Introduction

Virtual assets transactions such as non-fungible tokens (NFTs) have become mainstream in tech-world in these few years, and the focus of virtual interactions has been shifted to the “Metaverse”. Some tech companies, such as Meta (formerly Facebook) and Microsoft, have also announced their plans to develop new Metaverse platforms for both entertainment and working purposes. However, widespread discussion on the legal issues of Metaverse is currently not much more than an evolving idea and the fact that there is currently no solid legal framework regulating Metaverse or related technologies. This article will discuss the potential legal issues brought by the Metaverse and the Web 3.0 technologies from intellectual property (“IP”) law perspective.

What is Metaverse

The Metaverse, a world of unlimited imagination, can be explained as an immersive online experience that utilizes virtual reality and augmented reality technology and devices. The Metaverse is being built on a foundation of Web 3.0 technologies, including blockchain, cryptocurrencies, and in particular, NFTs. NFTs are unique records stored on a blockchain to provide proof of ownership of a digital asset as each NFT is uniquely identifiable and can be traded using blockchain technology.

IP issues raised by Metaverse

Metaverse raises novel and complex legal issues, as Metaverse is being built via computer software, including different types of programme or computer technologies which may be operated and/or generated via artificial intelligence. The operation of Metaverse may involve issues of patents, images, copyrights, trademarks, designs and drawings and require certain internet skills.

It is no surprise that activities on the Metaverse may involve infringement of IP rights. NFTs containing IP may be minted without the authorization of the real content creator, in breach of existing licensing agreements, or resemble patents, registered trademarks, drawings or copyrighted materials in the physical world.  

Yet, the very nature of the Metaverse itself poses additional challenges that existing laws would not have envisioned. For instance, determining the identity of the creators of a given work in the Metaverse may be more difficult when the work results from a decentralized collaborative process performed by users anonymized behind avatars. Apart from this, whether digital assets should qualify as “goods” for the purpose of trademark laws under the current IP regime is still unclear since NFT is a kind of calculation products of computers. Further, since users in Metaverse are behind the screen, the identity of the infringer may be difficult to locate which in turn makes the person who should be held liable unclear.

In fact, IP issues relating to the fashion and luxury goods sector have already begun to arise. In January 2022, French luxury fashion house Hermès sued a NFT creator Mason Rothschild, who marketed a line of digital assets called "Metabirkins," digital duplications of the Birkin bag created by Hermès sold for tens of thousands of dollars or more, with prices even higher in the resale market. Hermès alleged trademark infringement and dilutive use of the Birkin name. While the scope of IP protection in the Metaverse is not clear, companies and developers still need to carefully consider whether they have the necessary IP rights for protection in the Metaverse, and traditional approaches on enforcement of IP rights may be revisited or significantly challenged.

Enforcement

Taking a step back, before the issue of liability can be determined, IP owners are perhaps the most concerned about how to enforce IP rights in the Metaverse against infringers.

1.    Identification of infringement

Unlike traditional physical counterfeit activities, Metaverse exists in an unlimited space in the internet world. It is difficult to ascertain the identity of the infringers and the exact “location” of infringement as a number of servers operating such Metaverse may be involved.

2.    Jurisdiction and applicable law

Different courts around the globe take a different attitude towards the Metaverse and the IP issues arising therefrom. If an IP infringement took place on the blockchain, it would be debatable which court will have jurisdiction to hear the case though some NFT platforms may have their own dispute resolution clause whilst some may not.

Takeaway

The Metaverse has created ample opportunities for market players to develop, market and monetize their IPs, and at the same time presented risks of new forms of IP infringement. To obtain more useful and substantial protection, it is advisable for market players to take initiative approach to safeguard their IPs before dispute arises.