Now, many people are calling for new regulations for the metaverse. Why? To keep people safe when interacting in this virtual world and close what appears to be a gap between reality and the law.
People often say that the current rules don’t apply in the metaverse, that the laws aren’t made for that kind of world, or that technology moves faster than the law, but I don’t think these are true. Over the past 30 years, countries with a strong Internet presence have made new regulations about e-commerce, criminal activities involving technology, consumer rights on digital content, and Internet service providers’ liability, to name a few. Think about laws on intellectual property (IP). They protect people like authors, inventors, producers, designers, and performers by giving them exclusive rights to their copyright, trademarks, patents, industrial designs, or trade secrets. The main focus of IP rights regulation is not on the physical object that contains a creative work, a unique sign, or a technical innovation but on the intangible parts of those things.
Civil law decides who owns things like a car, a book, or a purse, which can all have trademarks, patents, or works of authorship. On the other hand, IP law decides who owns things like trademarks, patents, or works of authorship that aren’t things. In the intellectual property language, this is the difference between an asset’s corpus mysticum (it’s intangible part) and its corpus mechanicum (it’s physical part). This idea has been used for hundreds of years and works just as well in the metaverse and with NFTs. The metaverse is a virtual universe where people or computers can control avatars who can then control virtual items like cars, weapons, and furniture, all of which can have trademarks or copywritten works on them.
Because intellectual property laws deal with the intangible parts (corpus mysticum) of an object, whether it’s real or not, it’s clear that builders of the metaverse will have to respect the rights of inventors, designers, and owners of distinctive signs, just like in the real world. So, a person with IP rights will be able to go after the use of those rights in the metaverse, such as when they are attached to a virtual purse or jacket made for digital avatars.
The same thing can be said about NFTs. NFTs are digital files that can contain creative works or other things like videos or artwork. As long as copyright gives original works of authorship (corpus mysticum) an exclusive right, and this is different from the ownership of any digital object in which the works are embedded (corpus mechanicum), anyone who uses, for example, a sound recording or a clip from a video game in an NFT will need permission from the copyright
holder of such a work. Because of this, there isn’t much debate about how and if the current rules apply to NFTs and the metaverse.
From a legal point of view, the Berne Convention for the Protection of Literary and Artistic Works, which 181 countries have now ratified, says that contracting parties must give authors exclusive rights over their works, no matter what form they take. Since then, other international agreements have been made that add to the Berne Convention. One of these is the WIPO Copyright Treaty, passed in 1996, adapting the Berne Convention to the digital world. This agreement (Agreed Statement concerning Article 1(4) of the WIPO Copyright Treaty) makes it clear that storing a protected work in digital form in an electronic medium (like an NFT or a file whose content is shown in the metaverse) is a reproduction that needs the permission of the copyright holder. It doesn’t seem like the law is always so slow.
But these new forms of entertainment pose some problems for people who own IP rights, but these problems come from other places. Authors, producers, publishers, and people who own trademarks are the only ones who can use their intellectual property. However, these rights are not absolute because the Berne Convention says there are some situations where they can’t be used. Some uses, like copying a literary work for a book citation or using a brand to show the products or services of the brand owner, are not exclusive to the right holders.
So, in general, if we want to use a company’s trademark in a digital object, like an NFT or an item in the metaverse, we need to ask the owner of the mark for permission. Even though some courts have decided, for example, in video game cases, that certain descriptive uses of third parties’ trademarks don’t need their permission first, this doesn’t mean that it’s always the case.
What the courts say about it
There have also been a number of well-known cases of people using the work of others without their permission. One of the best examples is the case between Solid Oak Sketches, which owns the rights to some tattoos, and 2K Games, which makes the well-known NBA 2K video game series. The claimant owned the rights to several graphic designs tattooed on famous basketball players, like LeBron James, and said that the digital avatars of the athletes in the video game broke its copyright by using the same designs. The same court that decided the Humvee case (the United States District Court for the Southern District of New York) also ruled in favor of the defendant by using the de minimis use defense, the implied license defense, and the fair use defense, which is based on the artistic nature of video games.
However, the law has sometimes ruled that video game makers have gone too far in their appropriation of the work of others. So, it’s clear that each of these things needs to be looked at on its own.
The immediate conclusion, though, is that there are a lot of examples to look at when debating whether or not certain IP rights should be used in NFTs or the metaverse. Nothing, it has been said, comes from nothing, and new rules and regulations have always been developed using the idea of building on what has come before. Another thing to learn is that the metaverse and NFTs are not as disruptive as some think, at least from a legal point of view. After all, virtual worlds and digital objects have already been around for 20 years.
There is no doubt that NFTs and the metaverse when they become real, will pose many problems for people who own IP rights. At this point, most of these problems can’t be seen coming. So, we need to compare NFTs, the emerging metaverse, and any other new digital phenomena to the rules that are already in place. These rules were made after a lot of debate in many countries and cultures. These rules have also been tried out in different situations and held up for decades. In the coming years, it will be clear that some changes will be needed to control how people interact in digitally connected worlds, but these changes won’t be made until we know what the problems are. For the time being, however, intellectual property rights will remain just as important as they always have been to the development of new fields of study and artistic expression.
