This is kind of fun: The Guardian runs an article on IP rights in Second Life, leading to some blogs discussing trademark law in particular. See Marty Schwimmer, Professor Rebecca Tushnet, Robert Scoble, and Jeremy Pepper. (And while you're at it, re-read Betsy Book's excellent work to get an in-depth treatment of branding activities in VWs.)
When Scoble says "There's a LOT of trademark infringement inside Second Life. I see brands being attached to lots of things inside Second Life," realize that's a non sequitur. One very common misconception on the part of non-lawyers is that every time you see a trademark reproduced, this is an act of infringement. That's not true.
You're actually generally free to write the words "Starbucks" and "McDonald's" on random things in your possession. Go ahead -- have fun. It's perfectly legal. You can even let other people see it. But just don't *sell* that stuff.
The USPTO's primer on IP law will tell you that trademark law is about the prevention of consumer confusion as to the source of goods or services in commerce. The important points to see here are the requirements of use in commerce and (for traditional TM infringement) consumer confusion as to the source or origin of goods.
Rebecca Tushnet and Marty Schwimmer are lawyers who know trademark law. Rebecca takes up the issues potentially faced by the alleged VW infringers, and provides some random thoughts, with a reference to Marvel v. NCSoft:
If individual game players create costumes that resemble trademark-protected Marvel heroes, they haven’t engaged in use in commerce. If individuals in Second Life deck themselves up in virtual Versace, neither have they. But if they sell Versace to other avatars, there is a use in commerce and then other trademark considerations come into play...
[I]f unauthorized use of trademarks is the norm in the virtual world, there’s no reason to expect secondary confusion any more than primary confusion. Trademark dilution wasn’t made for this situation. But it might be the best fit (and indeed, might be a better application of dilution than most).
More interesting thoughts are at her post.
key thing about dilution law, and why it might be especially relevant
to alleged VW infringement, is that dilution claims don't require
most courts) proof of consumer confusion. That's also why many people
think dilution doesn't make too much sense. Why create gross property rights in words? I, for one, don't have a good answer to that question. (Federal TM dilution law will likely be revised soon, btw, in ways that largely endorse the lack of sound reasoning that has always plagued dilution.) Dilution does require use in commerce, however -- so you're still free to write "Disney" and "Rolls Royce" on your toothbrushes (just don't sell them).
Marty takes up the flip side of trademark & VW questions: what if you're a RMT-ish seller in a virtual world that permits RMT-ish sales (in Second Life, let's say) and you want to defend your original brand for virtual pants -- is that possible? Marty says:
I think the answer is "probably" as long as it remains within Second Life's interests to defend trademarks.
Given the inability of both Rebecca and Marty to come up with quick and easy statements, I'd say there's a good student note topic to be had here. There are plenty of law students publishing today on topics of virtual property, EULAs, and copyright, but I haven't spotted anything good on trademarks yet. Maybe we'll get an article on this after we get some real cases -- wouldn't that be an interesting twist. :-)
Btw, if you're a student writing on this and are desparate for things to cite, my past trademark-law-related writings can be found here, here, and here -- nothing virtual world-related, though the early one on trademarks and search engines does go on a bit about the placeness of cyberspace.
Btw 2: Does Dastar have any special relevance in this area? To wit, quoting Scalia:
In sum, reading the phrase "origin of goods" in the Lanham Act in accordance with the Act's common-law foundations (which were not designed to protect originality or creativity), and in light of the copyright and patent laws (which were), we conclude that the phrase refers to the producer of the tangible goods that are offered for sale, and not to the author of any idea, concept, or communication embodied in those goods. Cf. 17 U. S. C. §202 (distinguishing between a copyrighted work and "any material object in which the work is embodied").