The Metaverse and Its IP Implications – It is still a "Wild, Wild West" out there

The topic of the Metaverse has generated a great deal of enthusiasm and debate in recent months. For example, Facebook changed its name to "Meta" with lots of fanfare. In another headline, Nike purchased an NFT (non-fungible token) designer company, RTFKT Studios, and appeared ready to use virtual athletic shoe NFTs to generate exposure, as well as to begin selling virtual shoes. Also, a personal injury law firm in New Jersey decided to open an office in Decentraland, claiming to be the first-ever personal injury law ?rm in the Metaverse.

Even more recently, as of the week of 2 February 2022, a major law firm is opening a virtual o?ce in the Metaverse in the fashion and retail district of browser-based 3D platform Decentraland.[1][2] It is the first major law firm to open in the Metaverse.

Law.com describes the Metaverse as "the combined network of 3D virtual worlds in which people work, play and socialize." Increasingly, retail brands and some business services firms are buying property there. During the same week, for example, a major Wall Street bank became the first big bank to open in the Metaverse by opening a virtual lounge.[3]

The Metaverse still seems to mean different things to different people. And all of these different meanings could all be correct, just like four visually impaired people trying to describe an elephant based on what they touch and feel. Nevertheless, the Metaverse could refer to a virtual world where the users or citizens could do everything they could do in the real world, plus more. The Metaverse first appeared in a 1992 novel by Neal Stephenson, entitled "Snow Crash." In that novel, each user has a first-person perspective and can participate in the Metaverse through a digital personality, i.e. avatar. A key characteristic of the Metaverse is that each user is an active participant, not just a passive observer. Each user can actively live, work, play, socialize, create and trade in the Metaverse, just as he or she can do in the physical world.

While its arrival means more opportunities and novelties for people, the Metaverse could also guarantee that almost all issues and challenges in the real world would reappear in the Metaverse. What makes this scenario even more "challenging" is that there currently is no governmental or regulatory system within the Metaverse to uphold justice or to prevent abuse. It is still a "Wild, Wild West!"

Matthew Ball, a leading Metaverse expert, has sketched out a basic definition for the Metaverse,[4] where:

"[T]he Metaverse is a massively scaled and interoperable network of real-time rendered 3D virtual worlds which can be experienced synchronously and persistently by an e?ectively unlimited number of users with an individual sense of presence, and with continuity of data, such as identity, history, entitlements, objects, communications, and payments."

Let us digress a little here, so that we can refresh what we remember about IP, or intellectual property. IP refers to the body of rights designed to protect inventions, creativity and consumers. IP typically refers to the body of legal protection under patents, copyrights, trademarks and trade secrets. There has been signi?cant experience accumulated in terms of understanding and handling IP implications in the real world. For example, companies like Apple or Samsung want to protect their innovation vis-a-vis a third-party infringer. Nike also wants to protect its trademark, or brand, in the eyes of its consumers. Further, authors and designers wants to secure copyright registration and protect their creative work.

Without a doubt, the Metaverse will usher in many new technologies and applications, which will have this "shock and awe" effect on all of us. At the same time, what will enable the Metaverse may at this time appear nothing out of the ordinary, beyond increasingly powerful technology and more content. Nevertheless, we can try to anticipate some IP implications based on the "Ball Framework" as follows:

Hardware: This category includes physical technologies and devices that enable us to access and experience the Metaverse. For any technologist, what jumps out is the potential innovations in VR/AR/MR headsets, mobile devices, wearable electronics and haptic gloves. Aside from the consumer side, there is enterprise hardware, such as the technology infrastructure needed to operate the VR/AR environments, and cameras and tracking systems. Such consumer and enterprise hardware are constantly being invented and upgraded to meet the demands of an environment that requires increased processing speed, sensitivity, quality and connection. And naturally we will expect to see many potential innovations in this area, where factors such as access, look-and-feel, sensation, experience, spontaneity, and losslessness will be the key metrics.

One example can be found in Google's Project Starline, a hardware-based kiosk designed to make video conversations feel like you’re in the same room as the other participant. This technology is powered by a dozen depth sensors and cameras, as well as a fabric-based, multidimensional light-field display and spatial audio speakers. Each one, at a generic level of technology complexity, has already been developed and is generally within reach of those in the field.

As can be appreciated, the technological innovations will call for innovative companies to secure patent rights or implement trade secret protection for their ideas and investment and keep their competitors at bay. Trademarks and brands can also be leveraged to set themselves apart from a sea of mediocre products. The moment when a VR headset becomes successful, others would quickly copy it and infringe on the IP.

Networking: This category refers to persistent, real-time connections and decentralized data transmission, which is provided by the networks and backbone. Technology in this category will ensure that data and services are brought to the consumer endpoint.

Since this class of technology involves both the transmitting and receiving ends, innovations, as well as IP, in the area of international standards or protocols would be important to the providers of the network products and services. Brands may play a significant role in this category, since players in this category tend to be more established and mature providers. The players would want to go with some provider who is more established and stable to ensure quality service.

Compute: The Metaverse, as can be anticipated, will require an unprecedented amount of computing power to fulfill its diverse and demanding functionality requirements such as calculation, real-time rendering, data reconciliation and synchronization.

While patents and trade secrets are the traditional tools of preference for IP protection for such technology, it is just as likely that other companies would come up with workarounds in no time. This is just the nature of the technical innovations that are involved in building the Metaverse.

Virtual Platform: This category refers to the development and operation of immersive digital environments and worlds for the users to explore and participate. This is where the users will "hang out," so to speak. Today, the better-known virtual gaming platforms are Roblox and Minecraft, and to a lesser extent Grand Theft Auto Online and Fortnite Creative Model. The platforms will be accessed via VR devices, or a simple web browser. What will differentiate one platform from another is going to be content, branding and the underlying, enabling technology.

In the early days of the internet, companies were expected to become internet-ready by first building their websites and then their Facebook page. And then companies empowered their sites by enabling online transactions and e-commerce. Similarly, companies are expected to either build their virtual platforms or participate in the platforms. While the enabling technology is available to all, what sets them apart will likely be content and brands, which are governed in the real world by trademarks and copyrights.

Interchange Tools and Standards: This category refers to the tools, protocols, formats, services and engines that serve as standards for interoperability. We previously mentioned hardware, networking, compute and platforms, all of which contribute to the formation of the Metaverse. However, since a true Metaverse is meant to be an interconnected and interoperable world, interchange tools and standards are essential to the success of the Metaverse. In the Metaverse, one can experience it from any local device, anywhere and anytime.

As in the telecom or internet world, interchange standards will need to be established in order for true interoperability. Technology and protocols, which require huge upfront investment for their development, could lead to competition for standards. While building the Metaverse cannot be totally on an open-source basis, to grow the Metaverse ecosystem overall will likely require investment by companies, who will expect return in exchange at the end. IP, in the form of standards-essential patents, for higher interoperability purposes, will be a battleground in the Metaverse frontier.

Content, Services and Assets: This category refers to the design/creation, sale, storage, secure protection and management of digital assets as connected to user data and identity. They are specifically built for the Metaverse and are independent of virtual platforms. One popular asset is the NFT, which represents a non-interchangeable unit of data stored on a blockchain （a form of digital ledger） that can be sold and traded. Types of NFT data units may be associated with digital files such as photos, videos and audio.

As mentioned earlier, Nike has already acquired a digital design house in its effort to expand into the virtual and Metaverse domain. Even more recently, Nike just brought suit against an online reseller （StockX） in New York federal court[5][6].The suit alleged that StockX began selling unauthorized NFTs of its sneakers, telling buyers they would be able to redeem the tokens for physical versions of the shoes "in the near future." While the true value of NFTs is yet to be tested by a fully transparent market, it is foreseeable that more trademark and copyright issues will emerge due to all the hype around NFTs as well as the relative ease of entry in this field.[7] Then again, in a decentralized regime such as the Metaverse, it remains to be seen how, or what, legal jurisprudence will emerge.

Also, the underlying technology in generating and authenticating content, such as 3D rendering, will likely see innovations and potential IP disputes as the Metaverse calls for an unprecedented amount of data generation. Those with data and content libraries will also ?nd themselves holding a treasure trove in their hands as their data and products could be resold over and over. In fact, companies that already own or are developing popular IP and brands 7 today will find it easy to play a major role in the Metaverse as they expand into it. It would therefore behoove them to timely and adequately protect their innovation in the form of patents, copyrights, trademarks, designs or trade secret well in advance.

Without a doubt, the Metaverse is expected to jump-start innovation and transformation, over time, in fields such as gaming, exhibits, education, design/planning, medical, industrial manufacturing and public service. As with any uncharted territory, it is best to observe first before going all in. Better still, bring your technology and legal friends to ride "shotgun" with you on this journey.