Metaverse and Intellectual Property: Safeguarding Innovation in a Virtual Realm
Parmenides, a Greek philosopher, stated that "nothing comes from nothing" as early as the late sixth century BC. The world and the law seem to be on the verge of change in the digital age, with seemingly unheard-of events emerging every two or three years. Web 2.0, Cloud Computing, Blockchain, and Web 3.0 were the prevalent technologies a few years ago. Many papers published in the past year have predicted that the metaverse and NFTs (non-fungible tokens) will bring about a global revolution. This has sparked debate on whether new laws are urgently needed to keep up with these emerging technologies. To put it another way, which should come first: the metaverse adjusting to the law or the legislation being modified by it? The latter is the best course of action at this point for the reasons listed below. The technology and video gaming industries are gearing up for the arrival of the metaverse, a network of three-dimensional virtual worlds where people can communicate socially and commercially with one another primarily through avatars.
The metaverse does not yet exist and is still distant from becoming a reality, despite extensive media attention—at least according to what certain reporters are currently claiming. This is mainly due to the high processing demands and standardized procedures that are required for its widespread adoption. NFTs, however, are already a reality. NFTs, or non fungible tokens, are cryptographic data units with distinct information based on current blockchain technology. Because of this, NFTs may be identified from one another and contain additional types of data, such as the identities or artistic creations of various people. Because of their distinctiveness, they can be bought, sold, or traded, and every transaction is recorded in a digital ledger. Using the power of blockchain technology, NFTs generate digital files that are not tradable and, crucially for the entertainment sector, include an image, graphic, or video contained in the token that determines its market value.
The metaverse is a virtual world in which computer- or human-controlled avatars can manipulate virtual objects like furniture, cars, and weaponry that may contain copyrighted or trademarked content. Since intellectual property rules include the intangible components (corpus mysticum) of any kind of product, virtual or physical, it follows naturally that those creating the metaverse will need to uphold the same rights as real-world inventors, designers, and owners of distinguishing signs. As such, the right holder in question shall have the right to pursue legal action against any use of his or her intellectual property rights in the metaverse, such as when it comes to virtual handbags or jackets made specifically for digital avatars.
These new entertainment mediums do, however, provide a variety of difficulties for IP rights holders, albeit these difficulties have different causes. The exclusive rights to their intangible assets belong to writers, publishers, producers, and trademark owners. However, the Berne Convention allows for some circumstances in which people may not be able to exercise these rights, therefore they are not absolute. The exclusive domain of right holders does not extend to certain uses, such as copying a literary work for a book citation or using a trademark to represent the goods or services of the brand owner.
Therefore, in theory, we must ask the mark's owner for permission before using any company's trademark in a digital product, such an NFT or an item in the metaverse. Despite the fact that certain courts have determined—for instance—that some descriptive uses of third parties' trademarks do not require their prior consent in circumstances involving video games.
Legally speaking, contracting parties are required to provide authors exclusive rights over their works, regardless of the medium or manner of expression, according to the Berne Convention for the Protection of Literary and Artistic Works, which has been ratified by 181 nations. Since then, further international accords have been added to the Berne Convention, such as the 1996 adoption of the WIPO Copyright Treaty, which updates the Berne Convention for the digital age. This agreement (Agreed Statement concerning Article 1(4) of the WIPO Copyright Treaty) clarifies that storing a protected work in digital form in an electronic medium—like an NFT or a file whose content is displayed in the metaverse—represents a reproduction that requires prior authorization from the owner of a copyright. The law does not appear to move slowly all the time.
There have also been several well-known instances of using third-party content without authorization in the context of copyright. The lawsuit filed by Solid Oak Sketches, the owner of the copyright to several tattoos, against 2K Games, the company behind the popular video game series NBA 2K, is among the most pertinent examples. The claimant contended that the digital avatars of the sportsmen in the video game violated their copyright because they replicated many visual designs that were held by the claimant and were seen in the tattoos of well-known basketball players, including Lebron James. Applying the ‘de minimis use’ defense (where so little of the protected work has been used that the infringing work is not substantially similar to the copyrighted work and is therefore none-infringing), the implied license defense, and the fair use defense—which is based on the artistic nature of video games—the same court that decided the Humvee case also found in favor of the defendant.
In the Rogers v. Grimaldi case (1989) 875 F.2d 994 (2d Cir. 1989), the court established a standard to evaluate whether prior authorization is necessary for trademark use. It aims to ascertain if the trademark usage is "artistically relevant to the defendant's work" and whether it is "explicitly misleading." These are the two components of the investigation.
The publishers of the Call of Duty video game franchise were sued in 2017 by AM General LLC, the company that makes the well-known Humvee military vehicle, for the game's representation of the vehicle, which copied the vehicle's appearance and exploited the trademark. On the other hand, the United States District Court for the Southern District of New York determined that Activision's use of the vehicle and trademarks had artistic value and met the requirements of the so-called Rogers test because the company's goal was to create a video game that realistically simulated modern warfare.
However, in other instances, courts have found that video game producers have overreached themselves in utilizing intellectual property belonging to third parties. It follows that a case-by-case analysis of these issues is necessary.
The obvious conclusion, therefore, is that there are plenty of prior cases to draw on when discussing whether or not NFTs and the metaverse require specific uses of intellectual property rights. Nothing comes from nothing, as the saying goes, and historically, applying the idea of learning from past experiences has served as the foundation for the creation of new regulations. Another lesson is that, unlike what some may think, virtual worlds and digital things have been there for 20 years; therefore, the metaverse and NFTs are not as disruptive as they seem, at least not from a legal one.
When the metaverse and NFTs materialize, intellectual property owners will undoubtedly face numerous difficulties. At this point, it is impossible to predict the majority of these obstacles. As a result, we need to evaluate NFTs, the developing metaverse, and any other novel digital phenomena in light of the laws that are currently in place, which were decided upon after extensive discussion involving numerous nations and cultures. These rules have also been put to the test in a variety of situations and have shown to be reliable for many years. In the upcoming years, undoubtedly, certain changes will be required to control human interaction in digitally connected worlds, but these changes must occur once we understand the nature of these issues. Intellectual Property rights will remain essential to the progress of science and the arts in the interim.