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Intellectual Property in the Metaverse

By Anagha Sheerya and Hardi SattaApril 14, 2023January 19th, 2024No Comments

Introduction

The metaverse represents the next stage of the Internet’s evolution, offering a fully immersive and interactive digital environment where people can engage with each other and virtual objects in real time. This technological innovation has the potential to transform various industries such as gaming, entertainment, finance, etc. By creating a customized digital persona or avatar, individuals can experience life in the metaverse. The possibilities in the Metaverse are limitless, ranging from buying and selling virtual and real goods from virtual shopping malls, playing games, working, even so far as purchasing real estate, travelling, and attending concerts in the Metaverse. To best describe it in a sentence would be that it is a virtual counterpart to the real physical world. 

Intellectual Property and The Metaverse

The futuristic Metaverse has only been possible due to numerous innovations and the creativity of the human mind. With the increasing use of the metaverse, it has become crucial to protect intellectual property rights (IPR) within this digital realm. In the metaverse, IPR plays a crucial role in safeguarding the ownership and use of virtual goods, such as designs, characters, and music, among others. Without IPR protection, creators risk having their creations copied, replicated, or stolen without permission, which can result in financial losses and damage to their reputation. Therefore, IPR protection in the metaverse is essential for innovation, creativity, and investment in the digital space, ensuring a fair and equitable virtual environment for all participants. 

Every fragment of the metaverse has some kind of intellectual property emanating from it such as:

  1. Copyrights- Copyrightable works in the Metaverse include those that are original and fixed in a tangible medium of expression, such as text, images, audio, and video. Non-Fungible Tokens (NFTs) which are a type of digital asset that uses blockchain technology to verify ownership and authenticity, are themselves not copyrightable, but the underlying works that they represent, such as digital art, memes or music, are subject to copyright protection. Therefore, creating an NFT does not grant the buyer ownership or copyright of the underlying work, but rather it provides a unique digital record of ownership. 
  1. Patents- When considering the potential patents that could be sought in the metaverse, they can be broadly classified into two categories: i)those related to hardware components such as devices and the type of equipments that are used to access the metaverse including virtual reality(VR) glasses, processors, etc. and ii) those related to software-based inventions such as simulations. Patents filed in this arena must adhere to the same parameters required for any other patents, i.e. novelty, inventive step and industrial applicability. 
  1. Trademarks- As we know, trademarks are essentially brand identifiers. It performs the same function virtually as well. Metaverse is an added benefit for trademark-holding companies to extend their brands to the virtual world and thus increase recognition. Owing to this, brands have already started seeking trademark protection for their virtual goods by filing applications for registering their marks. Popular fast food destination McDonald’s has filed an application seeking to register the mark ‘McCafe’ concerning a virtual restaurant that features not just virtual goods but when ordered virtually, allows   home delivery of food in the real world. Reliance Industries has also acquired the registration for ‘Ajio Luxe’ to be utilized in virtual worlds for virtual footwear and apparel.

Brands in the Metaverse

As a brand owner, Metaverse can carve out a myriad of opportunities for brands to create a new community of customers in addition to integrating and creating a mode of interaction for the existing one. It showcases a platform to reach potential consumers, and followers and engage with them in the virtual immersive experience. An added benefit is the opportunity for such businesses to earn profits by selling their goods virtually without having to incur the costs of additional manufacturing facilities, production costs, and raw materials. Some sectors have already witnessed the success of this emerging platform. 

A great example is when the renowned jewelry brand, Tanishq unveiled its ‘Romance of Polki’ collection of wedding jewelry to create a new experience altogether for their users. No other Indian jewelry brand had previously launched such an event on the Metaverse. They received amazing feedback from the audience and rightly so, as they early on discerned how experiences are the new demand in the market.

IP Concerns in the Metaverse

Needless to say, with the emergence of numerous innovations, there are inevitable issues concerning intellectual property. Moreover, the legal status of the Metaverse itself is still a grey area, making it likely that infringers will exploit loopholes to gain illicit benefits by violating someone else’s IP. 

The recent case of Hermes v. Mason Rothschild is a prime example of this as it centers on the intersection of trademarks and NFTs, raising key questions about the extent to which “real” world trademark rights extend to the virtual world.

In this case, luxury brand Hermès, sued NFT creator Mason Rothschild for trademark infringement as Rothschild had created a virtual series of purses termed ‘MetaBirkins’. The MetaBirkins NFT bags were designed similarly to the popular Hermès’ BIRKIN bag design covered in various furs. The MetaBirkin NFTs sold for large sums, bringing in more than USD 1 million. Hermes won the case and a Jury in New York ruled in favor of Hermes in this trademark lawsuit. The jury awarded Hermes with roughly $133000 damages out of which $110000 were profits from the sales of the NFT MetaBirkins and the additional $23000 for cybersquatting on the website.

This verdict essentially confirms that trademark rights for physical items would also apply to digital goods and NFT’s. This decision is very likely to have a significant impact on how fashion brands & individual creators approach NFT’s in the future. 

Conclusion

Infringement of Intellectual property in the virtual world is equally serious as infringement taking place in the physical world. As of now, the jurisprudence concerning laws in the metaverse is still developing. However, it can be surely said that the ever-evolving world of the Metaverse needs rules and regulations in place to ensure that the novelty, creativity, and uniqueness of every stakeholder are protected. It will certainly be fascinating to see the boundaries of IP law being tested in this regard.

Hardi Satta
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