Author: Preslav Baldzhiev
What is the Metaverse? What legal issues lie behind this term? To what extent are the legislations prepared for such a digital phenomenon? All questions whose answers remain in the realm of conjecture, or at least will remain until sufficient practical examples are created and examined.
What is the Metaverse?
It turns out that Metaverse isn’t a new term – it’s popular among science fiction fans. In recent years its meaning has slightly changed, and the Metaverse is understood as a new world, parallel to, interconnected with, but also separate from the real one, which develops entirely in the digital space. The Metaverse relies on so-called extended reality (XR) – a type of interactive experience that allows one to interact with virtual objects the way one would interact with real objects.
It is precisely this type of interactive experience that begs the question of how much real-world life elements and circumstances will have the same meaning and value within the confines of the Metaverse. The answer to this question will become even more urgent when virtual reality becomes indistinguishable from living life.
The applicable law
The issue of applicable law is significant to the extent that the virtual life experience intertwines and overlaps with the real one. Or in other words, the transfer of certain circumstances or elements from the real world to the digital one is inevitable.
While these circumstances and elements have a legal order in the real world, what will happen to them if they are, in one form or another, incorporated into the digital space? Two approaches can be defined here – centralized and decentralized.
In the centralized approach, all circumstances and elements (whether transferred from real life or created in virtual reality) are regulated by the rules that the creator of the Metaverse has drawn up – this principle resembles the rule-making activity that the parliaments of individual countries implement. However, this does not include the Terms and Conditions, which are mandatory attributes for any internet space.
Applying the centralized approach creates uniformity of rules within the virtual environment, which, in turn, will allow users to make an informed decision about whether to become part of the metaverse in question.
The second option (decentralized) suggests that the users themselves prepare the rules according to which the life path in the Metaverse will develop. Such an understanding rests on freedom of contract and would have a salutary effect on the rate at which relations in the Metaverse are regulated (but let’s not forget that even freedom of contract is not absolute).
However, neither approach provides a definitive answer as to how the metaverse will interact with real-world legislation – after all, they are two parallel but separate universes. To say that such connectivity is unnecessary is to exclude the life orientation of the metaverse and equate it to simple video game-type software code.
Considering the essence of the Metaverse, namely that it is a virtual online space that exists through servers, it can be adopted two principles of interaction with real law (although we exclude its separation from the real world). According to the first principle, the law of the country where the servers are physically located will be applicable. The second principle implies applying the legislation to the address or seat of the person who created the metaverse (whether physical or legal).
These two assumptions also suffer from a serious ambiguity – what would happen if the servers were moved from one country to another, or if the creator of the metaverse decided to sell it to a person of another nationality? What if the creators of this virtual world are two or more individuals located in different countries?
The problem with personal data
We mentioned at the beginning that the Metaverse allows for an interactive experience. This interactive experience is possible for users who have created their own avatar (a digital human to interact within the virtual environment). Again, based on the life orientation, it is quite natural for the creators of such “spaces” to provide their users with all possible options for personalizing their avatars in such a way that these digital people come as close as possible to thе real appearance of the user.
This brings to the fore the issue of user biometrics and how well individuals are protected from identity theft. It would be naïve to assume that every user (potential or actual) of the Metaverse is acting in good faith – that is, that they will create an avatar that resembles the respective user of the service. It will not be units that build their virtual image on the visual representation of a famous person or an acquaintance. A particular problem can also be the accidental generation of digital visual appearance since at some point they will match the true appearance of an unsuspecting person.
Uploading a photo, based on which software generates an avatar, is also not a possible solution, as this raises the questions “Who is the author of the photo” and “Is the person captured really the same person who is uploading the photo?”
At first glance, this seems like a dead end. But it turns out that the only possible way out is a mandatory facial scan during registration – the exact same approach was taken by some financial companies to confirm the identity of the individual.
You’re probably thinking, “What does it matter what my avatar looks like? Isn’t everything in the digital space?”. As already mentioned, the Metaverse implies the incorporation of life circumstances and elements, but in no way excludes the reverse direction – that is, the digital world influencing real life. The idea of such types of virtual spaces suggests that they become the new living environment that will accommodate the events happening here and now, and this will create a prerequisite for the consequences of these events to be realized in the two parallel realities at the same time.
The intellectual property problem
This problem is of serious importance, as it directly affects the economic and commercial activity of the right holder. First of all, we should consider whether objects that are created in the Metaverse can be equated with objects of intellectual property. The answer to this question must be affirmative since such objects are the result of creative activity (behind the avatars are real people) and they are presented in an objective form (that is, they exist independently of human consciousness). If we reject the acceptance of an objective form, then this means excluding from the scope of IP objects everything that is created on a computer and exists only in the memory of the device (and more and more information is stored in this way).
This means that any object created in the metaverse is eligible to become an IP object. This allows this object to be protected according to the generally accepted rules for this type of protection (unless other mechanisms for protection exist within the Metaverse).
On the other hand, such IS objects that are created entirely within the Metaverse rely on NFT (non-fungible token). NFT is based on blockchain technology and is used to authenticate digital assets. That is, an NFT is a kind of certificate for the existence of a given digital asset.
Owners of IP objects, however, will face two serious problems concerning the right to use and the proof of actual use in the Metaverse.
To what extent IP objects are protected from unregulated use within such a virtual world is a 1 000 000-dollar question (as said in a popular TV show). As we mentioned at the beginning of the article, the Metaverse is a parallel but separate world that exists alongside the real one. This, in turn, limits the scope of territorial protection – after all, IP protection is granted for a specific territory, and the Metaverse is not (yet) envisaged as such. Even if at some point it is envisaged that the Metaverse will become one of the possible territories for protection, will such protection be given only to a specific virtual world or to all digital environments that are developed?
Currently, the legislative framework has no explicit rules governing the use of IP objects in the Metaverse. If we take into account the notion that everything that is not expressly prohibited is allowed, then this means that anyone can freely use foreign objects of intellectual property within the confines of this digital world.
Proving actual use is the other serious problem that owners of IP objects will face in the virtual world. The problem exists because the idea of the Metaverse is still new and it has not become a means that is widely used by consumers – that is, access to this virtual world, while easy, is not so sought after by them. On the other hand, the proof of real use is done with a view to the given territory – that is, we have registered a trademark with European Union scope, but in reality, the brand is used only and only in the virtual space of the Metaverse. In this case, will we have proven actual use of the EU territory?
Having spoken about the registration of trademarks, we should also pay attention to another important problem – if the trademark was created with the idea of being used only within the limits of the metaverse, then for which goods and services should it be registered?
Again, two approaches are encountered – we will consider how far they apply to goods and services independently of each other. According to the first approach, the trademark should be applied for the goods for which the same trademark would be applied and registered if it were to be used in the real world. More simply explained, if the mark is registered for shoes, then the protection will also cover the shoes offered in the virtual environment. This notion does not garner much support, as the Metaverse remains a virtual space with virtual objects – that is, the virtual object is not equivalent to the real one.
The rejection of this idea validates the acceptance of the other thesis – the mark will receive successful protection if it is registered for goods in class 9 and the goods themselves are explicitly mentioned (eg virtual shoes). Why this is so – class 9 contains goods that are directly related to the digital space, information technology, software programming, and other similar activities. As we have mentioned more than once, the metauniverse is a virtual space and all objects in it are part of the virtual space – this in itself defines the objects as virtual, as dependent on the digital environment.
When it comes to services, the two approaches are mixed. There is no problem with the trademark being registered for services of the different classes, but, in addition, a clarification should be given – that is, “Arranging newspaper subscriptions to others” shall look like “Arranging virtual newspaper subscriptions to others”. In other words, the specification must meet the condition Virtual (the name of the service) for virtual (specifying what will be done with the service).
More clarity on the question of what goods and/or services to apply for a mark to be used in the metaverse will be provided by the new edition of the EUIPO Guidelines (2023 edition).
And if we are to evaluate the protection that the Metaverse itself can receive, then it should be equated to the protection of software codes and video games.
Тhe Metaverse is a “game changer”. The possibilities it offers in these initial stages of its development create indications of an impending legal vacuum. But how imminent can this legislative void be when technology once again proves that “the future is today”?
This material prepared by Preslav Baldzhiev aims to provide more information about the metaverse. It does not constitute a legal opinion and cannot be interpreted as individual consultation on any concrete facts or circumstances. The advice of a specialist should be obtained for specific questions and situations. For more information on the above-mentioned issues and individual consultations, please contact the team of the law firm of Krasimira Kadieva at 00359 882 308 670 or make an inquiry using the contact form of the website. Since 2017 Preslav Baldzhiev is a law student at Sofia University “St. Kliment Ohridski “, having previously graduated from the High School of mathematics and natural science “Acad. Nicola Obreshkov” in Burgas. In February 2020 he took a course for industrial property representatives at the Patent Office of the Republic of Bulgaria in the field of trademarks, geographical indications, and industrial designs. He is interested in intellectual property, personal data protection, commercial and law on obligations and contracts and also regularly attends conferences, practical courses, seminars, and webinars.