What is the Metaverse?
You may have seen videos of virtual avatars experiencing a concert, attending a festival or experiencing a famous real-life landmark in a digitally created space or overheard people looking to purchase NFTs that can be used in this virtual space. While the 'metaverse' may have permeated dinner table conversations across the globe, there is still a long way to go when it comes to the people's understanding of the metaverse and all its applications.
So, let's break it down.
The metaverse is a simulated 3D digital environment or a virtual shared space, that mimics the real world by using augmented reality, virtual reality, blockchain and concepts from social media, offering users an immersive virtual experience to interact, collaborate, communicate, and transact with each other. Different technology companies have contemplated different kinds of metaverses. For example, Facebook (now called Meta) is developing an AR / VR based ecosystem allowing users to interact in different environments within the metaverse. Under the service 'Horizon Venues', Meta allows users to create digital avatars, wear VR headsets and attend live concerts, sports events etc. Other players such as The Sandbox and Epic Games (Fortnite) are developing a more gamified experience for users, where users will be able to buy and sell (virtual) land, create assets, host, and attend events and conduct transactions.
Given that metaverse is ultimately a virtual projection of real things, every service or experience offered in the metaverse in effect relies on the underlying digital content – whether in the form of images, sounds, videos, characters, visual effects, text, software, design, or a combination of all; the regulatory landscape governing digital content and intellectual property is the primary legal regime for the governance and growth of metaverse.
However, there continue to be rising concerns on the effectiveness of our existing legal regime that struggles to cope with the once-unthinkable use and dependence on technology for consumption of content and user interaction.
What are the key challenges as well as opportunities the lie ahead for the metaverse? Let us discuss.
Ownership of IP vis a vis the Platform
The ownership of intellectual property developed in the metaverse is one of the key issues to be addressed, given that every aspect of metaverse – including the platform, the underlying software, technology, the so-called 'real estate in metaverse', content, images, music, design, brands, audio-visuals – are all different types of intellectual property. It is therefore likely that the traditional principles and categories of intellectual property may need to be broadened and reshaped to reflect the unique requirements of the digital only environment. Another aspect to consider is the territorial scope relevant for the legal protection of a copyright or other intellectual property, in an entirely virtual context and absence of jurisdictional boundaries. The challenge perhaps will be to identify the location of use of intellectual property and the applicable jurisdictional legal regime.
On the other hand, content creators could benefit from the fact that a virtual only environment may make it easier for users to differentiate between content that is freely available to public from that which belongs exclusively to an author, performer, or copyright owner. Today, internet users are often under the ill-impression that digital formats of content (books, songs, movies) are free to access simply because they are available on the internet. One may expect that the illegality of piracy will be more evident in a virtual environment, with better traceability and advanced technological controls being implemented to identify IP rights violations.
Relevance of content acquisition contracts
Under the Indian copyright law, exploitation rights cannot be assigned for modes and mediums not existing at the time of assignment. Therefore, use and monetisation of content acquired prior to contemplation of metaverse could be open to challenge by authors and original rights owners. Even if a contract contemplates transfer of rights for use in future technologies or mediums, authors and original rights owners could claim that they are not fairly compensated given 'metaverse' as a means of monetisation was not contemplated at the time monetary value to the assignment/transfer of rights was determined. Therefore, each contract for acquisition of any content will need to be re-evaluated to see if it contemplates the rights necessary for exploitation of content over metaverse or the potential risk of challenge by the original owner to acquirer's exploitation of rights previously acquired.
Going forward, content licenses and assignments will need to be carefully drafted and negotiated in so far as they relate to exploitation of content on the metaverse or any new technology. For assignees or licensees, it will be important to ensure that contracts expressly grant rights for exploitation of content over metaverse and its future variants in the widest manner possible. While the metaverse is ultimately intended to be a decentralised interoperable ecosystem, in reality metaverse platforms are likely going to be filled with 'walled gardens' controlled by individual entities / brands / sub-ecosystems. Accordingly, for licensees and assignees that intend to exploit content in the metaverse, it is crucial that acquisition agreements do not include any restriction or limitation on use of content in a specific ecosystem within the metaverse.
From content owners' perspective, there is merit in clearly identifying the rights being granted and the modes and mediums of exploitation. Where possible, specific commercial terms should be attributed to various metaverse use-cases. To the extent parties cannot specifically contemplate use-cases, there should be flexibility to revisit the contract and determine commercial consideration as and when any new use-cases arise.
Music Licensing in the Metaverse
Music will likely be a key driver of the metaverse, with the growth of virtual concerts, virtual worlds, and the integration of music with games / brands / environments in the metaverse.
Similar to contracts relating to content acquisition, music licensing arrangements will also be heavily negotiated on aspects relating to manner and scope of use, modes and medium of exploitation, use of music across different environments in a metaverse.
In addition to this, metaverse creates a unique situation for the purpose of music licensing. Until now, the music industry bifurcated licenses in clearly defined categories such as public performance, streaming, downloading, physical reproduction and synchronisation. Given the varied use cases in the metaverse, licenses may not fall under the existing categories. For instance, a virtual concert in the metaverse could be construed as a hybrid of both, public performance and streaming. Similarly, almost the entire usage of music in the metaverse will be synchronised to audio-visuals or digital imagery, and as such could be construed to fall under a synchronisation license. There will also be other use-cases for music in the metaverse, such as instant artist collaborations on remix's and cover versions, creative collaborations with fans, monetisation via NFTs, etc.
As various kinds of metaverse develop, the potential for monetisation of music will also grow exponentially. The music industry will have to devise new and hybrid forms of licenses to cater to needs of platforms and users on metaverse.
Smart Contracts and the Metaverse
With the metaverse being majorly on digital assets and services such as NFTs, avatars, virtual gaming, virtual concerts, virtual real-estate, etc., use of smart contracts is likely to increase given the efficiency, expediency and convenience offered by such contracts as opposed to execution of physical contracts.
Smart contracts are digital contracts that are stored on a blockchain, which are automatically executed between parties when specific terms and conditions are met. Smart contracts are stored on a distributed ledger of a blockchain, adding more security to contractual arrangements, and restrictions on unauthorised access to the contract. Enforcement of smart contracts is also easier since performance of contingent obligations become effective if the relevant party completes performance of pre-requisite actions, clearly documented and recorded. However, smart contracts fall short in case of agreements which have subjective terms that require human intervention / interpretation. For e.g., determining the quality of specific services being provided, or covenants which are qualified by 'reasonable efforts' or 'best endeavour' of the performing party.
The initial use of smart contracts is likely to be for standardised agreements in the metaverse, however agreements that are more bespoke in nature are likely to be executed through traditional means, at least until development technology to remove human intervention in entirety.
Personality Rights and Privacy Rights
Personality rights protect the unauthorised usage of a celebrity or individual's name, likeness, voice, nickname / voice imitation or a look-alike, or personal attributes. Personality rights become more significant in the metaverse, given the different ways in which an "avatar" may be used in a digital ecosystem. Exploitation of personality rights through the metaverse will be a major revenue stream for celebrities and public personalities in future with new possibilities of endorsements, interviews, promotions, and performances in close settings as well as one-on-one interaction with followers.
For other individual users as well, the question of use of their digital avatars by third parties is a critical one. While data protection laws protect personal information, whether an avatar would fall within its scope is undecided. Privacy laws will have to swiftly redesigned in the context of changing technology to balance individual's privacy with permitted commercial use.
Content Regulation and User Behaviour
Metaverse platforms are intended to operate as intermediaries providing users and businesses virtual space and opportunity to interact and transact. As such, these platforms should be able to claim safe harbour from liability arising from actions of users, subject to the platforms being in compliance with requirements under the information technology regime.
A key aspect of the compliance requirements for intermediaries is to takedown content which is unlawful under applicable law, or which is in violation of the conditions set out in the Information Technology (Intermediaries Guidelines and Digital Media Ethics Code) Rules, 2021 ("IT Rules"). However, takedowns in the metaverse may not always be practical, particularly in relation to live interaction of virtual avatars. Other issues around user behaviour will also have to be addressed, for instance the possibility of assault or harassment in the virtual environment, safety of minors, possibility of identity theft, fraud etc. As such, a mere import of the current regime relating to digital media may not suffice for regulating metaverse and laws will have to evolve to ensure creation of a safe environment for users. In order to claim safe harbour from liability for acts of users, the platforms will likely be required to implement active measures, such as content monitoring and safety tools for users. While this may create burden of compliance for the platforms, it will eventually be an essential driver growth by making individuals feel safe in a virtual reality.
To the extent a platform makes available any content or feature itself, the platform will have primary liability. However, some platforms have proposed shared governance with users, where users will have voting rights in matters of governance based on the assets or currency the relevant user possesses or has earned. If this is implemented, it will be interesting to see if entities operating the platforms claim safe harbour on the grounds that the platform itself is governed entirely by users.
The Way Forward
Undoubtedly, the metaverse is set to change the manner in which content is consumed and interactions between users take place virtually. While platforms and their use cases continue to be developed, it is evident that the current regulatory framework may not be sufficient to effectively regulate the metaverse.
Eventually, if the metaverse truly becomes the universe for people to interact and access content; unauthorised use of intellectual property, data, and information, will create new challenges for rights holders. Further, if the end purpose of metaverse is to increase interaction or enhance the experience of content consumption in a digital only world, the accessibility of each metaverse will also need to be augmented.
Technology by definition develops rapidly, and therefore legal landscape is likely to continue being a step behind and reactive to new developments. Eventually, technology companies may have to consider agreeing to common standards for metaverse not only to aid interoperability, but to also ensure safety and protection of content, technology, information, and privacy of users, to ultimately foster the growth of this medium.
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