Pixel Marks & Parallel Markets: Rethinking India’s Trademark Regime for Virtual Goods After Hermès v. Rothschild

Introduction: The Rise of Parallel Markets in the Metaverse

Growth of metaverse has led to parallel markets which exist parallel to the traditional marketplaces and is a digital pillar of pixels. The metaverse has become a blossoming digital marketplace where individuals purchase, trade, and display virtual products, including NFT handbags and avatars clothes and branded digital collectibles. They have started to change the nature of the brand-customer interaction, acquiring actual economic benefits and appealing to millions of transactions. As this plays out, legal systems of the world are grappling with the issue of how the current intellectual property laws can be applied in these new surfaces. Research papers published in the recent past present a high degree of ambiguity regarding the legality of the virtual goods, and their policing over the decentralized systems and the danger of dilution of brands in the digital realm that is not confined by national boundaries.[i]

The problem was brought into the limelight following Hermes v. Rothschild case, in which a digital handbag, dubbed Metabirkin, raised a legal question as to whether or not NFTs and virtual imitations have the capacity to infringe real-world trademarks.[ii] This case was an indication that trademark protection has ceased to be limited in terms of physical goods, but it can also apply to digital imitation which may be just as damaging.

[Image Sources: Shutterstock]

The Indian Trademark Law, clung desperately to a physical-goods paradigm, has an immediate crisis of what ought to be the law do to secure real world trademarks at a time when the finest infringement of trademarks is in pixels, not factories. This blog discusses how the parallel virtual markets are questioning current trademark principles, why India will have to change and what needs to be changed to control branding, infringement and classification of products in the era of virtual goods.

Understanding Pixel Marks: What Counts as a Trademark in the Virtual World?

With commerce becoming part of the immersively metaverse environment, it in turn plays a fundamental part challenging the ontology of trademarks. Conventionally, the trademarks have existed within a tangible goods and services grid wherein the elements of differentiation, linkage of origin as well as consumer identification have relied on the physical markets. But in virtual ecosystems that consist of assets built on blockchain, blockchain-interoperable 3D worlds, and rewards represented in the form of tokens, the trademark is no longer affixed to a tangible item. Rather, it is displayed in digital formats, like the data in an NFT, information in the metadata, or a token in the blockchain or a visual logo on an object on the screen.[iii] These identifiers which are also known as pixel marks serve something close to the same purposes as the traditional marks such as source identifying through signalling origin functions, keeping brand reputation and impact the consumer decisions.[iv] However, they are implemented with radically different technology, with smart contract functionality, blockchain provenance, and graphical interfaces generated by platforms.

Despite the fact that they do not have physical damage, virtual goods have commercial value. The courts and regulators across the globe have also developed the tendency to treat such digital products as independent goods to establish a trademark interest that can be legally pursued.[v] In jurisdictions, there is no established legal treatment of virtual goods and NFTs, leaning between the treatment of property as property, digital certificates, rights under contract, or as items embedded in an IP.[vi] This uncertainty makes the application of trademark law to them hard. When the virtual thing is considered to be in the same category as the reality item, the duplication of a logo or a design on a virtual item of brand would obviously fall under the infringement by trademarks. However, when the product is perceived as an intangible transfer or a simple identifier, it is not altogether certain that even the conventional trademark regulations are applicable.

Pixel marks can be in the form of on-chain metadata of brand identifiers, in-3D-rendered logo as accessories, or a unique trade dress integrated in VR content, or token-linked design features written using smart contracts.

However, the main theoretical concern remains how these appearances relate to the “use in the course of trade” in the traditional trademark legislation. Literature emphasizes that producing, virtualizing, selling or producing virtual goods should be re-conceptualized as commercial activities in tablet markets.[vii]

It is imperative to comprehend pixel marks then by extending the trademark doctrine past the physicality. The virtual world portrays that as long as there is consumer perception-and digital commerce, the mark would be present.

Hermès v. Rothschild: Key Lessons for India

The Hermès v. Rothschild case is a case changer in the world trademark law as it indicated that digital copies can be a real curse to the physical trademark. Here, Rothschild produced and offered NFTs based on a famous Birkin handbag of Hermes called the MetaBirkin. Hermes said these NFTs infringed on its trademark and diluted the value of luxury in its brand. The court of the U.S. granted its consent on the ground that the products were in the form of digital images, but they nonetheless acted as commercial items and could deceive consumers regarding the origin or promotion of the NFTs.

There are a couple of significant lessons that India should learn in this case. First of all, it demonstrates that virtual commodities may be subject to the same risks of trade-related risks as the physical ones, although they exist only in the form of pixels or blockchain assets. Also, it raises another concern of the absence of clear classification or enforcement frameworks.

Secondly, Hermès demonstrates that the manifestation of art cannot be treated as a blanket defence when the digital piece serves as the commercial one. The greater the number of creators utilizing NFTs and virtual art platform, the more Indian courts will be forced to accept the freedom of expression versus the protection of the brand.[viii]

Third, the case highlights the importance of modernisation of the Indian interpretation of trademarks of their use in the course of trade. Minting NFTs, showing branded virtual objects, or selling them in marketplaces in the metaverse are also the kinds of activities that have to be identified as commercial use and subject to legal examination.

Ultimately, Hermès v. Rothschild signals that India should take the initiative to revamp its trademark system to defend brands in both its physical and virtual marketplaces, lest the claims of infringement be heard in Indian courts.

The Classification Problem: Where Do Virtual Goods Fit in India’s Trade Marks Registry?

The lack of a consistent system of trademark classification in India is one of the most urgent problems due to the emerging virtual goods. The Trade Marks Act, 1999, and the Rules, which accompany it were also drafted with goods being considered as being tangible and services physically delivered. Nonetheless, the virtual goods are not easily placing under the current neat system of Nice Classification that India has adopted as NFT artwork, avatar clothing, digital luxury goods, and 3D-rendered accessories.[ix] They are neither goods nor services as such, which leads to uncertainty among the applicants and examiners.

In the world, a number of offices have started explaining their position. Class 9 (downloadable digital files) now invites filing virtual goods at the EUIPO and related metaverse services have been introduced at the Classes 35, 41, and 42.[x] But India has not given similar directives. The absence of a harmonized method risks varying scrutiny and a poor effect on combating virtual violations (Szpringer, 2024; Saidov, 2025) as noted in recent studies.[xi]   

This is a legal grey area with severe ramifications. Without proper classification of virtual goods, the brand owners might have difficulties proving the collision with the infringing NFTs or metaverse imitations. As an illustration, a brand registered only under Class 18 as a trademark of a luxury handbag might not necessarily guard against a computerized version of the identical handbag without the brand having a filing about virtual products. Similarly, it will be confusing when the virtual goods copy physical trademarks but do not fit into the classes that were intended to be copied by them.

To future-proof the Indian trademark law, the Registry needs to identify virtual goods as a separate category, provide classification guidelines, and bring the emerging international standards on paper with domestic practice. In the absence of this reform, India may end up abandoning brands in the fast-growing digital markets.

Rethinking “Use in the Course of Trade” for the Metaverse

The most basic of the concepts of Indian trademark law is disputed by the metaverse: use in the course of trade. In a traditional sense, the use refers to the placing of a mark on matters or objects mostly used, packaging, advertisements, or trade documents. But in virtual economies, where only downloadable resources are available, in the form of NFTs, or avatar-worn items, such signifiers prove insufficient. The Hermès v. This gap in doctrine is highlighted in Rothschild dispute. The court applied a different approach and viewed MetaBirkin NFTs as commercial goods, an act which indicated that even in the absence of a tangible object, virtual replicas can be the use of a trademark[xii].

To India this will have immediate queries. Should a designer in Decentraland or Roblox make a virtual handbag using the mark of a registered luxury brand and the use is similar, is it actionable infringement? Does it matter whether there has been a tangible product or not? Is consumer perception of immersive online spaces, or that of more classic markets, different? The definition in the current statutory framework of Section 2(2) is not specifically made to fit into the digital contexts which allows infringers to plead that virtual representations are not covered by the Act.

Accordingly, India needs to expand its understanding of the term use to encompass digital forms of marks so that virtual economies are not safe zones of misappropriation and false innovation.

Pixel Perfect or Pixel Piracy? New Standards for Infringement & Passing Off

Zero products obscure the perception between what is considered an honest form of digital art and what is called illegal brand appropriation. As Hermès v. Even pixelated replicas can confuse into action on a basis of evoking an identity of a luxury brand, which Rothschild demonstrated. The problem the India is facing is making the traditional visual, phonetic and conceptual similarity tests more interactive/customizable and more user-created products in a virtual environment. Infringement can also take place in the metaverse in terms of skins, filters, avatars, or NFTs which replicate the look and feel of iconic brands without direct use of the word marks.[xiii]

The task of passing off also becomes difficult. The misrepresentation in virtual worlds can be achieved not due to direct consumer-induced misrepresentation but through blended digital signalling where users believe in authenticity due to the appearance of the asset in a trusted ecosystem or some similarity to a known design style. An average consumer has become a digital native who can buy items without ever seeing packaging, labels, and trademarks in a physical form.[xiv]

Such changes require new standards of infringement. The courts should consider virtual confusion, the impact of the platform architecture on the perception of the consumer, and whether artistic expression is applied differently in the nebulisated settings. India should define a framework, which acknowledges the fact that pixel piracy could be as detrimental as actual counterfeiting particularly when the virtual property finds its way around the world in seconds.[xv]

Enforcement Challenges in Parallel Markets

The issue with virtual economies is the only tangible way to enforce, since the infringement takes place on two parallel markets, the physical and the digital, active at the same time but subject to different rules.[xvi] Any counterfeit handbag can be easily targeted in Chandni Chowk, a virtual counterfeit can not. Platforms vary in their regulation; anonymity is widespread and blockchain irreversibility restricts conventional takedown.[xvii]

More, parallel markets increase dilution of brands. A brand luxury that has spent decades creating a sense of exclusivity can be duplicated infinitely in the virtual world and lose its high-quality perception with the online audience. The impossibility of enforcement also arises as NFTs infringed are minted using many wallets or mapped by using decentralised file storage, including IPFS.[xviii]

The Indian law does not provide inter-jurisdictional guidance on the enforcement of digital laws, the intermediary liability of virtual space or the evidentiary position of the blockchain records in accordance to the Trade Marks Act. Not even the place of infringement is easily determined in case the transactions take place on a decentralised network under no geographic anchors.[xix]

Enforcement has to change to cover platforms-level policing, cross platform takedown protocols, blockchain based authentication and jurisdiction agnostic remedies to secure Indian and global brands. Without these reforms, virtual markets will be breeding grounds to advanced, cross national infringement.[xx]

A Policy Roadmap for India: Building a TM Framework for Virtual Economies

India can greatly do with a progressive trademark system that takes note of the economic truth of virtual goods. The initial one would be to move to a classification regime which complies with EUIPO and USPTO standards, namely, the explicit recognition of downloadable virtual goods in Class 9 and of retail services of virtual goods in Class 35. This will create sanity among applicants, examiners, and courts.[xxi]

Second, the Registry is supposed to provide practice directions on the specimens of use of digital goods. Images of NFTs, evidence of creation, blockchain history entries, or images of online shops should be realised as credible evidence.[xxii]

Third, India ought to inject the provisions of platform liability on the operators of the metaverse, who will be expected to implement notice-and-takedown mechanisms that are applicable in decentralised settings.[xxiii]

Fourth, the agencies that enforce the use of blockchain technology should implement authentication tools that are integrated with blockchain, to allow the rights-holders to track the provenance and detect replicas. To pass off, India can consider an acceptance of a virtual confusion test, which takes into consideration immersive user experiences, identity as an avatar, and digital purchasing behaviour.[xxiv]

Lastly, a dedicated consultative team which includes the IP regulators, the technologists, the gaming companies and the luxury brands shall come up with a National Virtual Commerce IP Blueprint. This roadmap would equip India to be ready to regulate Web3 markets and enhance innovation and digital entrepreneurship.[xxv]

Preparing India for the Next Frontier of Trademark Law

Virtual goods and metaverse commerce are not abstract concepts but emerging markets with a real economic stake as India is moving towards a digital first economy at accelerated speed. The Hermès v. The case of Rothschild indicates a trend in the worldwide scope towards the acceptance of digital copies and NFTs as goods subject to trademarks and indicated that the line between the real and the digital market was disappearing. This is both a challenge and opportunity to India.

The Indian trademark law may be outmoded without the need to adapt it through literacy legislatures or even through doctrines because the law may leave loopholes to enable those infringing on their rights through virtual use, decentralisation of ownership, and markets incorporated across boundaries. On the other hand, active reform could make India a digital IP governance leader, which draws overseas brands, video and game studios, and Web3 creators

The way out must be made by being clear in classification, enhancing enforcement mechanisms, and having a contemporary interpretation of consumer perception in immersive environments. Further development of the virtual economies necessitates further development of the trademark law, which ensures the security of not only the traditional products but also pixel-based items that determine the digital identity and business.

India in the present position is at a regulatory intersection: either adapt and even lead, or lag and become irrelevant. The way forward to trademark law is to accept the fact that branding will be more virtual than physical in future.

Author: Aastha Gupta, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[i] Szpringer, M. (2024). Legal challenges of virtual goods in decentralized markets. Journal of Digital Law, 12(3), 45–62.

[ii] Hermès International v. Rothschild, 590 F. Supp. 3d 647 (S.D.N.Y. 2023).

[iii] Saidov, A. (2025). Blockchain, NFTs, and the evolution of digital property. Oxford Journal of IP & Technology, 18(1), 1–29.

[iv] Dinwoodie, G. (2022). Trademark functions in the digital environment. Chicago IP Review, 9(2), 77–104.

[v] EUIPO. (2022). Guidance on virtual goods and NFTs under Class 9. European Union Intellectual Property Office.

[vi] Lemley, M., & Volokh, E. (2022). Law of the metaverse. Stanford Law & Policy Review, 33(1), 123–167.

[vii] Ranchordás, S. (2023). Reconceptualizing commercial use in the digital marketplace. Yale Journal on Regulation, 40(2), 210–245.

[viii] McCarthy, T. (2023). Freedom of expression and trademark boundaries in virtual art. Trademark Law Journal, 56(4), 390–415.

[ix] Government of India. (1999). Trade Marks Act, 1999.

[x] EUIPO. (2022). Classification of virtual goods under Nice Classification.

[xi] Szpringer (2024); Saidov (2025).

[xii] Finck, M., & Moscon, V. (2021). Blockchain and IP enforcement. Harvard Journal of Law & Technology, 35(1), 1–40.

[xiii] Dinwoodie, G. B. (2022). Trademark functions in augmented and virtual reality. Chicago-Kent Journal of Intellectual Property, 9(2), 77–104.

[xiv] Ginsburg, J. C. (2023). Trademark dilution in virtual marketplaces: Expanding the boundaries of brand protection. Columbia Journal of Law & the Arts, 46(2), 175–210.

[xv] Frosio, G. (2022). Global enforcement of IP rights in virtual environments: Challenges and solutions. International Review of Intellectual Property and Competition Law (IIC), 53(4), 355–380.

[xvi] Lemley, M. A., & Volokh, E. (2022). Law of the metaverse. Stanford Law Review, 75(1), 1–52.

[xvii] De Filippi, P., & Wright, A. (2018). Blockchain and the law: The rule of code. Harvard University Press.

[xviii] Kouhizadeh, M., Saberi, S., & Sarkis, J. (2021). Blockchain and decentralized storage systems: Implications for digital asset tracking. Journal of Cleaner Production, 305, 127–156.

[xix] UNCTAD. (2023). Regulating digital assets: Cross-border challenges in enforcement.

[xx] Frosio, G. (2022), supra at xv.

[xxi] Sahin, S. (2023). Trademark classification challenges for virtual goods. Journal of Intellectual Property Law & Practice, 18(7), 560–574.

[xxii] Ginsburg, J. C. (2023). Proving use in digital marketplaces: NFTs, screenshots, and smart contracts. Columbia Journal of Law & the Arts, 46(2), 201–228.

[xxiii] Government of India. (2021). Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules.

[xxiv] Ranchordás, S. (2023). Digital provenance and authenticity: Implications for IP enforcement. Yale Journal on Regulation, 40(2), 210–245.

[xxv] Saidov, A. (2025). Consumer behaviour in virtual worlds and trademark confusion standards. Oxford Journal of IP & Technology, 18(1), 1–34.