The Metaverse – Legal Challenges and Opportunities for Intellectual Property Rights Holders

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As companies prepare for a future with and in the metaverse, there is an increasing focus on legal challenges, especially for trademark, copyright or patent owners. Not understanding intellectual property rights in a virtual environment can increase risks for intellectual property rights holders as well as sellers or buyers. So what can (or should) owners of intellectual property rights do? This article provides an overview of trademark, copyright and patent challenges in the metaverse.

The metaverse is gradually becoming a new reality. For some, it is primarily a collection of online virtual worlds. Others, however, focus on the role that specific technologies such as blockchain, virtual reality (VR) or augmented reality (AR) could play in accessing these worlds.

The Metaverse can be described as the three-dimensional successor to the Internet as we know it today. According to current predictions, the metaverse should consist of a multitude of interconnected and synchronous virtual platforms that operate continuously and can be experienced by consumers through their avatars. The boundaries between digital space and physical space will likely be blurred as virtual content will be displayed in real life and consumers will be able to easily access the metaverse through different devices. Some believe that we are already experiencing one or more metaverses today. However, it seems that a transition to the metaverse as described above is still a few years away and the concept of the metaverse is still evolving. It is therefore difficult to determine what changes and challenges will arise, particularly in terms of legal issues, but there are signs of what lies ahead.

There is no doubt that brands will need to ensure that their brands are properly protected in the virtual world as well as in the real world.

Last year saw an increase in the number of trademark applications for virtual goods and services. According to a May 2022 report, the rise in popularity of the metaverse and NFTs has elevated Nice Class 9 (including hardware and software) to second place by the end of 2021.

There has, however, been significant disagreement in legal circles over the possible classification of virtual goods and services intended for use in the metaverse. On June 23, 2022, the EUIPO issued guidance indicating that these virtual goods should be considered as falling within Class 9 (computers and scientific devices). The Bureau also said that NFTs (non-fungible tokens) should be “treated as unique digital certificates stored in a blockchain, which authenticate digital items but are distinct from those digital items.” As such they should be incorporated in Class 9; however, they must also specify the “type of digital element authenticated by the NFT”. Many brand owners holding trademarks for their “real” products are now wondering if additional protection for virtual goods is necessary.

When it comes to trademarks, there are several areas where conflicts can arise in the virtual space. Without specific protection for “virtual goods”, one of the main questions in this context will be whether there is a likelihood of confusion between a mark protected for physical goods and a sign used/applied for the virtual versions of these goods. (or comparable virtual goods). In other words, agencies and courts will have to decide whether virtual and physical goods have some degree of similarity and, furthermore, whether consumers will expect these two types of items to be likely to have the same commercial origin when they bear the same (or similar) mark.

From a copyright perspective, NFTs are at the center of current discussions. Harnessing the benefits of blockchain technology, NFTs are unique digital assets that can be traded easily and securely (e.g. artwork or other collectibles).

NFTs, serving as both a title deed and a certificate of authenticity, have created a huge market for digital content (which as such can easily be copied). NFTs include a variety of metadata that makes them unique and not interchangeable. If the digital asset underlying the NFT is, for example, a digital work of art, this metadata could include: the name of the digital artist, the title of the work, the number of copies and its size . Additionally, NFTs are governed by (smart) contracts defining how the buyer of the digital asset can use them, i.e. the specific copy of the digital asset that is represented by the NFT. These license agreements, as always, must be carefully drafted to ensure that both parties – seller and buyer – know the rights they have sold or acquired. The seller may wish to grant a non-exclusive license and/or restrict the right of use to certain use cases, while the buyer is often interested in obtaining an exclusive license to the digital work represented by the NFT. Therefore, NFTs will be fundamental in the metaverse where users buy and sell digital assets, including digital content (e.g., artwork) that they want to enjoy and showcase in their virtual home and, potentially, resell to another user, ideally at a profit.

Meta, Apple, and Microsoft are among the big tech companies that have announced they will invest huge sums in building a Metaverse. The filing of patents seems to be an essential element to take advantage of this virtual world. According to the Financial Times, US companies have already filed several hundred patent applications for several technologies that use users’ biometric data to power what they see and ensure their digital avatars are realistically animated in the metaverse. .

Looking a little deeper into published patent filings, they range from eye and face tracking technology to body pose tracking and avatar customization engines that even use a so-called skin replicator. They point to a future virtual world, in which a physical person in the real world can be effectively cloned into the virtual world, including every pore of the skin and the distinctive movements of a person’s body, eyes, and face.

Recently granted patents include “modification of an interface displaying video content received from users participating in a video chat session based on input from a participating user”, “augmented reality collaboration system with a device physics”, “the augmented reality collaboration system” and the list goes on and on. Although not all the patents are used yet, the goal seems obvious: to build a networked and marketed metaverse.

When it comes to which potential patents will be applied for and when they will be granted, a rough distinction can be made between software and hardware patents. Depending on whether the patent relates to a computer-implemented process or a hardware component, different prerequisites are required.

As for hardware patents for the Metaverse, they often relate to screens or equipment to enter the Metaverse such as VR glasses, sensors, processors or storage media. Although there are already many patents for VR and AR hardware, many more have already been filed. The main criteria for the patent to be granted will always be the need for novelty and inventiveness, but even subtle technological changes can lead to the invention being patentable.

On the other hand, the approval of patents related to software is more complex. Since most software for the metaverse will be used to create the virtual world, inventions for simulation programs are hard to come by for EPO countries. However, these restrictions do not apply globally. Software inventions are much easier to obtain in the United States, for example, where applications for pure software patents for the Metaverse have already been filed. This possible lack of protection for “simulation inventions” could lead to problems with licensing requirements or infringement issues in EPO countries later, for example, since the metaverse is accessible worldwide. .

With everything happening so quickly in the Metaverse, it’s hard to predict the challenges and opportunities for businesses. Those who want to enter the Metaverse must act quickly if they want to maintain their place in the virtual world, whether by acquiring licenses or filing patents themselves.

The Metaverse is going to be a profitable place for companies willing to understand it. It has the potential to reshape businesses – especially marketing and sales – as we know them. It will be exciting to see how the virtual world of the metaverse and the analogue world fit together.

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