Lawrence Stephens

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Legal Issues Facing the Metaverse

March 2022

The concept of the ‘metaverse’ has attracted much press interest of late, covering the emerging appetite for metaverse investment opportunities, a recent virtual land boom, or where crypto, gaming and capitalism collide.

The term ‘metaverse’, which comes from Neal Stephenson’s 1992 science fiction novel ‘Snow Crash,’ is used to refer to the development of virtual reality and augmented reality technologies. The grand concept is that the metaverse will be the next iteration of the mobile internet and a major part of both digital and real life. The new era of the metaverse will have implications on all aspects of society, including entertainment, advertising, and the economy.

During the pandemic, musicians have been able to put on virtual concerts using virtual reality akin to what a metaverse would be like. New ways of virtual interactions will provide ample opportunity for marketing, sales, and events without the need for physical presence.

For the metaverse to become a reality, many obstacles will have to be overcome, including significant legal issues. Some of these include:

  • Personal Data, Privacy and Cybersecurity: Privacy and data security lawyers are already challenged with addressing the global concerns presented by varying international approaches to privacy and growing threats to data security.
  • Technology Infrastructure: The metaverse will be a robust computing-intensive experience, highlighting the importance of strong contractual agreements. Performance commitments and service levels will take on heightened importance in light of the real-time interactions that users will expect.
  • Anti-competitive concerns: Collaboration amongst competitors may invoke antitrust concerns. Larger technology companies may be perceived as leveraging their position to assert unfair control in any virtual world.
  • Intellectual property issues: A host of IP issues arise, including infringement, licensing and IP protection.  The use of virtual images and virtual performances may lead to concerns over use of image rights and copyright, and dealing with different approaches in different jurisdictions.  Lawyers will need to assist in identifying IP rights being used in the virtual world and ensure appropriate consents and licences are put in place.
  • Ownership of property: Late last year, it was announced that Nike had filed seven trademark applications in preparation for its entrance into the Metaverse. The trademark application included downloadable virtual goods, retail store services featuring virtual goods and entertainment services featuring virtual footwear and clothing for use in virtual environments. In the physical world, the ownership can be attributed to the actual physical property. With digital/virtual items and properties in the Metaverse, whilst one person may own the corresponding physical property, the ownership of rights in the digital version may lie with others.
  • Anti-money laundering: Financial crime and anti-money laundering activities have always been an issue in cryptocurrency transactions, and it is foreseeable that it will take place in the Metaverse as well. Criminals may shift their money derived from illegal activities, converting it to virtual or cryptocurrencies and spending it on the goods and services in the Metaverse.

The Metaverse is exciting, but we will have to wait and see if the current vision of the metaverse will translate into long-term, concrete commercial and civic-minded opportunities. Ultimately, there are many legal issues that need to be resolved, before creating and participating in this new virtual world concept.