How does Intellectual Property work in the Metaverse?

What is the Metaverse?

Although Meta (formerly Facebook) have rather cleverly gotten the jump on the competition with their rebrand, the Metaverse is not exclusively theirs. In actual fact, it describes a series of fully online alternative worlds through which users move with what are known as avatars. These are essentially customisable renditions of the users, which they control and use as their virtual emissary on these Metaverse platforms.

This may sound like science fiction, but these worlds exist now, and Mark Zuckerberg announced earlier in the year that Meta would be investing $10bn to get its Metaverse project off the ground, with the wider industry having had an estimated $177bn invested in it already.

Companies, including Disney, have already begun appointing Chief Metaverse Officers to help them navigate this new frontier and ensure their interests are as well tended in the virtual space as they are in the ‘real world’.

All this is to say that this new age of online social and market change is not a fad, or a flash in the pan, it should be taken seriously by companies big and small, or there is a real risk they will be left behind.

What are the IP risks and the law in the Metaverse?

Property in the Metaverse has already begun changing hands for eye-watering sums, and investors are starting to gamble on which of the Metaverse platforms it is worthwhile spending millions of pounds for intangible real estate.

Iconic advertising spaces such as Times Square, Shinjuku and Piccadilly Circus will be replicated in these worlds and that PR real estate will be bought and sold as it is in the real world.

What happens when a third party uses a trade mark that is not registered to them in one of these spaces, or sells a virtual product which they did not design to hundreds of online users, or plays a song in an online shop or bar without the author’s permission, or passes off goods of another company as their own? How can one protect these rights in the Metaverse?

These are somewhat unanswerable questions at this stage, although it is helpful to look at the computer-game and NFT industries for an indication of where the law in this area is heading.

A series of cases, predominantly in the US, are seeking to deal with the infringement of trade mark rights by NFT creators, who have used marks owned by the likes of Nike and Hermès to create tokens that they are selling for profit. This area of the law is so new that decisions have not yet been handed down, but the court has rejected calls from infringers to dismiss their cases on the basis that the NFTs were an artistic expression. This is an argument that the court accepted in E.S.S. Entertainment 2000, Inc. v. Rock Star Videos, Inc., 547 F.3d 1095 (9th Cir. 2008), in relation to a rendition of the ‘get-up’ and trade marks of a famous LA land mark in Grand Theft Auto.

One of the main issues for companies will be identifying the particular user who may be infringing their rights. Much as with internet bullying or disinformation around elections, often the greatest difficulty social media companies have is identifying the person behind the post. In Hermès v. Mason Rothschild, 22-CV-384 (JSR) (S.D.N.Y. May. 18, 2022), the defendant is a well-known NFT artist and has identified himself as the natural person behind the allegedly infringing account. This may not always be the case.

What are the IP opportunities in the Metaverse and how can you prepare for them?

Although the above may seem all doom and gloom, this is also a very exciting time, and a huge opportunity for businesses to capitalise on what promises to be a ground-breaking and lucrative new industry. Licensing deals and assignments will be a crucial tool in order for a company’s products, branding and trade marks to be a feature of the Metaverse. The expertise required to render these things will be beyond the capability of most users to start with, so this work will need to be done by what will probably be a relatively small sub-set of the coding community. The contracts and agreements governing this work will be vital in the protection of IP rights as these waters are tested.

If the Metaverse is adopted with anything close to the speed and enthusiasm that Facebook, Instagram and Twitter have generated, then businesses will need to be prepared to strike while the iron is hot. As such, it would behove any innovative and forward-thinking company to understand what IP their business has, and what rights they have to protect and enforce it.

This may not be as obvious a task as one might think, clients are often surprised to hear that they are sat upon valuable IP that could and should be registered.

In short, change is coming; in fact, it has already arrived, and now is the time to be thinking about what the Metaverse will bring and how to prepare for it. As well as exploring the opportunities that it will inevitably provide, it is also important for companies to take stock of their IP and understand their rights, before they can look to this exciting new world to grow and exploit them. The Commercial and Dispute Resolution teams at Thomson Snell & Passmore have the expertise necessary to help you realise your IP potential now, and prepare your portfolio for the Metaverse.