Clifford Chance

In response to the conundrum of how high-end luxury brands can penetrate new markets and gain cultural capital, Balenciaga (the well-known Parisian fashion house) entered into a brand partnership with Fortnite (a popular online video game developed by Epic Games).

Balenciaga x Fortnite partnership

In September 2021, Balenciaga and Fortnite teamed up for a digital-to-physical brand collaboration. A Fortnite character named "Doggo", starred in a three-dimensional video billboard in Times Square, New York wearing a co-branded Balenciaga X Fortnite hoodie and jean combination, paired with Balenciaga sunglasses.

Within Fortnite, players could choose new Balenciaga outfits and accessories, visit a virtual Balenciaga store, and submit images of their virtual characters in the hope of being featured on the Fortnite virtual billboards. Customers could also purchase physical merchandise as part of the Balenciaga x Fortnite collaboration online and in certain brick-and-mortar stores.

Partnership benefits

Luxury fashion brands crossing into the video games industry is not a new concept. In 2019, Louis Vuitton and Nicolas Ghesquière (creative director of Louis Vuitton) entered into a partnership with Riot Games, the developers of the League of Legends video game. Such partnerships can be beneficial for all parties for several reasons, including but not limited to:

• Audience: interacting with a fresh audience.
• Perception: seen to be 'cutting edge' and innovative by the target audience.
• Coverage: parties can enjoy enhanced press coverage. Video game developers gain the opportunity to have their brand referenced in the same publications usually reserved for luxury brands. The Business of Fashion declared that "Balenciaga and Fortnite Are a Match Made in the Metaverse".

IP considerations

As the term suggests, co-branding and partnerships require each of the parties to collaborate by licensing their IP assets (e.g., trade marks; copyright; design rights) to one another for commercial use. In doing so, rights holders must give careful consideration from the outset as to how their IP assets will be used in the context of the partnership. For instance:

• Existing IP: the parties will want to ensure that the licensing agreements contain appropriate ring fencing provisions to protect their title, rights, and interests in any existing IP (i.e.  "background" IP) that is contributed as part of the collaboration.
• Scope of Licence: for a party to lawfully use another party's IP rights, a valid and legally binding IP licence must be in place. Parties should ensure that the scope of the licence (e.g., IP being licensed; field of use; exclusivity; territory; term of use) is clearly outlined from the outset. The rights holders should also consider whether the IP assets will only be used within that virtual partnership or in the physical world. For instance, throughout the Fortnite partnership, the co-branded merchandise was available both online and in the physical world.
• User Generated Content: certain collaborations may involve content being created by users. For instance, the Balenciaga and Fortnite collaboration allowed users to design and submit images of their characters wearing Balenciaga clothing to be shown on virtual billboards in the Fortnite town square. To avoid any IP infringement claims from users over the designs they create, Fortnite developers explicitly stated in the terms of service for play that all users grant Epic the rights to publish and display "user contributions" throughout the world in any media.

To protect their brands, rights holders should proceed with caution when entering into partnerships and co-branding arrangements. It will be important for each party to diligence the other party to reduce the risk of any adverse reputational damage that the collaboration may have on their respective brands. Given the increased trend for physical–virtual partnerships, it is likely that we will see more collaborations in the near future between the luxury brands and video games industries as each try to reach new audiences in different markets.

For more information on the intellectual property issues surrounding the video games industry, please read 'Level Up: A legal guide to the video games industry'