Turkey: European Commission Publishes Strategy Paper On Web 4.0 And Virtual Worlds

A. The content and significance of the strategy paper

On 11 July 2023, the European Commission published a strategy paper titled "An EU Initiative on Web 4.0 and Virtual Worlds: A Head Start in The Next Technological Transition" ("Strategy Paper").¹ The main purpose of the Strategy Paper is to set out the strategies to be used to ensure an open, trustworthy, fair and inclusive digital environment for EU citizens, businesses and public administrations by steering technological developments.

After Web 1.0, the infancy of the internet, which is referred to as the read-only web, came the participative social web era, in which user-generated content and people's interaction with each other have been part of our daily life. Since the 2010s, the semantic web, namely Web 3.0 technology, which is information-oriented and whose main features are openness, decentralization and full authorization of users, has become widespread. Now Web 4.0 focuses on digitization, enabling a more complex interaction between humans and machines and significantly increasing the integration between digital and real objects and environments.

The European Commission has estimated that digitalization will be one of the main drivers of the EU economy from 2030 onward, become increasingly crucial, in particular, in health, green transition, industry, education, art and design, and that the size of the global market of virtual worlds will grow to over EUR 800 billion by 2030 and create 860,000 new jobs by 2025.²

The Strategy Paper, based on previous studies conducted with EU citizens, businesses and academia, adopts an integrated approach focused on four main pillars: (1) the human resource-oriented approach to raise awareness, promote access to reliable information and train new-generation experts in virtual worlds; (2) business-oriented approach encouraging innovation by establishing a uniform ecosystem across the EU; (3) public administration-oriented approach to support virtual public services; and (4) governance approach focused on the shaping and administration of global standards based on openness aiming to prevent Web 4.0 and the virtual worlds from being dominated by a few large market players.

B. The future of IPRs in the Strategy Paper

The main legislation on IPRs in force in the EU, especially the Regulation on the EU Trademark,³ the Directive on the Protection of Know-How and Trade Secrets,⁴ the Directive on Copyright in the Digital Single Market⁵ and the Directive on the Legal Protection of Computer Programs,⁶ is, in principle, valid and applicable to Web 4.0 and the virtual worlds.

The first innovation envisaged in the Strategy Paper on IPRs is the establishment of a virtual worlds toolbox to enable citizens to understand how to protect and manage their identities, virtual creations, assets and data in virtual worlds, and to advise them and provide guidance on their rights under EU legislation. The virtual worlds toolbox will also cover digital identity and digital wallet solutions for secure authentication, virtual transactions, management of digital data and assets, data protection and privacy, consumer protection and cybersecurity, as well as copyrights and other IPRs. According to the European Commission, the unauthorized reproduction and distribution of virtual assets in virtual worlds, as in the real world, poses a serious threat to both consumers and owners of IPRs. Especially for rights holders, counterfeiting in virtual worlds entails a significant risk of loss of revenue and dilution of brand value. In the context of combating counterfeiting, the Strategy Paper envisages the creation of a toolbox to guide rights holders on the enforcement of IPRs in online and offline environments, including virtual worlds.

Even though the Strategy Paper contains no further explanation of the future of IPRs apart from the creation of a toolbox, the Staff Working Document ("Working Document")⁷ accompanying the Strategy Paper contains a more comprehensive examination.

Virtual worlds not only have the potential to foster human creativity and offer new business opportunities but also provide new methods for the creation and processing of content protected by IPRs. In this context, the Working Document evaluates the effects of Web 4.0 and the virtual worlds on the enforcement of IPRs, particularly copyrights, trademarks, designs and trade secrets.

The protection and management of copyright and related rights are intimately associated both with the structure of virtual worlds, such as software, computer programs and website design, and with the works created for virtual worlds by developers, users or artificial intelligence (AI), such as works of art, avatars, music and stories. While especially the rules on the exceptions to economic rights and copyright have been harmonized across the EU, it is unclear how rules that differ across EU countries, such as moral rights, will be handled by national courts in virtual worlds.

The use of non-fungible tokens (NFTs) also raises various copyright issues. For instance, whether storing NFTs on the blockchain causes copyright infringement, and if so, how to destroy those infringing NFTs, is a rather significant matter.

Moreover, the interaction between AI and copyright also has a complicated structure, and both the use of copyright-protected works in the training of AI technologies and whether the works created by AI can be protected by copyright give rise to legal disputes. While Directive 2019/790 on copyright in the Digital Single Market contains a general text and data mining exception, it is considered that creations of AI cannot be protected by copyright, as the EU legislation requires the condition of the author's own intellectual creation, similar to the regulations in Türkiye. Another issue related to copyright is whether virtual world platforms can enforce content providers to grant nonexclusive free licenses to themselves or third parties. The Working Document emphasizes that these practices should not deprive users of the profits arising from their own content.

In the EU, a significant increase in trademark applications covering virtual goods or NFTs has recently been observed. However, it remains unclear whether the use of a trademark on virtual goods constitutes actual/serious use in relation to the physical goods within its scope. Similarly, it is not clear how to handle disputes involving the comparison of virtual and physical goods or services. Due to the increase in trademark infringement in virtual worlds,⁸ the European Commission states that it will consider whether legislation on trademark protection in virtual environments should be reinforced.

The existing EU legislation on designs will be amended with the entry into force of the Draft Directive on Designs⁹ and the Draft Regulation on Community Designs.¹⁰ The main legal discussions raised by virtual worlds in relation to designs are the registration and protection of virtual goods as designs, including NFTs, the disclosure of unregistered designs to the public, the classification of goods, the use of registered or unregistered designs in virtual worlds, and how to ensure legal certainty in infringement cases related to virtual designs.

Trade secrets are regulated by Directive 2016/943 on the protection of know-how and trade secrets. As in the real world, commercially sensitive information revealed in the context of a virtual office also needs to be protected by the owner or provider of virtual worlds from unlawful interception by third parties.

In terms of enforcing IPRs, the most important issue created by virtual worlds is their cross-border nature. This feature makes it difficult to make a regional determination in infringement cases. The Working Document emphasizes both that the inability to identify users in virtual worlds should not prevent the determination of liability for violation of rights and the need for all stakeholders interacting in virtual worlds to comply with the rules on the enforcement of IPRs.

C. Conclusions and evaluations

As in the birth of the internet, AI and innovations in virtual worlds pave the way for the emergence of new legal debates on IPRs. The effective registration, protection and enforcement of IPRs in virtual worlds, particularly trademarks, designs and copyrights, are crucial for both rights holders, users and a sustainable IPR system.

In the Strategy Paper, the first actual plan of the European Commission on Web 4.0 and virtual worlds is the creation of toolboxes to guide both citizens and rights holders on the protection and enforcement of IPRs. These toolboxes mentioned in the Strategy Paper are expected to be ready for use by 2024.

On the other hand, while the Working Document touches upon various legal issues and states that it will assess whether the relevant legal framework, in particular on trademark protection, needs to be reinforced by being revised, the exact arrangements and amendments envisaged are not elaborated.

Web 4.0 and virtual worlds raise similar concerns regarding IPRs in Türkiye, as in the EU. In Türkiye, these legal issues are currently being discussed mainly in literature. Even though an important step has been taken toward the harmonization of national legislation on trademark, design and patent rights with the EU legislation through the Industrial Property Code No. 6769, the efforts of modernization to harmonize the legislation on copyright, particularly the Law on Intellectual and Artistic Works No. 5846 dated 5.12.1951, with international agreements and EU legislation have not yet been completed. Considering the complicated relationship between Web 4.0 and virtual worlds, especially with copyrights, the steps taken in this field by the EU and other countries should be carefully monitored during the harmonization process.

In the determination of an effective IPR policy regarding Web 4.0 and virtual worlds, it will be highly valuable for rights holders to closely follow the regulatory studies, the court precedents and the decisions issued by national and international intellectual property offices/

Footnotes

1 European Commission, Communication, "An EU initiative on Web 4.0 and virtual worlds: a head start in the next technological transition," Strasbourg, 11 July 2023, COM (2023) 442/final.

2 European Commission, "EU competitiveness beyond 2030: looking ahead at the occasion of the 30th anniversary of the Single Market," Brussels, 16 March 2023.

3 Regulation No. 2017/1001 of 14 June 2017 on the European Union trademark.

4 Directive 2016/943 of 8 June 2016 on the protection of undisclosed know-how and business information (trade secrets) against their unlawful acquisition, use and disclosure.

5 Directive 2019/790 of 17 April 2019 on copyright and related rights in the Digital Single Market and amending Directives 96/9/EC and 2001/29/EC.

6 Directive 2009/24/EC of 23 April 2009 on the legal protection of computer programs.

7 European Commission, Commission Staff Working Document, accompanying the document: "An EU initiative on Web 4.0 and virtual worlds: a head start in the next technological transition," Strasbourg, 11 July 2023, SWD (2023) 250 final.

8 For example, https://www.thefashionlaw.com/the-metabirkins-verdict-5-key-takeaways-for-brands-and-creators/.

9 European Commission, "Proposal for a Directive on the legal protection of designs," Brussels, 28 November 2022 COM (2022) 667 final.

10 European Commission, "Proposal for a Regulation amending Council Regulation No. 6/2002 on Community designs and repealing Commission Regulation No. 2246/2002," Brussels, 28 November 2022 COM (2022) 666 final.

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