The metaverse is here – what does this mean?
It is undisputed, the metaverse is having a moment. Tahir Basheer dissects the IP issues you need to be considering following his talk at our Spring Conference.
Mark Zuckerberg has rebranded Facebook as “meta”, the most expensive NFT – The Merge – a series of NFT’s sold for a total cost $91.8m and celebrities are advertising cryptocurrency – it’s a big deal.
Despite this, there seems to be a lack of consensus or at least a finite definition as to what the metaverse is.
At this stage, the metaverse is understood as an interactive, virtual experience. This incorporates virtual and augmented worlds, blockchain, crypto currencies and NFTs. The overarching theme is that it is virtual, not physical.
Brands have (and arguably are required to) branch out in this space. Often compared to the internet in the 90s/early 2000s, the metaverse is seen as the next big evolution.
How have brands entered and used this new world? A big player in this space, Nike, enabled consumers to design and sell virtual trainers on their own metaverse platform Swoosh.
Gone are the days of paper loyalty cards to be stamped, Starbucks have put their loyalty programme on blockchain – enabling consumers to earn and buy digital assets. Even luxury jeweller Tiffany teamed up with Cryptopunk to create an NFT.
Legal challenges in the metaverse
Technology is fast advancing and brands are entering this space rapidly, but this undoubtedly raises a number of legal issues. Three of these issues are considered below.
Content on the metaverse
The metaverse and the various platforms offer new assets and experiences. Digital fashion is becoming monetised – such as buying skins on Fortnite.
However, this also presents issues of counterfeits which can affect brand identity.
In theory, anyone can create fake goods and sell them just like in the physical world. The US MetaBirkin case of 2023 was the first to explore the interaction between content and how it intersects with trade marks and commercial rights.
In this instance, the court found that, even though the MetaBirkin NFTs were in some respects works of artistic expression, the creator had intended to confuse potential consumers and ruled in favour of Hermes.
This decision has been met with some criticism in that it favours brands over artists and their expressions.
It does raise the question; how far can one make an artistic work and self-expression before it is considered too far and result in trade mark infringement?
How will infringements such as this one be policed? Will designing a pair of trainers to look like a certain brand and having an avatar run around the metaverse constitute infringement of IP?
Large language models – training, inputs and outputs
Large language models (LLMs) such as ChatGPT have the ability to generate meaningful text. However, the creation and use of these models appear to clash with IP rights, in particular copyright.
From an IP perspective, the issues caused can be divided into three categories; the training of the models, the inputs into the models and the outputs of the models.
Firstly, in order to train these models, AI developers have to scrape vast amounts of data from the web. This collection of data, if not authorised, can be an infringement of copyright no matter how unintentional.
Secondly, when using the LLMs, there have been multiple reports of issues of confidentiality.
These appear to arise from people entering confidential and sensitive information as prompts. Businesses are increasingly having to implement guidelines to prevent employees from revealing confidential information through these LLMs.
Finally, the output of the LLM creates four IP issues:
(i) does copyright subsist in the works created given it was machine generated?
(ii) who is legally considered the author and the owner of the works – is it the developers of AI or the user who input the prompts?
(iii) if there has been copyright infringement, who can the infringed seek to claim from?
(iv) in addition to copyright issues, there are possible trade mark infringement and passing off claims.
The above questions are an ongoing and continuous debate – how can rights holders be protected whilst developing and using new technologies? Currently, there are a number of ongoing cases diving into these questions and it may be a case of wait and see.
Blockchain
One of the key issues with blockchain technology is that enforcement of rights can be complex.
This appears to be due to two main reasons: anonymity and decentralisation.
Anonymity is absolute on the blockchain, making it exceedingly difficult to locate perpetrators and allowing unscrupulous parties to remain hidden.
The decentralisation of the technology means there is no one place/set of rules/ regulations governing blockchain.
Courts are beginning to look at these areas of development. As unidentifiable parties will be tricky to take actions against, there is the potential for intermediaries to become vicariously liable.
Additionally, being “served” documents is simply not possible if you do not know who and where to serve them. Recently, developments have considered to be able to serve documents via NFTs and email.
What comes next?
Given all these potential IP issues, it seems a bit of a minefield for brands who need to be able to exploit the metaverse and yet protect themselves.
Well, all is not lost. When entering the metaverse, brands should consider:
- Registering (or extending registration) for their trade mark rights to cover uses on the metaverse;
- Using AI carefully. The LLMs can be great tools to increase productivity and produce work. However, how and what they are used for needs to be monitored and even controlled carefully by employers.
- When considering the blockchain, understand who should be sent the takedown notice, perhaps considering the decentralised marketplaces such as OpenSea.
Brands also need to appreciate that (currently) there may be limited legal recourse for some of these issues and may need to rely more on commercial solutions.
For example, RTFKT Studios relied on incentivising the consumers – when buying their Cryptokicks NFT, customers were able to claim physical shoes. As such, they helped educate their customers and enhanced appreciation of the digital asset.
Author
Tahir Basheer
Telephone +44 (0)20 7079 0103
Mobile +44 (0)7920 238 447
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