ROLE OF INTELLECTUAL PROPERTY RIGHTS IN THE WORLD OF METAVERSE (By-Ganesh K)

ROLE OF INTELLECTUAL PROPERTY RIGHTS IN THE WORLD OF METAVERSE

Authored By-Ganesh K

Table Of Content

ABSTRACT

INTRODUCTION

CHAPTER ON NON FUNGIABLE TOKEN
COPYRIGHT IN NFT
TRADEMARK IN NFTS
CHAPTER ON ROLE OF IPR IN METAVERSE
2.1 COPYRIGHT

2.2 TRADEMARK

2.3 PATENT

IMPACT OF METAVERSE ON IPR
3.1 IP LICENSING IN METAVERSE

3.2 DATA OWNERSHIP, PRIVACY CONCERNS, AND NFTS

3.3 CYBERSECURITY AND PROTECTING IP

CONCLUSION

Abstract

Metaverse is a concept that is discussed everywhere in recent times though it has existed in science fiction novels, year 1992. The developments in technology are creating a new space of virtual reality interface and NFTs. The shift of this invention creates a lot of legal issues in the field of Intellectual Property Rights. As the interface mainly deals with digital property which are inter linked with intellectual property are discussed in this paper and analyses the legal concern on the Metaverse from the recent situation.

Keywords: Metaverse, Intellectual Property Rights and NFTs.

Introduction

Metaverse is a combination of the words ‘meta’ and ‘universe’ and is practically the creation of a parallel virtual universe with digital avatars where one may be living their regular life, an alter ego. It will expand the scope of the internet to bring together digital spaces like social media, online gaming, 3D spaces, decentralized commerce, virtual/augmented/mixed/extended reality, non-fungible tokens, cryptocurrency, immersive learning and the like. It is a platform where developers or users create experiences that mimic the real world through virtual social possibilities, which are mixed with gaming or simulation experiences. In short, the metaverse can be considered a virtual universe that can be accessed using various technologies to create an experience in a digital world that is similar to the daily life of a person. The metaverse also provides opportunities for users to have an experience in the virtual world that might not be possible in the physical world[1].

At present, with the immense growth of interconnectivity, along with digital experiences creating augmented reality and virtual reality, many digital marketers and technology and this new sphere or market provides offers and is very much likely to expand upon the new ways for multiple industries and sectors to increase scalability, including new business opportunities and ways of promoting products and services at an even faster pace. NFTs may refer to the digital goods or specific pieces sold in the Metaverse. However, NFTs, in general, refer to the data stored on a blockchain for authenticating and keeping track of the digital property.

These are non-fungible, implying that they are unique and can never be replaced by something. Therefore, an NFT can refer to a digital art piece or can be linked to a physical product for proving the authenticity or ownership of the said product[2].

These latest developments in the digital economy have an important feature of interoperability, which means that consumers can conveniently move virtual items like cars or clothes from one platform to some other. When we talk about the real world, a consumer can buy a sports team jersey online or at some mall and then wear it at home, to a restaurant, or at some sports event. On the contrary, in the virtual landscape, an outfit could be purchased and worn by an avatar on more than one platform. Furthermore, the purchase of virtual products and services could be used in multiple virtual worlds[3].

Considering such new scenarios, brand and business owners must craft robust IP strategies for leveraging business models and innovations. In the Metaverse, protectable IP assets vary from copyright to trademark, including slogans, logos, brand names, and trade dress in the form of design and packaging, and even Patent Protection for inventions. In this scenario, business companies should conduct an in-depth analysis of the virtual landscape where they have plans to market and promote their products and services to figure out whether or not they even want to do business in the Metaverse[4].

The Metaverse is set to invade various spheres of the human experience. The way people work, play, socialise or experience activities such as buying art, will no longer be the same. One of the main beneficiaries of the Metaverse is the gaming industry. The Metaverse has greatly changed the outlook of the gaming industry, as users of gaming platforms such as Roblox, Fortnite and Minecraft are now able to create their own virtual worlds, interact with other users and purchase gaming add-ons with digital currency[5].

More interestingly, such gaming platforms are now entering into partnerships and collaborations with other companies to enhance the virtual experience of their users. An example of such collaboration is between Nike Inc.

(Nike) and Roblox. Nike – the multinational corporation engaged in the manufacturing, worldwide marketing and sales of sportswear, recently created ‘NIKELAND’, a bespoke world within the Roblox virtual space, this innovation is building on Nike’s goal to turn sport and play into a lifestyle[6]. The idea of a virtual universe is an unusual and somewhat strange concept, in the traditional sense of things, however, the Metaverse is an inevitable part of the future of technology[7].

As mentioned above, the metaverse is not a recent technical innovation. The concept of the metaverse is widely considered to be first discussed in the 1990s. Hollywood movies such as The Matrix series, Spy Kids, Gamer, etc., and computer games such as Minecraft and Roblox, have further crystallised the idea of the metaverse. To the extent that it is considered akin to a virtual game or something that is solely restricted for entertainment purposes, the metaverse might not pose big questions[8].

However, recent developments such as the consideration of non-fungible tokens (NFTs) as assets, utilisation of the internet of things to do business and even choosing the metaverse as a platform for solemnising weddings has created a legal conundrum with no clear answers. The field of IP has, in particular, witnessed a spike in such dilemmas as matters of the virtual world start becoming the subject of legal battles in courts[9].

Chapter 1

NON FUNGIABLE TOKEN
With the growth of the Metaverse comes along the ownership of digital assets such as NFTs and cryptocurrency, amongst others. NFTs are created and traded, using blockchain and smart contract technology, which gives each NFT a digital certificate of authenticity and ownership. The blockchain system allows for recording of digital transactions, which provides a ledger and a record of ownership of each NFT. NFTs are digitally unique as each NFT is different from the other. NFTs can digitally represent real life items, such as social media posts, videos, audio files, collectible items, art, signatures, paintings, documents and so on. The interest in NFTs has increased significantly over the years[10].

The Smart contracts in NFTs contain details of the underlying digital or physical asset to which the NFT relates, and the rules and rights that attach to the NFT. For example, a rule that the original creator of the NFT gets paid a percentage of any subsequent resale value[11].

The most expensive NFTs of all time, were sold in the year 2021. Most notable of such sales was the first tweet ever by the former chief executive officer and co-founder of Twitter, Jack Dorsey, which sold for $2.9million[12] The tweet, which simply said, “just setting up my twttr”, and was published in 2006, has been likened to historical works of art such as the Mona Lisa painting.

NFTs are digital assets which means they can be bought, sold, or licensed just like physical assets. Furthermore, they can be protected by IP Rights, which aim to protect a rights owner (or the owner of an asset, be it tangible or intangible), from unauthorised use by a third party. When purchasing an NFT, it is important to understand what rights are being transferred to the buyer and the scope or limitations of such ownership[13].

Copyright in NFTs
Copyright gives the owner of an artistic, literary or cinematographic work, the right to publish, distribute, sell or reproduce the work. However, the purchase of an artistic, literary or cinematographic work does not automatically mean that the copyright vested in the work has

 been transferred to the purchaser. For instance, when one purchases a work of art, the purchaser has simply purchased the physical work of art and the right to enjoy it; the artist retains the copyright, unless it has been specifically assigned to the purchaser. The same principle applies to NFTs. When an NFT is purchased, the buyer does not own the IP rights vested in it or in the underlying asset, unless otherwise assigned or licensed in a written agreement[14]. This means that any IP rights remain with the creator of the NFT and any unauthorised use of the underlying asset by the purchaser, may amount to an infringement of the IP rights vested in the same, as prescribed in the Copyright Act.[15]

Trademark in NFTs
French Luxury Brand, Hermes, brought an action of trademark infringement against Mason Rothschild, the creator of the Meta Birkins (non-fungible tokens that depict renderings of Hermes’ famous and most exclusive Birkin bag)[16]. Hermes claimed that Mr. Rothschild infringed on their trademark, more specifically the brand name and trade dress by using both the name as well as the design of the bag without due authorisation[17].

Another recent case on NFTs and trademarks, is the case between online sneaker reseller, StockX and the sportwear brand, Nike. Nike instituted an action for trademark infringement against StockX, with respect to the sale of virtual Nike-branded sneakers on its website. As with the Hermes case, Nike claims that StockX has created NFTs using Nike’s trademarks without due authorisation or approval, thereby creating a false association between the two brands and in turn, diluting Nike’s globally recognised trademarks.[18]

The various legal issues arising from creation and ownership of NFTs has also led to the issue of regulating the Metaverse as a whole. Like almost every other aspect of the economy and the human existence, there is a need for regulations in order to prevent anarchy. There are currently no Metaverse- specific laws and the scope of regulations, as it relates to the Metaverse, are currently limited to IP rights, protection of fundamental human rights and data privacy[19].

The Metaverse is unravelling, and the expectations are limitless, the novelty of the entire subject makes it difficult to provide regulations coupled with the fact that the Metaverse is yet to reach its full potential. Another foreseeable difficulty which regulators are set to face in providing adequate regulations for the Metaverse is the strive to achieve a balance between protecting the rights of participants of the Metaverse without stifling technological advancement[20]

Chapter 2

2
 ROLE OF IPR IN METAVERSE
The transformation from mobile internet to Metaverse will likely result in new opportunities for inventors and brand owners to develop equipment’s and software such as Automated Reality (AR) and Virtual Reality (VR) devices. Moving further, they will try to enhance user-friendliness and make these devices cheaper and durable. This has a direct relation with Intellectual Property Rights as more patentable inventions will come in the market. Brands providing virtual goods and services and physical equipment’s shall also emerge resulting in establishment of virtual trademark domain. There will be IP objects both in the virtual as well as real worlds. User generated content will take the platform to the next level. As far as trademarks are concerned, mostly non-conventional trademarks such as sound marks, moving image marks, etc, will be used to distinguish brands. Since entirely new products and services shall come in the market, there will be a need to establish a new category of goods and services such as downloadable virtual goods, retail store services for virtual goods, and online entertainment services. As far as goods such as eyewear and other equipment’s are concerned, they will be subject to patent protection, whereas software related technologies including games shall be copyrightable.[21]

From the above, it can be reasonably understood that general IP issues such as of territoriality, infractions, licensing, unauthorized use, etc, shall continue to occur in the metaverse as is the case with existing virtual platforms. Although the Metaverse aims at providing interoperable, decentralised virtual worlds with seamless switching however, the same is not going to work smooth on account of current licensing structures.

Today, the different virtual worlds are operating like locked rooms controlled by single entities, which the users cannot switch easily. Therefore, for any entity wanting to step in the metaverse needs to establish clear IP licensing arrangements with the metaverse platform provider. This gives rise to issues such as term, territory, royalty rates and scope of the licence[22].

Copyright
Copyright law protects original works of authorship, such as books, movies, and songs. In   Metaverse, copyright law usually applies to user-created content — avatars, virtual buildings, and digital artwork but, if you create something in Metaverse that is like a copyrighted work in the real world, you may also be infringing on the copyright. The owner of a copyrighted work has the exclusive right to reproduce, distribute, perform, and display the work. They may also authorize others to do so. If you violate any of these rights, you can be sued for copyright infringement.

For example, if you create an avatar that is based on a copyrighted character, the owner of the copyright may be able to sue you for infringing their copyright. They could ask the court to order you to stop creating and distributing avatars that are based on their work. They may also seek monetary damages from you.

Minsky v Linden Research. Richard Minsky, an American scholar of bookbinding and a book artist, filed a complaint alleging violation of his rights in the mark SLART in relation to art galleries by an avatar, Victor Vezina, who was operating an art gallery in a virtual multimedia platform Second Life under the name SLART garden. The suit was finally settled. However, the court considered the matter on merits during the initial stages and granted a preliminary injunction against the avatar[23].

Trademark
Trademarks are now widely used in the metaverse. Louis Vuitton, Prada, and Chanel sell their virtual collections for avatars in Roblox, and Samsung Electronics sells its home appliances and electronics in the Samsung VR Store. So companies are rushing to protect their trademarks in

the online, virtual environment the metaverse[24]. In the US too, several companies are protecting their trademarks for similar goods and services. Hermes has sued a Californian artist, Mason Rothschild, for his “MetaBirkins” digital artworks alleging trademark infringement. Nike has also brought an action for trademark infringement against StockX alleging that StockX’s NFTs depicting Nike shoes violates its trademarks[25].

Even though the virtual landscape along with augmented reality has opened a new arena of opportunities for brands to extend their growth as an industry, and as a result expand their purchaser and client base- several issues have cropped up for users and owners of trademarks, especially in the domain  of online gaming. A common issue in this space is the use of third-party trademarks from the real world. Trademark enforcement of real-world trademarks in video games has been a difficult task, particularly for owners in the United States. The case of E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc. is a potential example of the above-mentioned issue. Here, the question was whether a computerised image of a real-world strip club depicted in the famous game of ‘Grand Theft Auto: San Andreas’ amounted to trademark infringement of the real strip club, with respect to  its logo and other trademark rights associated with it. It was held by the Court that this virtual exposition in the popular game was not a violation of the trademark owner’s right, as it was a mere expression of art that was protected by the First Amendment, and it is not probable for consumers to believe that the person who runs the real-world strip club also owns the fancy game[26].

Patent
The tremendous popularity of social networks and the advances in virtual reality (VR), leading tech companies began developing new revolutionary technology - a computer-generated universe called Metaverse. It is a network of three-dimensional virtual worlds in which people can build virtual homes, run businesses, interact with their friends and families through their avatars, create art, enjoy travel, play games, etc. Although it may be years before such features

of the Metaverse become mainstream, the opportunities to shape the future of this technology at an early stage make investing in its development possibly highly lucrative. Many tech companies have begun aggressively developing and patenting technologies to power the Metaverse.

Examples of such patented technologies are systems for optimizing shared views of virtual objects to multiple wearers of VR headsets; algorithms for generating and moving virtual shapes and scenes in a VR environment based on hand gestures, head motion, or line of sight of the user; systems for generating haptic feedback corresponding to users' interaction with virtual objects in a virtual environment; and methods for generating 3D avatars of the users, which emulate users’ appearance and behavior, to name a few.

Chapter 3

IMPACT OF METAVERSE ON IPR
The proponents of “Web 3.0” have lofty goals to create a collaborative space that comprises a seamless experience across the virtual world(s) designed by developers and companies. These virtual worlds come with their own complex economy involving digital assets (both virtual and tangible)[27].

IP Licensing in Metaverse
The development of virtual worlds introduces a host of issues relating to, among other things, cross-licensing, advertising, copyrights, trademarks, royalties, and patents that all will have to be carefully navigated and negotiated. These negotiations may challenge lawyers from a wide variety of practice areas to make assumptions regarding the scope of the metaverse and legally define a set of rights in a virtual world that has no borders. Additionally, agreements will need to protect a brand from the reputational damage that can arise from unauthorized use by articulating the metes and bounds of proper brand usage.

It may also be critical to establish clear IP licensing arrangements with metaverse platform providers that take into account the broad potential of the metaverse. For example, agreements

must contemplate, among other factors, the breadth of use to be allowed and new applications that are envisioned. On platforms that invite user-generated content, agreements should also clarify the steps the metaverse provider will take to remove and/or censor infringing content.

Data Ownership, Privacy Concerns, and NFTs
The metaverse will induce the creation of data, and the implications of that data must be considered. For example, haptic inputs from gear meant to supplement the experience raise concerns over what data is being collected and how it is used or shared. Guaranteeing authenticity and protecting IP from counterfeit digital replications is another challenge in the metaverse. This is where NFTs, or non-fungible tokens, come into play. Among many other uses, NFTs can function as digital certificates that can prove ownership online.

Cybersecurity and Protecting IP
Cybersecurity remains an unresolved issue on Web 2.0. Security concerns may be compounded in the metaverse, where cybercriminals will seek to match innovations on new platforms with some of their own, exploiting any vulnerabilities. Impending regulations may soon reshape the virtual environment to address the expansion of deep fakes, avatar impersonation, stolen biometric data, and digital wallet hacks, all of which remain an issue in online environments. As long as data is an asset that can be sold and/or traded, such data will be a target of online cybercriminal activity, including in the metaverse.

Conclusion

The metaverse is an extremely exciting space with many opportunities. It is also a shift that breaks down conventional legal thinking and frameworks built for the old economy, creating new legal, regulatory and technical issues that need resolution.

Lawyers and regulators have historically struggled to keep abreast with technology, and we are at a point that might leave them limited choice other than jump in and address these quickly. Legal tech professionals, in particular, need to prepare for a considerable revamp of existing legal approaches while looking for solutions within these technologies themselves.

The metaverse will present challenges for IP law and IPR holders, but there will also be important opportunities for IP to evolve and become compatible with the metaverse ecosystem. Grasping these new opportunities to adapt to the metaverse will be both valuable and necessary to sustain the continued adaptation of IP law to novel technological advancements.