The metaverse is a combination of virtual reality (VR), augmented reality (AR) and blockchain technology. This digital reality platform includes aspects of social media, gaming and virtual trade; allowing the users to interact. The key difference between social media as we know today and the potential of the metaverse is the ownership of virtual or digital items such as clothes, land, interactive tools etc. These digital items reliant on blockchain technology and smart contracts. Blockchain technology creates, records and verifies the NFT (Non-Fungible Tokens) whereas smart contracts establish the intellectual property rights by establishing the terms of agreement, ownership and authenticity of the items which are subject to trade in the metaverse among the users. Moreover, smart contracts can be embedded in the NFTs. The ownership of NFTs in the metaverse entails that the users can function in the virtual world like the physical world by creating avatars, buying clothes, painting, property, race horses etc.
While the concept or technology behind it isn’t novel, the metaverse has recently gained the interest of the world especially due to the neoteric activities of Meta (Facebook) and Microsoft, who have announced their plans of working with the technology. Finance, entertainment and gaming are just few of the many industries that will be heavily impacted.
Role of IPR in the Metaverse
The relationship of intellectual property and the metaverse has a promising future but it is not void of issues and challenges. With the establishment and rapid use of the metaverse, it seems integral for intellectual property to evolve and adapt to the technology. The intellectual property framework in its present form will not be sufficient to cover the new range IP which will flood into the virtual market. Non-traditional trademarks and copyrights, virtual and augmented reality related patents are some of the many fresh challenges that will arise. The infringement of intellectual property in the digital space also includes trade secrets and its maintenance as the traditional practice of non-disclosure agreements or limiting access with biometric technology won’t be enough. Hence, it is immensely important to alter and shape the present system according to the needs of the metaverse to sustain the protection of intellectual property rights.
In the month of January 2022, Hermès, a luxury fashion house, sued Mason Rothschild, a NFT creator for marketing “Metabirkins” in the metaverse. The Metabirkins are a digital counterfeit of the world-famous Hermès Birkin bags. Hermès filed for trademark infringement and dilutive use of the Birkin name.
Protection of Intellectual Property in the Metaverse
It would become significant for IP owners to establish a brand-new set of terms which consider aspects related to the metaverse which the orthodox licensing agreement doesn’t include for the licensing of their intellectual property in the metaverse. While typical terms of a licensing agreement such as the term, territory, royalty etc would still be considered in the digital world; a step further would be necessary to cover aspects such as the scope of the intellectual property to determine its use in the metaverse. IP owners would find it necessary to set the boundary of usage to mitigate their own risk and damage from infringement and unwanted brand association.
- NFTs (Non-Fungible Tokens)
Non-Fungible Tokens will take on a more essential role in the area of intellectual property by providing protection through its own technology with the help of embedding. Virtual or digital items would be embedded with certain information to establish the owner’s rights which are associated to the particular item made available in the metaverse. The information embedded in the digital items can include;
- The history of ownership
- The rights associated to the use or licensing of the digital items
- The description and information of the product
Intellectual Property Moats (IP Moats) refer to the strength and coverage of a technology company’s intellectual property. As companies in the technology sector are dependent on its intellectual property, those which create an IP moat will have a competitive advantage over those companies which don’t, particularly in the long run. Technology companies which are already involved with the metaverse have started developing and strengthening their IP portfolios to shift efficiently into the metaverse.
With the exponential growth of the metaverse, an increase in a number of regulatory and legal issues will also arise. It has become essential for the intellectual property framework to evolve and modify itself to match the developments in the metaverse. Undeniably, it will soon become crucial to implement safeguards to protect intellectual property in the digital world to steer clear of possible legal disruption.
By Saiesha Dhawan, Intern at Excelon IP