, resale — because the default is nothing and the expectation is everything.

Two: the underlying asset needs its own analysis. If the image depicts a third party's trademark, product design, or copyrighted work, minting it is a use of that work regardless of what the token is. See Fair Use After Warhol.

Three: on-chain royalties are not property rights. A royalty encoded in a smart contract is honored by marketplaces that choose to honor it. It is not enforceable against a buyer who transfers the token elsewhere, and it is not a copyright resale right. Brands building revenue models on it should understand they are building on a convention.

Part Three: The Expressive Use Line

This is where most virtual-goods disputes are actually decided.

The framework. For expressive works, a long-standing approach asked whether the use of a mark had any artistic relevance to the underlying work and, if so, whether it explicitly misled as to source. That framework kept trademark law from policing titles, characters, and depictions in creative works.

What changed. The Supreme Court held that the framework does not apply when the challenged use is as a designation of source for the defendant's own goods. Where the defendant uses the mark to brand its product, the ordinary likelihood-of-confusion analysis governs, expressive content notwithstanding.

Applied to virtual goods, the line runs roughly here.

A game that depicts a real-world brand as set dressing, part of an environment, or an element of a narrative is using it expressively.
A game that sells a branded virtual item as a purchasable product, using the mark to identify what the buyer is getting, is using it as a source designation.
An NFT collection that comments on a brand may be expressive; one that uses the brand name as the collection's own identifier is closer to source use.
A parody survives or fails on the same line: parody is a consideration in the confusion analysis, not an exemption from it.

The practical consequence. The defense that used to resolve these cases at the threshold now frequently does not, and the analysis proceeds to a full confusion inquiry with the attendant expense. That has shifted settlement dynamics considerably in favor of brand owners.

The dilution overlay. Famous marks have a separate claim for blurring and tarnishment under 15 U.S.C. § 1125(c), with statutory exclusions for noncommercial use, news commentary, and certain fair uses — but the noncommercial exclusion does not shelter use as a designation of source.

See Rogers, Jack Daniel's, and the Trademark Parody Problem; Litigating Expressive Use Trademark Disputes; Expressive Use and Parody Risk Checklist.

Part Four: Games and In-Game Economies

Games are where virtual goods have real economic weight, and the legal architecture is mostly contractual.

Players do not own their items. Terms of service consistently provide that in-game items are licensed, not sold, and are revocable. Courts have generally respected that framing. Players who spend substantial sums nonetheless believe they own things, and the gap between the belief and the terms is a source of consumer-protection exposure rather than property law.

User-generated content is the hard part. A platform allowing players to create and sell items has built a marketplace with all the intermediary problems of any other, plus creators who copy real brands enthusiastically. The 17 U.S.C. § 512 safe harbor is available for the copyright half with the usual conditions; there is no trademark safe harbor, so the specific-knowledge analysis governs. See Who Else Is Liable?; Marketplace and Platform Liability Toolkit.

Brand integrations need real licenses. A studio placing a real brand in a game, and a brand licensing into one, should paper the same things any license papers: scope, term, territory, approval rights with clocks, quality standards for how the item is rendered and behaves, and what happens at termination when the item is in millions of player inventories. That last question is the one nobody drafts and everybody eventually faces. See Brand Licensing Program Toolkit.

Loot boxes and virtual currency carry consumer-protection and, in some jurisdictions, gambling exposure that sits outside IP entirely, and disclosure obligations attach to odds and pricing.

Real-money trading, whether sanctioned or not, converts a licensed item into something with an external market, which changes both the consumer expectation and the enforcement calculus.

Part Five: Digital Identity as a Brand Asset

Handles, profiles, avatars, wallet addresses, and blockchain naming records are brand assets with weak legal architecture.

Handles. No dispute policy analogous to the UDRP, and recovery runs through platform impersonation and trademark reporting processes — which work far better with a registration than without one. See When the Platform Turns You Off.

Blockchain naming records. Registered on-chain, transferable, and not subject to any registry that will order a transfer. Recovery generally requires identifying the holder and obtaining a judgment, which is often impossible. Registering defensively is cheap; recovering is not.

Domains remain the best-governed layer, with the UDRP, the URS, and the ACPA at 15 U.S.C. § 1125(d). See Domain Name and Digital Identity Toolkit; UDRP Complaint Checklist.

Avatars and digital likenesses implicate publicity rights alongside trademark, and digital replica issues are developing quickly. See Your Face Is Not Public Domain; Right of Publicity and Personal Brand Toolkit.

Community-run assets — the enthusiast Discord, the fan wiki, the unofficial account with more followers than the official one — are governance problems. The choice is to embrace them under a written community license with brand guidelines and a merchandise prohibition, or to enforce. Enforcing against a beloved fan community is a communications decision as much as a legal one, and the license is usually the better answer.

Part Six: Enforcement Where There Is No Defendant

Identify the choke points. Marketplaces, hosting providers, payment processors, wallet software, and — for domains — registrars. Each has abuse and IP policies, and each is reachable without jurisdiction over anyone.

Copyright moves faster than trademark, again. Where the infringing item copies your product photography, design files, or artwork, 17 U.S.C. § 512 supplies a statutory notice with a deadline. Trademark supplies a request.

Registered content is worth more. Registration is a prerequisite to a U.S. infringement suit under 17 U.S.C. § 411 and unlocks statutory damages and fees under 17 U.S.C. § 412 and 17 U.S.C. § 504(c) when timely. See Copyright Enforcement Toolkit.

Where the seller is pseudonymous, the mass-action route with alternative service and asset freezes is the practical tool, subject to its real limits. See Schedule A Defendants.

And sometimes the honest advice is not to chase. A pseudonymous minter on a foreign marketplace with no U.S. contacts, selling low volume, is frequently unreachable at any sensible cost. Document it, take down what can be taken down, and spend the budget on the filings that prevent the next one.

Part Seven: Building the Program

Extend the filing map to digital classes for the core marks, on an intent-to-use basis, with documented intent.

Publish terms for anything you issue. What the holder gets, what they may do, what happens if the asset becomes inaccessible, and what happens if the program ends.

Register the copyrights in product imagery, 3D models, and design files. They are your fastest remedy.

Claim the digital identity layer: handles, blockchain names, and domains, all in the entity's name with role-based contacts.

Write a community license for fan projects, with brand guidelines, a non-commercial condition, and a revocation right exercised sparingly.

Monitor the surfaces: marketplaces, game platforms, app stores, and social. Automated detection with human review of close calls.

Decide the AI question before it arrives. Generated brand assets raise authorship and ownership questions that affect what you can register and enforce. See Who Owns What the Machine Made; AI, Content, and IP Toolkit; Generative AI IP Compliance Checklist.

Part Six-and-a-half: The Cost of Everything

Digital brand programs get funded badly because nobody has priced them, so here is a rough map of what each piece costs and what it buys.

Filings for digital classes. Modest per class, per mark, and recurring at renewal. For a brand with three core marks extending into two digital classes across a handful of markets, this is a real but manageable annual line. It buys citations that block others, marketplace registry access, prima facie validity, and — the underrated part — a basis for enrolling in game-platform and digital-marketplace brand programs that otherwise will not talk to you.

Copyright registration of product imagery and 3D assets. Very inexpensive per batch, and the single highest-leverage spend in the digital program. Registration is a precondition to suit under 17 U.S.C. § 411 and, if timely, unlocks statutory damages and fees under 17 U.S.C. § 412. Brands that register their photography can act; brands that have not are limited to asking.

Domain and identity claims. Small, recurring, and worth doing broadly at launch rather than defensively later. Blockchain naming records in particular are cheap to claim and effectively unrecoverable once someone else holds them.

Monitoring. Automated detection across marketplaces, game platforms, and social, plus human review. This is the line that scales with the size of the problem, and the temptation is to buy detection without buying review — which produces volume, misclassification, and eventually a wrongful takedown.

Enforcement. Highly variable and mostly discretionary. Takedowns are nominal. Demand letters to identifiable parties are modest. A mass action with an asset freeze is a real expense with a real recovery. A contested expressive-use case is a full litigation, and it is now more likely to reach a full confusion analysis than it was before the Supreme Court narrowed the threshold defense — which raises the cost of the cases brands most want to bring.

The allocation that works. Most of the budget in filings, registration, and identity claims. A meaningful slice in monitoring with review. A reserve for one enforcement action a year chosen deliberately. And nothing at all spent chasing pseudonymous low-volume minters on foreign marketplaces, which is where undisciplined programs spend most of their money and get nothing.

Part Six-and-three-quarters: Drafting for a World Where Assets Disappear

Three provisions belong in every digital-brand agreement and appear in almost none of them.

What happens to items in inventories at termination. A physical license ends with a sell-off period and an inventory certification. A virtual license ends with millions of items sitting in player accounts, and there is no analogue. The options are: the items persist with the mark, which is licensed use after termination and therefore requires surviving quality obligations; the items are removed, which is a consumer relations problem and possibly a consumer-protection one; or the items persist with the branding stripped, which requires the platform to be technically capable of doing that and contractually obligated to do it. Pick one at the outset and write it down.

What happens if the asset becomes inaccessible. Where a collectible references an off-chain file, the file's continued availability is a hosting question, not a legal one. Terms should say who is responsible for hosting, for how long, and what the holder's remedy is if it goes away. "The token is unaffected" is a true statement and an unsatisfying one, and disclosing it in advance is far better than explaining it afterward.

What happens when the platform changes the rules. Game platforms, marketplaces, and virtual environments revise their terms and their technical capabilities regularly, and an integration built on a feature that gets deprecated is an integration that stops working. Allocate that risk expressly — usually as a termination right with a wind-down rather than as a breach — because otherwise it becomes a dispute about which party bore a risk neither of them named.

And a fourth, for brands issuing anything themselves: version and archive the terms. The terms in force on the date of each sale govern that sale. A program that revises its terms three times and keeps only the current version has lost the documents that define what most of its holders actually bought.

What Happened at Pellet & Vane

The minted collection was traced to a pseudonymous seller on a marketplace with no U.S. presence. Marisela's team filed takedowns with the marketplace, which honored them, and the collection reappeared under a new seller name within a week. After the third cycle, counsel advised against pursuing the individual and recommended instead that the company file for digital classes so that future takedowns would rest on a registration rather than on an assertion, and so that the marketplace's brand program would accept an enrollment. That is what happened, and the cycle time on subsequent takedowns dropped from weeks to days.

The game studio's virtual watch was the strongest claim, because the item was sold as a product and the mark and trade dress functioned to tell the buyer what they were getting — source-identifying use, not set dressing. A demand letter setting out that distinction, with the design comparison attached, produced a licensing conversation rather than a fight. The resulting agreement included a rendering specification, a ten-business-day deemed-approval clause, and an express provision that on termination the item would persist with the Pellet & Vane branding removed — the provision that would otherwise have been negotiated three years later under pressure.

The digital twin launched about nine months later. The filings went in first, on an intent-to-use basis, with a documented project plan supporting the bona fide intent. The terms of sale were drafted before the marketing copy, which reversed the usual order and prevented the usual mismatch between what the marketing promised and what the terms delivered.

The Discord server was licensed rather than enforced against. A one-page community license granted use of the logo for non-commercial community purposes under brand guidelines, prohibited merchandise sales, and reserved a revocation right. The organizers were relieved; the merchandise stopped; the community stayed. Enforcement would have cost less in fees and far more in everything else.

And the registrations now cover screens as well as wrists, which is the whole point.

Part Eight: The Defensive Chair

Everything above assumes you are the brand owner. Increasingly the client is on the other side — a studio, a creator, a platform, or a collector — and the analysis runs differently.

If you are a studio depicting real brands. Depiction as environment, narrative, or realism is the strongest position, and the further the use sits from a purchasable branded item the better it holds. Document the creative rationale contemporaneously, because artistic relevance is easier to establish from a design document written during development than from testimony written after a complaint. Keep the mark out of titles, packaging, storefront listings, and promotional copy, which are the places source-identifying use is found.

If you are selling a virtual item that references a brand. This is the hardest position, because selling the item is exactly what converts expressive depiction into a designation of source. Consider whether the item can be generic, whether the reference can be commentary rather than replication, and whether a license is cheaper than the argument. Often it is.

If you are a platform hosting user-generated items. The copyright safe harbor is available with its conditions; the trademark exposure runs on specific knowledge and willful blindness. Build the intake, keep the removal records, implement the repeat-infringer policy in fact and not only on paper, and do not design systems that avoid learning what you suspect.

If you hold a collectible whose issuer disappeared. The token persists; the asset may not; the rights are whatever the terms said. This is a contract question and usually a disappointing one, and the honest advice is often that the remedy is against an entity that no longer exists.

A general note for every defensive posture. Preserve early. Access to marketplaces, game builds, terms versions, and platform records degrades fast, and the version of the terms in force on the relevant date is frequently the whole case. See Trademark Defenses Toolkit.

A note on how fast this area moves. Classification practice for digital goods, the contours of the expressive-use analysis, digital replica legislation, and platform policy all continue to develop, and a memo written eighteen months ago may describe a landscape that no longer exists. Date every opinion in this area, state the authorities as of that date, and re-check the classification guidance before filing rather than reusing an identification from a prior application.

A Suggested Reading Path

If you have a specific problem right now, branch:

Someone is minting your brand. Trademarks in Virtual Worlds → Litigating Expressive Use Trademark Disputes → Schedule A Defendants.
You are launching digital goods. Clearing and Filing for Virtual Goods, NFTs, and Digital Collectibles → Intent-to-Use Applications → Goods and Services Identification Checklist.
A creative work uses your mark. Rogers, Jack Daniel's, and the Trademark Parody Problem → Expressive Use and Parody Risk Checklist.
You want to use someone else's mark in a game or collection. Descriptive and Nominative Fair Use → Fair Use After Warhol → Fair Use Risk Assessment Checklist.
Your handles and digital identity are a mess. Platform Account Risk Checklist → Domain Portfolio Checklist.

If you are building the program from nothing, read in this order:

Trademarks in Virtual Worlds — the doctrinal map.
Clearing and Filing for Virtual Goods, NFTs, and Digital Collectibles — the filings.
Rogers, Jack Daniel's, and the Trademark Parody Problem — where the defense begins and ends.
Failure to Function — the ornamentality problem in a new setting.
Who Owns What the Machine Made — the authorship question under generated assets.
Platform Account Risk Checklist — the identity layer.

Primary Authorities

| Authority | Rule, in one line | |---|---| | 15 U.S.C. § 1051(b) | Intent-to-use application; bona fide intention required. | | 15 U.S.C. § 1057(b) | Certificate as prima facie evidence of validity and ownership. | | 15 U.S.C. § 1057(c) | Constructive use nationwide from the filing date. | | 15 U.S.C. § 1114 | Infringement of a registered mark. | | 15 U.S.C. § 1125(a) | False designation of origin; unregistered marks and trade dress. | | 15 U.S.C. § 1125(c) | Dilution by blurring and tarnishment; the fame threshold and the statutory exclusions. | | 15 U.S.C. § 1125(d) | Cybersquatting; the domain layer of digital identity. | | 15 U.S.C. § 1127 | Definitions; use in commerce, and what counts as a mark at all. | | 15 U.S.C. § 1052(e) | Descriptiveness and related bars, which reach digital-goods identifications too. | | 17 U.S.C. § 106 | Exclusive rights, including reproduction and derivative works — what minting implicates. | | 17 U.S.C. § 107 | Fair use; the four factors and transformative purpose. | | 17 U.S.C. § 411 | Registration as a precondition to a U.S. infringement action. | | 17 U.S.C. § 412 | Timely registration as a precondition to statutory damages and fees. | | 17 U.S.C. § 504(c) | Statutory damages, including the willfulness enhancement. | | 17 U.S.C. § 512 | Notice and takedown; the statutory remedy trademark lacks. | | 37 C.F.R. § 2.56 | Specimen requirements, applied to digital goods. |

Forms and Templates

License Agreement Template is the base for a brand integration into a game or virtual environment, and it needs three additions the physical-goods version does not: a rendering and behavior specification describing how the item must appear and function, an approval clause with a deemed-approval clock geared to development sprints rather than print deadlines, and a post-termination provision addressing items already in player inventories. That last provision has no physical-goods analogue and no default answer, and leaving it out means negotiating it at the moment of maximum friction.

For collectibles the brand issues itself, the operative document is the terms of sale rather than a license from anyone: what the holder receives, what they may do commercially, whether derivative works are permitted, what happens if the referenced asset becomes inaccessible, and what happens when the program ends. Publish them, version them, and archive each version, because the terms in force on the date of sale are the ones that govern.

UDRP Complaint Template covers the domain layer of digital identity, which remains the best-governed part of the territory. Read it with UDRP Complaint Checklist for the three elements in the order a panel reads them.

Related Toolkits and Checklists

Domain Name and Digital Identity Toolkit covers the identity layer in depth, including the recovery routes that exist for domains and do not exist for handles or on-chain names. Online Brand Protection Toolkit is the general surface map.

The First Amendment and Trademark Toolkit is the full treatment of the expressive-use question that decides most virtual-goods disputes, and it should be read before sending a demand about a creative work. Fair Use and Permissions Toolkit covers clearing third-party material in your own digital products.

AI, Content, and IP Toolkit covers generated assets, which increasingly are the assets. Marketplace and Platform Liability Toolkit covers the intermediary questions that user-generated virtual goods raise. Right of Publicity and Personal Brand Toolkit covers avatars and digital replicas. The Brand Owner's Master Toolkit indexes the shelf.