Law In The MetaverseDecember 22, 2021 – Article
The metaverse is the future; it involves wearing a headset that transports you to anywhere you want to go. You can do it on your own time and in your own home. So not only will you be able to watch something “when and where you want to” (the mantra of VOD), but now you will be able to be when and where you want to. Want to be on Mars? Want to race at the Indianapolis 500? Want to be at the battle of Thermopylae in 480 BC? No problem; you will think you are actually there – and all your friends can be there too, all from the comfort of your home. Many of the legal issues that arise (or will arise) in connection with the metaverse are tried and true intellectual property issues that are not unique to the metaverse, but many have a unique spin given the unexplored U.S. legal terrain of the technology.
ISSUES RELATING TO DISPUTES OVER OWNERSHIP OF THE INTELLECTUAL PROPERTY
Disputes over ownership of the underlying intellectual property are going to be frequent and hotly litigated, as billions of dollars can ride on the outcome. Set out below is a summary of the various theories that will be litigated.
Patents: Under U.S. patent law, the first person to apply for a patent that is subsequently granted for a novel, non-obvious invention has a monopoly on that invention for twenty years. Unlike copyright law (discussed below), it does not matter if the later infringing invention is independently created. There will be endless disputes over whether a particular metaverse patent is being infringed by other technology, particularly given how fast the technology is evolving, since it will be difficult to tell a “novel” invention from a mere modification of an existing one. To add to the fun, in 2014 the Supreme Court in Alice Corp. v. CLS Bank International held that software implementation of an escrow arrangement was not patentable because it was an implementation of an “abstract idea.” You can bet that whoever is being accused of infringement of a metaverse patent will claim that the patented invention is a non-patentable implementation of an “abstract idea.”
Copyright: As with all other software disputes (think Google vs. Oracle), there will be mountains of litigation over whether copyrighted software operating the metaverse has been infringed by other software.
Contract: A key fight that will be fought in the contract arena is who owns metaverse rights under existing contracts that were drafted before the metaverse was even contemplated. This issue will be similar to the battles over who owns VOD rights under contracts that were drafted before those rights existed. For example, if a studio granted video game rights to a gaming company, the gaming company may be able to claim ownership of the metaverse rights depending on how the contract is drafted. Going forward, it will be critical to draft contracts with scalpel-like precision to allocate exactly who owns what metaverse rights.
ISSUES RELATING TO THE CONTENT OF THE METAVERSE
The next set of legal issues are claims relating to the content in the metaverse. What can and can’t be included in metaverse content? Most of the claims will fall into three categories - copyright, trademark, and right of publicity.
Copyright: The Copyright Act protects the owner of an original work from third parties copying that work. Critically, there is a defense called “fair use” that in theory protects some copying based on weighing certain factors set out in the statute, but in practice it all comes down to what a particular judge or jury thinks is “fair,” so there is usually little comfort in relying on the fair use defense. Importantly for any metaverse that incorporates cityscapes, owners of the buildings that appear in the metaverse cannot make copyright claims for such use.
If an individual user inserts unauthorized copyrighted material into the metaverse, only that user should be liable for infringement and not the metaverse company, as the company should be protected by the safe-harbor provisions of the Digital Millennium Copyright Act (DMCA), and third parties can use the takedown notice provisions of the DMCA to have the copyrighted material removed.
Trademark: Trademark law protects against the unauthorized use of a trademark in a manner that causes a reasonable consumer to believe that the trademark owner either (i) was the source of the goods or (ii) endorsed or sponsored such goods. What if the metaverse lets you drive a Ferrari or wear a Bijan suit, as will surely happen? Will you think that Ferrari or Bijan either created the metaverse (unlikely) or sponsored it (maybe)? This is a far cry from seeing a Ferrari drive across the screen in a film, and while several brands have sued for such use in films, they have all lost because the audience does not think that Ferrari produced or endorsed the film. The brands should find much better traction if the metaverse allows users to interact with the product, particularly if the user must pay virtual or actual cash to use that product. The outcome, in that case, should be no different than the sale of toy Ferraris, which requires a license from Ferrari.
What if an individual user imports the trademarked item into the metaverse where other users can see it? Indeed, what if the user can sell the trademarked item they imported for virtual or actual cash? The safe-harbor provisions of the DMCA do not protect metaverse companies from trademark claims, but by analogy to general trademark infringement cases (such as Tiffany v. eBay), the companies should be protected from contributory infringement claims if they either are not aware of the conduct or take actions to remove the infringing content if they become aware of it. The difficulty here is that once a metaverse company becomes aware of use of a trademarked item that is imported by a user, the company will have to decide whether the user’s use of the item in the metaverse is itself trademark infringement, which as discussed above is not a simple question.
Federal Trademark Anti-Dilution Act: Under the Federal Trademark Anti-Dilution Act, nationally known brands can sue if the use of their trademark by others in advertising or branding a product “tarnishes” or “blurs” the trademark. This Act applies whether or not consumers are confused as to the source of the goods, so it is more analogous to a copyright claim than a trademark claim. Thus, metaverse companies would be wise to not include any images of nationally known brands in their advertisements, such as on-line trailers, teasers, or opening web pages.
Right of Publicity: The simplest way to conceptualize the right of publicity is to assume that, putting aside defenses, there is a prima facie case anytime anybody uses anyone else’s name, likeness, or voice (referred to herein as “persona”) for any reason. Note the breadth of the action: Anyone can be a plaintiff, not just celebrities. Also, the right applies to any use, not just a commercial use. It does not even require the use of the plaintiff’s actual persona; liability can be based on the use of the plaintiff’s nickname or a “look-alike” or voice imitation. The case law is hopelessly muddled on defenses, which vary from state to state, so whether a metaverse company can use a celebrity’s persona in the experience may depend on the state where the lawsuit is brought. At a minimum, the persona should be made to be “transformative,” since it will then meet the protection given by states that give complete protection for expressive works and states that give protection only for transformative works.
As with the other causes of action, the issue will arise as to the potential liability of the metaverse company if the individual user imports a third-party’s persona into the metaverse. As with trademark claims, the safe-harbor provision of the DMCA does not apply to protect on-line hosting companies against right of publicity claims, and there is a split of authority on whether the Communications Decency Act protects on-line hosting companies from such claims. Thus, the safe assumption is to assume that the metaverse company may be subject to such claims, in which case the best course of action is for the company to stop any obvious use of third-party personas, such as celebrities, by users.
CLAIMS BY USERS AGAINST METAVERSE COMPANIES
There are going to be numerous claims by users against metaverse companies, particularly for personal injuries. The metaverse requires the use of a head mounted device ("HMD"), so the user cannot see the actual environment they are in. If they attempt to walk around at home, they could trip and possibly fall down stairs or through a window. The metaverse can be so real and scary that 30% of participants could not make it across a room with a simulated tightrope walk between the twin towers, so there may even be a few heart attacks. The metaverse can also cause significant nausea to the point of vomiting when the visuals do not align with body movement. Some people may become addicted to the metaverse, and some may be traumatized by events that occur in the metaverse. Without question, there are going to be suits for negligence and product liability against metaverse companies and the suppliers of any hardware, software, and content.
Even beyond physical injuries, there will be the standard boatload of class actions for violating privacy or data mining laws or for damages after the inevitable hacking of personal or credit card information. The privacy claims will be particularly acute since some metaverse companies will scan the user’s face and body dimensions, know what they like to look at with eye tracking, and sell that information to advertisers.
To limit potential liability for claims by users, it will be important for metaverse companies to have thorough binding terms of service for users that cover all these issues, including mandatory arbitration and class action waivers. Under the case law applicable to on-line contracts, the user must be required to open and click-through acceptance of the terms of service in order for those terms to be binding.
CLAIMS BY USERS AGAINST USERS
My favorite category, and thus saved for last, will be claims by users against other users for various nefarious misdeeds done in the metaverse. Every imaginable crime and tort that can be committed in the real world can be committed in the metaverse, particularly with multiple participants. There are already reported cases of theft of virtual items that can be traded for virtual or actual cash and of sexual groping by one avatar of another, which caused genuine emotional harm to the person who was playing the groped avatar. What would be the outcome if one avatar raped another, and a user suffered post-traumatic stress syndrome as a result? What if it was a repeat offender and the metaverse company knew it? Such questions are not far off in our brave new metaverse world.
This article was originally published in Forbes and can be accessed here.