How to Sell Digital Fashion Online (Fast)

Clothes make the man. It is now really undeniable how important fashion is in society.

What does that lead to? Fashion is mass-produced, sold and worn by us. However, due to the fast pace of fashion and constantly changing trends, we cannot, or rather do not want to, wear as many clothes as we consume and then dispose of them. Fashion is often bought to be filmed and photographed just once (commercially or privately). Whether for TikTok, Instagram or even the photo on LinkedIn – fashion is a mode of expression and communication, it is a medium through which we tell something about ourselves.

On the one hand, fast fashion allows low-threshold access to fashion, on the other hand, it leads to overconsumption worthy of criticism as well as masses of rubbish and microplastics. Fast fashion is anything but sustainable and is expensive (at least for the masses).

But what does digital fashion have to do with it?

The term “digital fashion” refers to computer-generated clothing that can be worn by avatars or edited into a photo or video.

Users provide the digital fashion provider with their film or photo, including a description of the order, and the provider then adds the digital garment and gives the user the finished video or image.

In fact, the whole thing works no differently than the creation of animations and special effects in a film. The video or image creates the illusion that the person in the video/image is actually wearing the garment. It is effectively a deepfake and CGI (computer generated image). If the editing is well done, the viewer doesn’t even notice it, but if it overshoots the mark, it looks alien (this is the so-called uncanny valley).

Digital fashion offers the advantage that you don’t have to physically wear the garment to be filmed or photographed in it. It only contains digitised information about the garment that is used for the digital work, the photo or video. It therefore has the potential to be cheaper, more sustainable and more unique. It doesn’t take 4,100 litres of water to make a digital T-shirt (of course, it doesn’t work completely without energy – the energy then goes into electricity and server power). In the end, you don’t have anything to wear to the office, but you do have the desired photo of yourself sitting (well dressed) in the office.

Strictly speaking, digital fashion has been around for a long time, for example in the field of video games. In games like Fortnite or League Of Legends, you can buy so-called skins for your avatar. Skins are the clothes that the avatar wears. This branch of the economy was also discovered and developed by established fashion houses such as Louis Vuitton.

Digital fashion is now also relevant elsewhere: there are already purely digital labels, such as the fabricant (@the_fab_ric_ant) or the Berlin label rohbau (@ r_o_h_b_a_u), which “produces” hoodies for social media accounts.

There are also already purely digital models (e.g. @shudu.gram). Digital fashion is available from luxury brands as well as from the Inditex group (Zara, Stradivarius).

Looking to the future and to the metaverse ahead of us, we can see that digital fashion represents prêt-à-porter fashion there.

How does this work legally?

But how exactly does the purchase of a digital garment work?

1. The type of contract

When we buy a real item of clothing, we do so via the absolute classic of German civil law and the paragraph most often used by law students: § 433 of the German Civil Code (BGB) (we may also just rent the item of clothing for an evening, § 535 BGB). It also depends on whether we receive ownership of the item (§ 90 BGB) according to §§ 929 ff. BGB or “only” possession.

In any case, the question of ownership or possession is also the legal pivotal point. This is where the legal assessment of “real” fashion and digital fashion separates. A virtual item of clothing is not a “thing” in the legal sense – i.e. not a physical object as required by § 90 BGB. It is a purely digital “object” and therefore to be classified as digital content in the sense of § 327 BGB. According to this provision, digital content means data that is created and provided in digital form. The regulations on contracts for digital products have only been in the BGB since the beginning of 2022. They go back to a European directive.

Since virtual garments are therefore not things in the sense of § 90 BGB, it is also not possible to establish or transfer ownership or possession of them. However, it is possible to make the digital content available to users and to transfer rights to them to an extent to be determined.

As a rule, there will first be a contract of sale, but for consumers in the variant of a so-called contract for digital content according to §§ 453 (1), 433, 327 BGB. In addition, the digital fashion provider will regularly offer the service of editing the video or photo so that it can be uploaded by the consumer. This component is a contract for work and services according to §§ 650 (2), 631 BGB, again in the variant of the contract for digital content. As a rule, the consumer owes remuneration.

If, on the other hand, the consumer is only to be provided with the item of clothing for a limited period of time, e.g. for one day on the occasion of a video call, the purchase contract element of the contract is to be replaced by a rental contract according to §§ 578b, 535 BGB in the variant of the contract on digital content. In a rental contract, in contrast to a purchase contract, the consumer is not provided with a permanent legal right to the digital garment, but is provided with the garment in a form that continues to exist but can be terminated by notice.

In summary, the acquisition of digital fashion is a purchase or rental of digital content.

2. What rights need to be considered when trading and using digital garments?

Digital garments will regularly be protected by copyright and related rights. Furthermore, digital fashion providers and users of the digital garments could come into conflict with design protection and trademark rights that may exist on the garment in the context of the use and distribution of their garments. In addition, the rights existing in the images/videos to be edited must be taken into account.

a. Copyright

aa. of the digital fashion provider

The digital garment is protected by copyright if it reaches the so-called level of creation. This is achieved if the digital garment has such a degree of individuality that it is considered a personal intellectual creation within the meaning of § 2 (2) of the German Copyright Act (UrhG).

Copyright protects the idealistic (moral rights) and economic interests of the author (exploitation rights).

bb. of clients

The rights holder of the video or photo to be edited must grant the digital fashion provider the right to edit. Providing the video/photo with a new dress is an adaptation within the meaning of the UrhG and therefore requires consent in accordance with § 23 UrhG.

Photographs are already protected as photographs under § 72 UrhG and therefore do not necessarily have to reach the level of creation as defined in § 2 (2) UrhG. If they do, they are additionally protected as photographic works under § 2 (2) UrhG. The same applies to videos, which, if they do not reach the level of creation under § 2 (2) UrhG, are in any case protected under § 95 UrhG.

b. Design right

The digital garment should in principle constitute a design in the sense of § 1 Design Act (DesignG), e.g. a design patent (= another, older term for designs used at EU level) according to Art. 3 CDR. This means that design protection could exist for the digital garments.

In Germany, however, design protection requiresregistration of the design in the design register at the German Patent and Trade Mark Office (DPMA). This is not only the case at European level, there the CDR provides for a dual system of protection for Community designs registered with the European Union Intellectual Property Office (EUIPO) and for unregistered Community designs. The registered Community design has a maximum protection period of 25 years, the unregistered design has a maximum protection period of 3 years.

If design protection exists, third parties may not use the design without the consent of the design owner, in particular they may not offer, market or manufacture products incorporating the design.

c. Trademark law

Trademark rights must also be observed if, for example, a digital item of clothing contains elements protected by trademark law. A Louis Vuitton print cannot be legally used on real clothing as well as in the digital sphere without having the relevant rights.

This is at least true for such a well-known trademark as Louis Vuitton. Well-known trademarks are in fact protected against exploitation of their reputation . In the case of less well-known marks, however, the protection under trade mark law does not extend beyond the respective protected goods and services. Here it would have to be checked whether the respective trade mark has also been registered / used for virtual goods, such as digital fashion. If this is not the case, there is no protection (affected trade mark owners should therefore consider extending their trade mark protection).

In individual cases, however, a trademark infringement may be excluded on the basis of artistic freedom pursuant to Art. 5 (3) sentence 1 of the German Constitution (GG). Artistic freedom is not guaranteed without limits. It is limited by conflicting constitutional law, i.e. it must be weighed against the infringement of the fundamental rights of others. The design of a digital garment that contains a well-known trademark is therefore not automatically covered by artistic freedom. The interests of the artist – the designer of the digital garment – and those of the trademark owner must be weighed against each other. If the balance is in favour of the designer, a trade mark infringement is excluded on the basis of artistic freedom. However, this will occur in the rarest of cases, since a decisive criterion in the weighing process in the past was what economic benefit the use of the trademark brings. If this is in the foreground, which is often the case, the use is not covered by artistic freedom.

In this context, the decision on a case from New York is eagerly awaited. There, an artist by the name of Mason Rothshild has created a collection of edited digital handbags on an NFT trading platform that look very similar to the Birkin Bags by Hermès and is invoking artistic freedom in this respect. The sale of the NFTs has earned him more than USD 1.1 million. The prevailing opinion in the legal world clearly sees the economic benefit in the foreground here, which is why the prognosis for success is negative. However, it remains to be seen how the court in New York will assess this….

d. Data protection law

In addition, the execution of the contract must comply with data protection law. Videos and images contain personal data within the meaning of the GDPR. Personal data are details about an identified or identifiable person, thus in particular also biometric characteristics in the form of a video and image representation or information from the metadata. The visual material is necessarily processed for the performance of the contract. If it concerns personal data of the contractual partner, the legal basis for the processing is Art. 6 (1) p. 1 lit. b DSGVO. If it concerns a third party, consent may be required according to Art. 6 (1) p. 1 lit. a DSGVO.

In addition, further personal data, e.g. from the designer of the digital garment, can theoretically be processed when processing image material. Here, too, attention must be paid to the lawfulness.

e. Right to one’s own image

Just as data protection law extends to one’s own image, this applies all the more to the right to one’s own image according to §§ 22, 23 Art Copyright Act (KUG). In the case of a picture used by mutual consent, permission under the KUG will usually be granted. If this is not the case, for example because a third party is depicted in the photo, it should be obtained.

3. Necessary content of the contract

In the contract, the digital fashion provider should commit to providing the digital garment in return for payment by the user. In addition, the extent to which the existing rights to the digital garment are to be assigned to the user in the individual case must be regulated. In addition, the existing rights to the images/videos to be processed must be taken into account. Corresponding regulations could be made within the framework of the digital fashion provider’s GTC. These should include the following points in particular:

To what extent may the user use the digital garment or the edited photo/video?

• Should a simple or exclusive right of use be granted? In the case of a “unique item” – exclusive rights of use – it should only be possible for one person to “wear” the digital garment; in the case that the garment is to be sold to several people – simple rights of use.
• Types of use: adaptation, use, reproduction, presentation, display, making available to the public and copying.
• Should the rights of use be limited in time and space or unlimited?

The user must assure that he/she owns the necessary rights (especially image rights) to the submitted photos/videos.

Digital fashion providers must also have data protection information and an imprint.

My item of clothing has a defect – what rights do I have?

Basically, as a user you have the same rights as with a real item of clothing. In the event of a defect, the user as a consumer haswarranty rights such as supplementary performance, termination of the contract or reduction – in each case plus a claim for damages or reimbursement of expenses.

According to § 327 lit. d BGB, the digital product, i.e. the digital garment, must be provided free of defects. In this respect, a differentiation is made between defects of title according to § 327 lit. g BGB and product defects according to § 327 lit. e BGB. For freedom from product defects, the digital garment must meet the subjective and objective requirements, as well as the requirements for the integration of the digital garment into the digital environment of the users. A legal defect exists if the user cannot use the digital garment as agreed without infringing third party rights.

The rights of third parties that could be violated in this regard have already been discussed above. Against this background, it is particularly important to draft the agreement on the transfer of rights carefully.

What can I do as a rights holder if someone copies or otherwise uses my digital garment?

If someone infringes my copyright, trademark or design rights, I have the possibility to warn the infringer and to claim injunctive relief and damages.

If the infringement occurs on a platform that is not operated by the infringer himself, you should also report the infringement to the operator of the platform. The large platform operators have ready-made online forms for this purpose with which such a report can be completed within a few minutes. The platforms are obliged to delete infringing contributions and, under certain circumstances, may even be held liable for the infringement themselves (more on this in this article).

The freestyle: blockchain, NFT and smart contracts

Finally, the use of an NFT also comes into consideration when distributing digital works. Information about the author and the rights chain can be perpetuated in the blockchain in order to be able to prevent copies if necessary and to (better) protect rights ownership. In addition, smart contracts can also be considered here in order to enable a distribution of profits to the rights holders in the case of a further use of the digital fashion. It must be clarified whether the design or only the design in connection with the video or photo should be secured.

Image: Nina Doll (@dollushka) – NFT for bubblehouse.