BlogEntrepreneurship & BusinessLegal ResourcesWe’re Not in Kansas Anymore: Metaverse and All the Not Answered Legal Questions

September 7, 20220
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In The Wizard of Oz, Dorothy says to her dog:

“Toto, I’ve a feeling we’re not in Kansas anymore.” 

The magical land of Oz seemed, – well, magical, to Dorothy, who was swept away from her home in Kansas by a tornado. The tornado to the legal community has been the announcement of Facebook’s founder, now known as META, Mark Zuckerberg in October 2021 on this new Back-to-the-future concept named Metaverse. 

Metaverse is a three-dimensional world where people love, live and spend money. All users have a digital twin – a customized avatar that represents them in the virtual world, and they interact with each-other similarly as they would in the physical world.

Basically – a human in the metaverse can:

  • become an owner of real estate
  • create games and experiences
  • express individuality through an avatar
  • meet colleagues and socialize with friends
  • buy, sell, and invest in digital artwork. 

As we read through the list, we may channel Jake Peralta from Brooklyn Nine-Nine mumbling “Cool, cool, cool, cool, cool. No doubt, no doubt, no doubt”, but the lawyer in us ponders on all the legal questions:

  1. Who rules in the Metaverse?
  2. Is there a concept of identity?
  3. More or less privacy in the Metaverse?
  4. Is Metaverse a well-regulated market? Safe? Fair?
  5. Is real life/virtual intellectual property protected? How?

 

1. Who rules in the Metaverse?

 

Sovereignty and Jurisdiction are two concepts that a law student learns in the first year of her law degree. 

In layman’s terms, sovereignty is the power to make laws by a sovereign – the one who exercises this power beyond the power of others to interfere, and jurisdiction is the territory within which this sovereign may rule. 

In the real world, there is an abundance of legislation, treaties and rules that have regulated the limits of one’s jurisdiction and sovereignty. 

In the metaverse? 

It remains to be seen in the future.

Metaverse works with a blockchain technology, which is defined as a shared, immutable ledger that facilitates the process of recording transactions and tracking assets in a business network. 

Basically, it works on the idea that this version of the world is based on decentralization, and it is a reality where everyone will own their digital assets, personal data, and identity

The blockchain is a system that sits independently of any central authority. Everyone working with the blockchain essentially owns part of it. Following this reasoning, there is a new concept emerging in recent years: the idea of self-sovereign identity (SSI). 

SSI are digital identities managed by users themselves, without relying on any third-party providers. Their identity is verified using public-key cryptography, eliminating the need to maintain the information on a central database and giving the individual control on what information they store and share

This level of decentralized and verified trust, has sparked the idea of a reality with no laws, regulations or taxes that extend beyond territory-based states. Right now, real-world governments are still wary on their approach to the metaverse, and the metaverse itself is not making it easier for them to think on a governing possibility (even if we were to think of countries buying land on the metaverse). It will be interesting to see how everything will unfold.

 

2. Is there a concept of identity?

 

Self-sovereign identity facilitates a world where an individual can choose how it wants to be represented in the metaverse. But differently from the identity we represent on social media, where we provide the verifiable information to the service providers that gather, store and control the data, in the metaverse our identities may be anonymous.

An individual uses an avatar, or a digital twin, which is defined as an extension of a person and the entirety they represent in the virtual world. There is a flexibility on how a user chooses to be represented on the Metaverse, without restraining to the concepts of race, gender, sexual preference, or physical ability. 

The problem is what happens when a user enters in illegal activity in the metaverse, like cyberbullying, sexual harassment, and other types of cybercrimes. As this is a relatively unregulated area, it remains in the willingness of the businesses with Metaverse models to be mindful of reporting, mapping and preserving the evidence for law enforcement agencies.

And what if you want to look like David Beckham in the Metaverse?

In the real world, personality rights are recognized – meaning that a person cannot appropriate the name or likeness of another for commercial gain.  This applies in the Metaverse as well. 

A user may choose to look like a famous personality, but he should not use this avatar to advertise products or gain profit from an unlawful infringement of another person’s identity and/or identity theft.

 

3. More or less privacy in the Metaverse?

 

The collection and use of personal information has been an issue in web or mobile-based platforms, as they are obligated to collect the minimum information for a purpose. 

In the Metaverse, the approach is to go for stricter and more transparent privacy standards. Blockchain technology offers anonymity and security, but with the increasing number of users and the implication of the virtual world to the real word, privacy needs to be carefully considered.

At Legit, you can find lawyers that can advise you on any aspect of data privacy and protection in connection with virtual worlds and metaverses.

4. Is Metaverse a well-regulated market? Safe? Fair?

 

Metaverse has a functional economy similar to the real world, where people use a currency, and they engage in the transactions of goods and property. This works on blockchain-based exchanges grounded on cryptocurrency – the currency of the metaverse.

In the Metaverse, users can enter into a contractual agreement. The contracts can involve anything from selling virtual goods to renting virtual property. If two people enter a contract in Metaverse, both parties must abide by the terms of the agreement. If one party fails to do so, the other party may be able to sue for breach of contract.

The legal question revolves around NFTs (which stands for “non-fungible token”) – a digital collectible on a blockchain that has some particularities. For instance, unlike another virtual currency, they are assets for a user. It can exist on the blockchain forever after it is minted, people can access the records and confirm the provable scarcity without relying on someone for authenticity, and the history of the ownership is recorded. 

By using the smart contracts” technology, NFTs can be traded between players, games, and worlds, and since it is a decentralized authority – there is no central economy to enforce the contracts. For this reason, a person would have to raise a claim in the real-world court for any contract breaches.

5. Is real life/virtual intellectual property protected? How?

 

NFTs are particularly regulated on the Metaverse, but what happens when real work is reproduced, performed, exhibited, distributed, or rented on the metaverse platform? 

Intellectual property laws protect authorship of user-created content in the Metaverse, like avatars, virtual buildings, and digital artwork. However, misappropriating real-world brands, like GUCCI or Nike, is presumed to fall under the copyright laws

If an avatar steals a digital ‘Gucci bag’ in the ‘metaverse’, this will involve issues relating to property rights, theft and intellectual property law. If loss of money or reputation of a real-world person or company is involved, there is a case to be made that these are legal problems sufficiently substantive to warrant a real claim in a real court of law.

At Legit, we can connect you with the right lawyer that can advise you on IP protection, IP infringement, including DMCA takedowns, and Ownership and licensing of User-Generated Content (UGC). All you need to do is click here.

Is this all there is to the Metaverse?

 

Well, not exactly. There continues to be uncertainty regarding the rule of law on the metaverse. As the legislator needs to catch up with technological development, the extension of the real-life laws to the virtual-worlds are seen more as a given, than truly enforced by law.

This entails that businesses need to be wary of the legal implications of providing a medium to facilitate crime, and users need to be informed on what would particularly be a problem with their avatar behavior, if they convey consequences in reality.

It would be a good idea to Better Call Saul (or Legit) before thinking of doing something ambiguous in the Metaverse.

 

**Disclaimer: This blog was originally published in qLegal, on August 30, 2022.

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